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CERTILMAN v. HARDCASTLE

January 24, 1991

BERNARD CERTILMAN, ROBERT CERTILMAN, LEE CERTILMAN, AND STEVEN CERTILMAN, INDIVIDUALLY AND AS SHAREHOLDERS OF HARDCASTLE, LTD. ON BEHALF OF THEMSELVES AND ALL OTHER SHAREHOLDERS OF HARDCASTLE, LTD., AND BERNARD CERTILMAN, ROBERT CERTILMAN, STEVEN CERTILMAN, & LEE CERTILMAN, INDIVIDUALLY, PLAINTIFFS,
v.
HARDCASTLE, LTD., STUART BECKER, ORDEN REID, WILLIAM IRVIN, HARRY SHUFRIN, AND JAMES HAGADORN, DEFENDANTS.



The opinion of the court was delivered by: Mishler, District Judge.

  MEMORANDUM OF DECISION AND ORDER

Defendants Stuart Becker ("Becker") and Harry Shufrin ("Shufrin") move to dismiss the complaint pursuant to Fed.R.Civ.P. 9(b) (failure to plead fraud with particularity) and 12(b)(6) (failure to state a claim upon which relief can be granted).*fn1

Plaintiffs allege that they were fraudulently induced by defendants into purchasing securities in defendant Hardcastle, Ltd. ("Hardcastle"). Plaintiffs allege various state law grounds for relief, including common law fraud and Section 352-c of the New York General Business Law (Article 23-A) (the "Martin Act"), and claim violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) ("Section 10(b)"), and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962, 1964(c), (d) ("RICO").

Defendants Becker and Shufrin argue that the common law fraud, Section 10(b), and RICO claims in the complaint should be dismissed because they are not pleaded with the requisite particularity and fail to state a claim upon which relief can be granted.

FRAUD AND SECTION 10(b) CLAIMS

Plaintiffs allege that Becker, Shufrin, and the three other named individual defendants were directors and "controlling persons" of defendant Hardcastle. (Complaint paras. 7-11, 31). Plaintiffs further allege the following:

  12. In April of 1985 defendant Shufrin with the
    knowledge and consent and under the direction of
    defendants Becker, Irvine and Reid, solicited
    Plaintiffs, in the Eastern District of New York,
    by use of the mails and telephone to subscribe
    for stock in defendant Hardcastle.
  13. Plaintiffs were advised by defendant Shufrin
    that the defendant Hardcastle was offering to
    sell shares of its common stock in $50,000 units
    of participation

    each of which represented 7%, of the defendant
    Hardcastle's stock.
  14. At or about the time of said solicitation,
    representations were made by Defendants to
    Plaintiffs as follows:
    a) That defendant Hardcastle was in the business
    of providing technological integration of
    computer systems and software programs for its
    customers.
    b) That defendant Hardcastle owned state of the
    art equipment including computer systems,
    optical scanners, disc converters and laser
    printers.
    c) That defendant Hardcastle was able to convert
    over 500 different computer and word processing
    languages.
    d) That defendant Hardcastle had contracts for
    its services and was then doing business with
    numerous companies including but not limited to
    the following:

1. American Broadcasting Company

2. American Express Company

3. Bank of America

4. Bear Sterns [sic] and Company

5. CBS, Inc.

6. Citicorp

7. Dun and Bradstreet

8. International Business ...


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