The opinion of the court was delivered by: ROBERT W. SWEET
Defendant Stuart Becker & Co., P.C. ("Stuart Becker"), has moved pursuant to Rules 12(b) and 9(b) of the Federal Rules of Civil Procedure for dismissal of the claims against it, and defendant Eisenberg Honig & Fogler ("Eisenberg Honig") seeks similar relief pursuant to Rules 12(b)(1), 12(b)(6), 9(b), and 56. For the reasons set forth below, there motions are granted, and the claims against them dismissed.
The underlying disputes and principal parties that are the subject of this and related actions are recounted in the prior opinions of this Court, familiarity with which is presumed.
In this particular case, there are 136 plaintiffs. One, the Sarasota Plaza Defense Fund, Inc., is a not-for-profit corporation organized under the laws of Florida with its principal place of business in Florida. The rest, all individuals, are residents of Arizona, California, Connecticut, Delaware, Florida, Illinois, Indiana, Maryland, Michigan, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia and Wisconsin, and are investors in the limits partnerships that are the subject of these actions.
The defendants in general are alleged to have induced the Plaintiffs into investing in limited partnerships formed for the purpose of owning and operating commercial office space properties by misrepresenting the soundness of the investment properties in partnership offering materials, and, thereafter, to have looted and misappropriated limited partnership funds by exercising control over the general partners and managing agents of the limited partnerships.
Stuart Becker is a New York corporation. It is a professional accounting firm and was retained to provide financial forecasts for and to conduct audits of one of the limited partnerships, Sarasota Plaza Associates.
Eisenberg Honig is a New York professional corporation with its principal offices in New York City. It was retained by RRI Realty Corp. to prepare the Sarasota Plaza Associates private placement memorandum, a tax opinion, and an opinion on the legality of the limited partnership units.
Prior Proceedings and Facts
The Ahmed complaint was filed on November 16, 1989. An amended complaint, which is the subject of these motions, was filed on April 4, 1991. The amended complaint generally alleges violations of § 10(b) of the Securities Exchange Act of 1934 ("'34 Act"), 15 U.S.C. § 78j(b), Rule 10b-5 promulgated under the '34 Act, 17 C.F.R. § 240.10b-5, the Racketeer Influenced and Corrupt organizations Act ("RICO"), 18 U.S.C. §§ 1961-1966, and state law claims of civil theft, fraud, breach of fiduciary duty and professional negligence. Against Eisenberg Honig and Stuart Becker, it specifically alleges federal claims under § 10(b) of the '34 Act and state claims of civil theft and professional negligence.
Stuart Becker filed its motion to dismiss on May 14, 1991, while Eisenberg Honig filed its motion on September 3, 1991. Oral argument was heard on October 17, 1991, and both motions were considered submitted as of that date.
In general, a court should dismiss a complaint for failure to state a claim under Rule 12(b)(6), Fed. R. Civ. P., only if it appears beyond doubt that the plaintiff can prove no set of facts supporting its claim that entitles it to relief. See H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 109 S. Ct. 2893, 2906, 106 L. Ed. 2d 195 (1989): Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir. 1984), cert. denied, 470 U.S. 1084, 85 L. Ed. 2d 144, 105 S. Ct. 1845 (1985). A court must construe the complaint's allegations in the light most favorable to the plaintiff and accept those allegations as true. See Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); Dacey v. New York County Lawyers' Assoc., 423 F.2d 188, 191 (2d Cir. 1969), cert. denied, 398 U.S. 929, 26 L. Ed. 2d 92, 90 S. Ct. 1819 (1970).
Both defendants argue that the Plaintiffs' § 10(b)/Rule 10b-5 claims are time-barred under the Supreme Court's recent decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 115 L. Ed. 2d 321, U.S. , 111 S. Ct. 2773 (1991), and that these claims also fail to meet Rule 9(b)'s particularity requirement, Fed. R. Civ. P. 9(b). If the securities claims are dismissed, both then ask that the Plaintiffs' pendent state claims be dismissed for lack of subject matter jurisdiction.
I. The Statute of Limitations
No action shall be maintained to enforce any liability created under this section, unless brought within one year after the discovery of the facts constituting the violation and within three years after such violation.
The present action was filed before Lampf was decided. Therefore, whether Lampf is to be applied retroactively must be determined first.
A. Retroactivity of Lampf
The Supreme Court had more or less foreclosed the Lampf retroactivity question in James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, U.S. , 111 S. Ct. 2439 (1991) ("Jim Beam"); see Welch v. Cadre Capital, 946 F.2d 185, 187 (2d Cir. 1991) ("Welch II"). There, in expressing a preference for "principles of equality and stare decisis. . . over any claim based on a Chevron Oil analysis" and rejecting "selective prospectivity," Jim Beam, U.S. at 111 S. Ct. at 2446 (plurality opinion), the Court essentially held that "when the Court has applied a rule of law to litigants in one case it must do so with respect to all others not barred by procedural requirements or res judicata." Id. at , 111 S. Ct. at 2448.
Congress, however, recently unsettled this mandate by unwinding the retroactive effect of a uniform federal statute of limitation for § 10(b)/Rule 10b-5 claims to June 19, 1991. It did this by amending the '34 Act and inserting a new § 27A:
(a) EFFECT ON PENDING CAUSES OF ACTION.--The limitation period for any private civil action implied under section 10(b) of this Act that was commenced on or before June 19, 1991, shall be the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991.
(b) EFFECT ON DISMISSED CAUSES OF ACTION.--Any private civil action implied under section 10(b) of this Act that was commenced on or before June 19, 1991--
(1) which was dismissed as time barred subsequent to June 19, 1991, and
(2) which would have been timely filed under the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991,
shall be reinstated on motion by the plaintiff not later than 60 days after the date of enactment of this section.
Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242, § 476, 105 Stat. 2236 (to be codified at Securities Exchange Act of 1934, § 27A, 15 U.S.C. § ). The President signed the bill on December 19, 1991.
This action was commenced on November 16, 1989. Congress' recent decree therefore applies, compelling this Court to determine the governing statute(s) of limitations.
Prior to the Supreme Court's decision in Lampf, the United States Court of Appeals for the Second Circuit also had adopted a uniform federal statute of limitations for § 10(b)/Rule 10b-5 actions. See Ceres Partners v. GEL Associates, 918 F.2d 349, 364 (2d Cir. November 8, 1990). In doing so, the circuit court followed in the footsteps of the Seventh and Third Circuits. See Short v. Belleville Shoe Manufacturing Co., 908 F.2d 1385, 1392 (7th Cir. July 30, 1990), cert. denied, U.S. , 111 S. Ct. 2887, 115 L. Ed. 2d 1052 (1991); In re Data Access Systems Securities Litigation, 843 F.2d 1537, 1545 (3d Cir. April 8, 1988) (en banc), cert denied, 488 U.S. 849, 102 L. Ed. 2d 103, 109 S. Ct. ...