58. Eisenberg Honig prepared tax opinion letters which were included as an exhibit to the Sarasota Plaza Associates Memoranda, in which Eisenberg Honig represented that it was its opinion that it was more likely than not that the favorable tax treatment described in the Sarasota Plaza Associates Memoranda would, in fact, be given to the subject transactions.
The amended complaint seeks to hold Eisenberg Honig liable both as a primary wrong-doer and as an aider and abettor under § 10(b).
The amended complaint fails to meet Rule 9(b)'s particularity requirement here as well. First, para. 57 fails to set forth the proceedings of which the attorneys should have been aware and the regulations imposing such a duty. Second, para. 58 merely summarizes the conclusion of the opinion letter contained in the Offering Materials. No specific facts are provided; only the type of blanket allegations that Rule 9(b) protects against.
Third, para. 56 seems to try to raise an inference of scienter. However, it merely states that Eisenberg Honig was retained and that it provided tax opinions. The Plaintiffs do not allege that Eisenberg Honig was an insider, so that relaxed pleading is unavailable. The complaint simply fails to allege that Eisenberg Honig had any reason to commit the alleged fraud and that its action were egregious enough to meet the applicable standard of care to infer scienter.
Finally, it appears that the amended complaint also alleges an aider and abettor claim against Eisenberg Honig. For essentially the same reasons as discussed above in relation to Stuart Baker, this allegation also fails to meet Rule 9(b)'s particularity requirement.
The Plaintiffs have failed to plead their alleged claims for relief under the '34 Act against Eisenberg Honig with the particularity required by Rule 9(b).
The claims are therefore dismissed, with leave granted to replead.
III. The Pendent Claims
The Plaintiffs argue that, even if the § 10(b) claims against Eisenberg Honig and Stuart Becker are dismissed, the Court should retain pendent jurisdiction over the state claims against the two. Complete diversity among the parties is lacking, so pendent jurisdiction is the only means by which jurisdiction can be retained.
United Mine Workers v. Gibbs, 383 U.S. 715, 726, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966) set forth the general standards for pendent jurisdiction. There, the Court noted that "if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well." Under this rubric, the state claims against Eisenberg Honig and Stuart Becker should be dismissed without prejudice for lack of jurisdiction.
The plaintiffs also ask the Court to exercise pendent party jurisdiction over the state claims brought against Eisenberg Honig and Stuart Becker. Given the current posture of the proceedings, however, it would be imprudent to address this argument at this time.
It may be renewed at such time as is necessary.
For the reasons set forth above, the claims against Eisenberg Honig and Stuart Becker based upon alleged violations of § 10(b) of the '34 Act brought by the Third Circuit Plaintiffs are dismissed pursuant to Rule 12(b)(6), Fed. R. Civ. P., as time-barred. The § 10(b) claims brought by the remaining Plaintiffs are dismissed under Rule 9(b) with leave granted to replead. The remaining state claims against the two defendants are dismissed for lack of subject matter jurisdiction pursuant to Rule 12(b)(1).
It is so ordered.
New York, N. Y.
January 9, 1992
ROBERT W. SWEET