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JEFF ISAAC RARE COINS, INC. v. YAFFE

April 27, 1992

JEFF ISAAC RARE COINS, INC. and JEFF ISAAC, Plaintiffs, against MARK YAFFE and NATIONAL GOLD EXCHANGE, INC., Defendants.


The opinion of the court was delivered by: I. LEO GLASSER

 GLASSER, United States District Judge:

 This is an action among parties of diverse citizenship. The defendants seek to dismiss all four causes of action under Federal Rules of Civil Procedure 9(b) and 12(b)(6). For the reasons set forth below, the motions of the defendants are granted; the complaint is dismissed in its entirety.

 FACTS

 Plaintiffs are Jeff Isaac Rare Coins, Inc. ("JIRC") and Jeff Isaac, president of JIRC. JIRC is a New York corporation; apparently, JIRC engages in the business of buying and selling investment-grade coins. Defendants are National Gold Exchange, Inc. ("NGE") and Mark Yaffe, an officer of NGE. NGE is a Massachusetts corporation with its principal place of business in the State of Florida. NGE also engages in the business of buying and selling investment-grade coins. The dispute that underlies this action involves the transfer of certain valuable coins from the defendants to the plaintiffs. The plaintiffs claim that the coins were sent to the plaintiffs for resale in New York but that the defendants misrepresented to the plaintiffs who owned those coins.

 In brief, the plaintiffs appear to argue that the coins were sent to the plaintiffs by the defendants on the understanding that the coins were in fact owned by Martin Haber of Numismatic Investments of Florida ("NIOF"). The plaintiffs, on receipt of the coins, decided to retain the coins and to apply them as a set-off against a debt owed to the plaintiffs by Haber and by NIOF. Thereafter, the defendants informed the plaintiffs that they, the defendants, were in fact the owners of the coins and that the plaintiffs should either return the coins or compensate the defendants for the value of the coins. When the plaintiffs refused to return the coins, the defendants instituted arbitration proceedings; the plaintiffs persuaded a New York state court to stay those proceedings. The plaintiffs thereupon filed this action in New York state court (it was subsequently removed by the defendants to this court), and the defendants filed an action against the plaintiffs in Florida state court. It is not clear which of the actions -- this one or the Florida one -- was commenced first.

 The complaint alleges four causes of action (this court earlier dismissed a fifth cause of action for lack of personal jurisdiction): (1) fraud; (2) abuse of process; (3) harassment and invasion of privacy; and (4) mail and wire fraud. The plaintiffs seek over $ 1,000,000.00 in damages. The defendants have moved to dismiss the complaint in its entirety under Federal Rules of Civil Procedure 9(b) and 12(b)(6).

 DISCUSSION

 1. Rule 9(b)

 Federal Rule of Civil Procedure 9(b) provides that "in all averments of fraud . . . the circumstances constituting fraud . . . shall be stated with particularity." The Second Circuit has construed this rule to require that allegations of fraud specify the time, the place, the speaker, and the content of the alleged fraudulent statement. Luce v. Edelstein, 802 F.2d 49, 54 (2d Cir. 1986). Moreover, if the complaint alleges fraud by more than one defendant, "the complaint should inform each defendant of the nature of his alleged participation in the fraud." DiVittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247 (2d Cir. 1987). Against the somewhat elusive standards of Rule 9(b), the purposes of the rule are instructive: "The three-fold basis for the rule lies in the need 'to provide a defendant with fair notice on the basis of the plaintiff's claim, to protect a defendant's reputation from groundless accusations of fraud, and to prevent strike suits brought for settlement value.'" United States v. Rivieccio, 661 F. Supp. 281, 290 (E.D.N.Y. 1987) (citations omitted). This court has remarked before, however, that determination of the adequacy of a complaint under Rule 9(b) is ultimately and necessarily fact-specific; accordingly:

 [Rule] 9(b) particularity is much like obscenity, legally speaking: 'I know it when I see it,' Jacobellis v. Ohio, 378 U.S. 184, 197, 12 L. Ed. 2d 793, 84 S. Ct. 1676 (1964) (Stewart, J., concurring)."

 Rivieccio, 661 F. Supp. at 290 (E.D.N.Y. 1987).

 In this case, the plaintiffs have fallen far short of the pleading standard set by Rule 9(b). They have not set forth the "time, place, speaker and content of the alleged fraudulent statements or misrepresentations;" they have not indicated the alleged role of each defendant in the claimed fraud; and, most importantly, they have not given the defendants fair notice of the basis for their claim. On the first cause of action, the plaintiffs state their allegations as follows:

 On or about January 8, 1991, defendants, acting for each other and independently, conspired to defraud . . . the plaintiffs, in that they falsely and fraudulently represented that they had possession of certain rare ...


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