Unreported / Non-Citable
Background
Coastal Communications Holdings, directed and solely owned by Michael Windsor, purchased the shares of TJT Communications, doing business as Coastal Communications, from Todd Threw. The Firm Advisors and its brokers Cortney Sells and Maykayla Kalagias handled the sale, while Jared Olson drafted the transaction documents. CCH alleged that a sale summary, confidential business review, balance sheet, and Threw's June 2024 letter misrepresented the company's clients, staffing, management needs, financial prospects, and expected purchase orders. The complaint also alleged that Threw privately reported a business slowdown to others without telling Windsor and that CCH later incurred at least $435,000 in unexpected expenditures.
CCH filed suit on April 30, 2025, and amended repeatedly after earlier dismissal rulings, including partial grants on the first and second motions to dismiss. The operative Fourth Amended Complaint was filed August 5, 2026. Threw and the TFA defendants moved to dismiss under Rule 12(b)(6), the court vacated the October 22, 2026 hearing at the parties' request, and took the motions under submission without oral argument. The court accepted the factual allegations as true for purposes of the motions, used the 149% return projection in the attached summary where the complaint inconsistently alleged 171%, and disregarded balance-sheet allegations attributed to Threw's wife, a nonparty.
The Court’s Holding
The court granted both motions. Applying Janus, it held Threw was not the maker of statements in materials controlled by Sells and Kalagias, leaving four Review statements quoting him and three statements in his June letter. The opinion statements about sales, his wife's role, and a potential successor lacked particularized allegations that Threw did not hold those beliefs or supplied false supporting facts. The hiring explanation was not adequately alleged to have been false when made. The expected purchase orders were forward-looking projections; their failure to materialize and the absence of later documentation did not show Threw lacked a reasonable basis, and a Crown Castle representative's account was insufficiently described to establish reliability and personal knowledge.
Those deficiencies defeated falsity and undermined CCH's derivative scienter theory. Independently, the complaint did not connect particular misrepresentations to particular economic losses, as Rule 9(b) requires even for privately traded securities. Olson was dismissed because CCH conceded he made none of the challenged statements. Claims against the remaining TFA defendants failed for lack of particularized scienter: allegations that an audit would have exposed inaccuracies supported ordinary carelessness as readily as deliberate recklessness, while the alternative assertion that no audit occurred was conclusory. After four opportunities to plead a federal claim, the court dismissed Section 10(b) with prejudice, declined supplemental jurisdiction over the California claims under 28 U.S.C. Section 1367(c)(3), dismissed them without prejudice to pursuit in an appropriate forum, and ordered the clerk to close the case.
Key Takeaways
- A securities defendant generally is liable for a statement only if that defendant had authority over its content and communication, not merely because the defendant supplied information or participated in the transaction.
- Opinion statements require particularized allegations that the speaker did not hold the professed belief and that the belief was objectively untrue, or that an embedded supporting fact was false.
- A failed projection and missing corroborating documents do not alone establish that a forward-looking statement lacked a reasonable basis when made.
- Private securities transactions do not excuse Rule 9(b)'s requirement to link specific misrepresentations and revelations to specific economic losses.
- Repeated unsuccessful amendments supported dismissal with prejudice, while the state-law claims were dismissed without prejudice rather than decided on their merits.
Why It Matters
The decision applies the PSLRA's heightened pleading requirements to a private business acquisition rather than a conventional public-market fraud case. It separates attribution, contemporaneous falsity, scienter, and loss causation, explaining why allegations of a disappointing acquisition and later-discovered problems did not satisfy those distinct elements.
The disposition is final as to the federal securities claim but does not adjudicate the California misrepresentation and state securities claims. The court expressly left CCH free to pursue those claims in an appropriate forum, although it questioned in a footnote whether counsel could comply with California Code of Civil Procedure section 128.7 given the repeated pleading failures.