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THREE CROWN L.P. v. CAXTON CORP.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


February 18, 1993

THREE CROWN LIMITED PARTNERSHIP, THREE CROWN CAPITAL PARTNERS, MEADOWLANDS FUND, L.P. and H. BARNDT HAUPTFUHRER, Plaintiffs,
v.
CAXTON CORPORATION, BRUCE KOVNER, D. SCOTT LUTTRELL, LUTTRELL CAPITAL MANAGEMENT, STEINHARDT PARTNERS, STEINHARDT MANAGEMENT CORPORATION, MICHAEL STEINHARDT, SOROS FUND MANAGEMENT, GEORGE SOROS, SALOMON BROTHERS, INC., JOHN DOE, JANE DOE, XYZ CORPORATION, XYZ PARTNERSHIP, XYZ INSURANCE COMPANY, XYZ BANKING COMPANY, XYZ BANKING CORPORATION and XYZ FUND, Defendants.

Carter

The opinion of the court was delivered by: ROBERT L. CARTER

OPINION

ROBERT L. CARTER, District Judge

 Plaintiffs bring this action alleging ten causes of action against Caxton Corporation, Bruce Kovner, D. Scott Luttrell, and Luttrell Capital Management (collectively, the "Caxton Defendants"); Steinhardt Partners, Steinhardt Management Corporation, and Michael Steinhardt (collectively the "Steinhardt Defendants"); Soros Fund Management ("SFM") and George Soros (collectively, the "Soros Defendants"); and Salomon Brothers. The complaint asserts claims under (1) Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5; (2) the Commodities Exchange Act, 7 U.S.C. § 13(b); (3) the Racketeer Influenced Corrupt Organizations Act (RICO), 18 U.S.C. § 1962; (4) the Sherman Act, 15 U.S.C. §§ 1,2; (5) common law fraud; and (6) intentional infliction of emotional distress. The Caxton, Soros and Steinhardt Defendants have each moved to dismiss these claims under Rules 8(a), 9(b), and 12(b), F.R.Civ.P.. *fn1"

 Three Crown alleges that, in or about March 1991, defendant Kovner, chairman of the board of Caxton, convened a meeting at which Luttrell, Caxton's chief bond trader; Soros, the president and chairman of the board of SFM; and Steinhardt, the president of Steinhardt Partners; a representative of Salomon and others were present. Luttrell allegedly highlighted the attractiveness of the Treasury's two year notes, particularly the imminent April issue. Steinhardt Partners subsequently acquired $ 4 billion and Caxton $ 2.5 billion of the April 1993 Two-Years (the "April Two Years" or "April Treasury Notes") in the When-Issued Market. *fn2" By the early stages of the Secondary Market, *fn3" Steinhardt Partners and Caxton had each acquired substantial "long" positions of $ 8 billion of the April 1993 Two-Years, the equivalent of 133% of the issue. Plaintiffs took a substantial "short" position.

 Plaintiff further avers that some or all of the defendants, acting together, thereafter "squeezed" the Secondary and Financing Markets *fn4" for the April Two-Years by restricting the supply and circulation of these securities through "anti-competitive conduct," including "anti-competitive financing." Specifically, Salomon's finance department allegedly conspired in the manipulation of the Secondary and Financing Markets for the April Two-Years by financing positions of the April notes for some or all of the other defendants, and Steinhardt and others financed a portion of their position in a manner allegedly designed to ensure that the securities could only be relent at great expense to the borrower. Moreover, on or about May 24, 1991, Luttrell informed Three Crown that Caxton was a large holder of April 1993 Two-Years, and would continue to hold the notes and acquire more rather than swapping out into other issues. As a result of this conduct, plaintiffs claim that the availability of April Two-Years in the Secondary and Financing Markets was severely restricted until mid-September, 1991, when the "squeeze" ended, and Three Crown was "forced to pay artificially inflated prices to purchase and premium rates to borrow the [April Treasury Notes] they required to cover their position." Complaint P 69.

 Shortly after the next Two-Year Treasury Note auction was announced, a Salomon employee allegedly informed representatives of Tiger Investments, a non-party in this action, that he believed Salomon's finance department would be in a position to dictate a "special rate" *fn5" in the Financing Market for May 1993 Two-Years (the "May Two-Years" or the "May Treasury Notes"). Salomon thereafter acquired for its own account and for the accounts of certain customers, $ 10.6 billion of the $ 11.3 billion in May 1993 Two-Years auctioned. Salomon was allegedly aware that Steinhardt had acquired at least $ 6 billion in the May Two-Years. Plaintiff's aver that Soros, acting in concert with Salomon and allegedly financed at premium rates by Salomon, also took a substantial position of over 35% in the When-Issued Market, so that Salomon, Steinhardt and Soros together allegedly controlled more than 140% of the May Treasury Notes. Moreover, plaintiffs allege that the defendants entered into financing agreements that were designed to reduce the number of May 1993 Two-Years circulating in the Financing Market. *fn6"

 Securities Exchange Act Claim

 Rule 12(b)(6), F.R.Civ.P., Motion

 Alone among the moving defendants, the Caxton defendants contend that a defect in the complaint precludes plaintiffs from satisfying several elements of a § 10(b) and Rule 10b-5 claim, and requires that the claim be dismissed pursuant to Rule 12(b)(6), F.R.Civ.P.. *fn7"

 Specifically, the Caxton defendants assert that the complaint alleges an incomprehensible scenario: On the one hand, contend the defendants, the complaint alleges that the plaintiffs strongly believed that the When-Issued, Secondary and Financing Markets in April and May Treasury Notes (hereafter, the "Relevant Markets") were being manipulated, and, in particular, that by late May of 1991 plaintiffs "knew everything" about the Caxton defendants role in the purported "squeeze." On the other hand, contend the defendants, the complaint reveals that after learning of the manipulation in late May of 1991, the plaintiffs nonetheless substantially increased their aggregate short position, a move which escalated any exposure plaintiffs had to the alleged "squeeze." According to the defendants, the plaintiffs' behavior as alleged in the complaint constitutes an attempt by the plaintiffs to "have their cake and eat it too" by using the securities laws as an insurance policy against losses in the securities markets.

 Based on their interpretation of the complaint, the Caxton defendants contend that the plaintiffs have not sufficiently pled the materiality, reliance, transaction causation and loss causation elements of their § 10(b) and Rule 10b-5 claim. However, the defendants' attack with respect to each of these elements hinges on the court's acceptance of their interpretation of the complaint as described above. *fn8" Therefore, if the Caxton defendants' reading of the complaint is rejected, all of their attacks as to the sufficiency of plaintiffs' § 10(b) claim must necessarily fail.

 Although the defendants' reading of the complaint is interesting and may constitute a potent attack on plaintiffs' claim at a later stage of this litigation, it must be rejected at this stage based upon the well-known rule for deciding a motion to dismiss for failure to state a claim. The rule provides that for purposes of a Rule 12(b)(6), F.R.Civ.P., motion, plaintiffs' well-pleaded allegations must be accepted as true, together with such reasonable inferences as may be drawn in the plaintiffs' favor. See e.g. Allen v. Westpoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991); Qantel Corp. v. Niemuller, 771 F. Supp. 1361, 1370 (S.D.N.Y. 1991) (Leisure, J.).

 While the Caxton defendants are correct that Appendix A of the complaint *fn9" appears to indicate that plaintiffs increased their aggregate short position in the April Treasury Notes after the end of May, see Appendix A at 28-33, the defendants' assertion that the plaintiffs "knew everything" about the alleged manipulation by the end of May must be rejected. In particular, the defendants rely on Paragraph 65 which states that "between May 24 and June 28, 1991" plaintiffs and other market participants advised the Federal Reserve Bank of New York and the United States Treasury "of the manipulation" in the Relevant Markets. Complaint P 65. However, a favorable inference for plaintiffs which may be drawn from this paragraph is that plaintiffs' initial phone calls to state and federal regulators in late May were query and concern oriented, and they did not fully understand that a "squeeze" had occurred in the relevant markets until late June. This inference is further supported by allegations in the complaint that it was not until the "last week of June" that plaintiffs "became aware" that the notes were "no longer freely trading in the Secondary Market," and that alleviation of the squeeze was not going to happen. Complaint P 65-66. *fn10"

 Accepting plaintiffs' contention, as the court must at this stage of the proceedings, that they were not fully aware of the manipulation until late June, rather than the late May date asserted by defendants, the Caxton defendants' Rule 12(b)(6) attack on the sufficiency of the Section 10(b) and Rule 10b-5 pleadings must be rejected.

 Rule 9(b), F.R.Civ.P., Motion

 The Caxton, Soros and Steinhardt defendants all move to dismiss plaintiffs' § 10(b) and Rule 10b-5 claim pursuant to Rule 9(b), F.R.Civ.P., for failure to plead fraud with particularity. A § 10(b) claim is subject to the requirements of Rule 9(b), F.R.Civ.P.. See Thornock v. Kinderhill Corp., 712 F. Supp. 1123, 1128 (S.D.N.Y. 1989) (Sweet, J.). Rule 9(b) provides: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally."

 The moving defendants all take issue with plaintiffs' "information and belief" pleading. Despite Rule 9(b)'s generally rigid requirement that the "circumstances constituting fraud [be] stated with particularity," allegations may be based on "information and belief when facts are peculiarly within the opposing party's knowledge." Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990); see also, DiVittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247-1248 (2d Cir. 1987); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). In this case where manipulation is alleged, as opposed to affirmative misrepresentation, some or all of the facts will be in the control of the defendants and inaccessible to the plaintiffs without discovery. See Brickman v. Tyco Toys, Inc., 722 F. Supp. 1054, 1060 (S.D.N.Y. 1989) (Carter, J.). Therefore, the plaintiffs must be allowed some information and belief pleading.

 However, this exception allowing information and belief pleading is not free license to base claims of fraud on "speculation and conclusory allegations," rather the complaint must "adduce specific facts supporting a strong inference of fraud." Wexner, 902 F.2d at 172 (emphasis added). In particular, allegations based on information and belief must be accompanied by a statement of facts upon which the belief is founded. Segal v. Gordon, 467 F.2d 602, 608 (2d Cir. 1972). Despite this requirement, plaintiffs' complaint is based almost entirely on information and belief without accompanying statements of the facts upon which the allegations are founded. This is impermissible. *fn11"

 In addition, the defendants contend that the complaint does not adequately specify their respective roles in the manipulation. Under Rule 9(b), F.R.Civ.P., where multiple defendants are charged with fraud, the complaint must be specific as to the nature of each defendant's alleged participation in the fraud. DiVittorio, 822 F.2d at 1247. Despite this requirement, most all of the allegations in plaintiffs' complaint as to each defendant's role in the manipulation are alleged on information and belief without a statement of the source of information and the reasons upon which the belief is founded. Throughout the complaint defendants are clumped together in vague allegations regarding "some or all of the defendants." Such wide-scale clumping is unacceptable. See, The Limited, Inc. v. McCrory Corp., 645 F. Supp. 1038, 1043-45 (S.D.N.Y. 1986) (Carter, J.). For example, although plaintiffs provide some factual support for their allegation that a squeeze of the May Treasury Notes occurred, Complaint P 47, they provide no particularized facts as to why the Caxton, Steinhardt and Soros defendants are necessarily implicated in that squeeze.

 The moving defendants third attack with respect to Rule 9(b), F.R.Civ.P., is that plaintiffs have failed to plead scienter with the requisite specificity. A valid § 10(b) claim must allege scienter. See, Ochs v. Shearson Lehman Hutton, Inc., 768 F. Supp. 418, 427 (S.D.N.Y. 1991) (Haight, J.). While Rule 9(b), F.R.Civ.P., allows scienter to be averred generally, such allegations must be supported by facts giving rise to a "strong inference" of fraudulent intent. Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir. 1987), cert. den., 484 U.S. 1005, 98 L. Ed. 2d 650, 108 S. Ct. 698 (1988), overruled on other grounds, United States v. Indelicato, 865 F.2d 1370 (2d Cir. 1989) (en banc), cert. den., 493 U.S. 811, 110 S. Ct. 56, 107 L. Ed. 2d 24 (1989). To satisfy the scienter requirement, a plaintiff may allege facts showing a motive, or where motive is not apparent, a plaintiff may plead scienter by identifying circumstances indicating conscious behavior by the defendant, though the strength of the circumstantial allegations must be correspondingly greater. Id. at 50; see also, Rooney Pace, Inc. v. Reid, 605 F. Supp. 158, 162 (S.D.N.Y. 1985) (Weinfeld, J.) (where alleged fraudulent conduct is market manipulation proof of knowledge likely to be in defendants' exclusive control, evidence of intent must await discovery).

 The plaintiffs argue that the following six points constitute the "requisite factual predicates to support a strong inference of defendants' fraud": (1) defendants met in March 1991, (2) defendants thereafter took massive positions in the April and May Two-Years, (3) at least one defendant (D. Scott Luttrell) admitted to holding enormous positions, (4) a Salomon Brother representative said that the May 1993 Two-Years were going to trade "on special," (5) defendants engaged in restrictive financing, and (6) defendants made enormous profits. Plaintiffs Brief at 16.

 There are a host of problems with plaintiffs' list of "factual predicates." First, although the complaint describes a May 1991 meeting, it contains no allegations that defendants made any plans to manipulate the when-issued, Secondary and Financing markets for April and May two-year Treasury Notes at that meeting; rather, the complaint indicates the meeting was convened for the harmless purpose of discussing "various investment alternatives." Complaint P 50. Second, examination of the complaint reveals that plaintiffs' second, third and fifth alleged factual predicates, are not facts but allegations pled on information and belief without accompanying statements of fact. Complaint P 53-56, 73-74, 58-62, 64, 77-78. In addition, while plaintiffs characterize their third and fourth alleged factual predicates as admissions of fraudulent activity, their complaint does not provide any context for such an assumption. *fn12"

 While the fourth predicate provides some weak allegations of scienter with respect to defendant Salomon Brothers, Inc., who is not a moving defendant, the allegation is irrelevant to the moving defendants. Complaint P 72. The sixth predicate provides a conclusory allegation in support of motive with respect to the moving defendants, but does not constitute a "strong inference" of fraudulent intent.

 In sum, the six "factual predicates" put forth by the plaintiffs do not give rise to a "strong inference" that the moving defendants acting alone or in concert manipulated the Relevant Markets. Plaintiffs § 10(b) and Rule 10b-5 claim must be dismissed pursuant to Rule 9(b), F.R.Civ.P.. *fn13"

  Commodities Exchange Act

 The Caxton and Steinhardt defendants have moved to dismiss plaintiffs' claim under § 9(b) of the Commodities Exchange Act (CEA), 7 U.S.C. § 13(b), for failure to state a claim pursuant to Rule 12(b)(6), F.R.Civ.P..

 Section 9(b) of the CEA makes it a felony for any person "to manipulate or attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any contract market, or to corner or attempt to corner any such commodity . . . ." 7 U.S.C. § 13(b). Although § 9(b) is a criminal provision, § 22(a)(1) of the CEA provides a private right of action for violations of the substantive provisions of the CEA, including § 9(b). See, Grossman v. Citrus Associates of New York Cotton Exchange, Inc., 706 F. Supp. 221, 230-231 (S.D.N.Y. 1989) (Haight, J.).

 Section 22(a)(1) of the CEA lays out what are in essence "conditions precedent" which must be alleged in addition to the elements required to plead a violation of one of the substantive violations of the CEA; otherwise, the complaint will not survive a Rule 12(b)(6), F.R.Civ.P., motion. See Id.; In re Conticommodity Services, Inc., Securities Lit., 733 F. Supp. 1555, 1567 (N.D. Ill. 1990). Plaintiffs in this case rely on clause (D) of § 22(a)(1) which requires plaintiffs to allege that the defendants violated the CEA by manipulating the price of a futures contract purchased or sold by plaintiffs, or by manipulating the price of a commodity underlying that futures contract. *fn14"

 With respect to their CEA claim, plaintiffs allege: (1) that defendants manipulated "one or more commodities in which plaintiffs traded, as set forth in Appendix A," and (2) that "plaintiffs were damaged by the foregoing conduct in connection with plaintiffs' purchases and sales of futures contracts as set forth in Appendix A . . . ." Complaint PP 101, 102. *fn15" Thus, the complaint accuses the defendants of manipulating the price of the commodities underlying the futures contracts purchased or sold by the plaintiffs, not the price of the futures contracts themselves. *fn16" The only manipulation described in the complaint is of the When-issued, Secondary and Financing markets in two-year Treasury Notes maturing in April and May of 1993. Complaint P 45, 49-81. The only futures contracts specifically identified in the complaint as ones in which plaintiffs traded are Treasury bill futures and eurodollar futures. Complaint P 83, 100. *fn17"

 However, the Caxton defendants assert that plaintiffs' allegations do not satisfy § 22(a)(1)(D) because their CEA claim is based on the "absurd and mistaken proposition" that the April and May Treasury Notes traded by defendants constituted the commodities "underlying" the Treasury bill and eurodollar futures contracts traded by plaintiffs. According to the defendants, Treasury bills (not Treasury notes) are the commodity underlying Treasury bill futures and eurodollars are the commodity underlying eurodollar futures.

 Defendants are correct that plaintiffs' theory of manipulation is not one for which there is a private right of action under § 22(a)(1)(D). Based on standard definitions of a "futures contract," the phrase "the commodity underlying such [futures] contract" in § 22(a)(1)(D) refers to the commodity specified within the particular futures contract. See, e.g., Commodity Futures Trading Commission Act of 1974, S. Rep. No. 93-1131, 93d Cong., 2d Sess 130 (1974), reprinted in 1974 U.S.C.C.A.N. 5843, 5856, 5863; Leist v. Simplot, 638 F.2d 283, 286 (2d Cir. 1980) (citing 1 Bromberg & Lowenfels, Securities Fraud & Commodities Fraud § 4.6(421) (1979)). For example, the May 1976 Maine potato futures contract at issue in Leist was a contract for Maine grown potatoes. Id. at 286.

 Thus, while defendants alleged manipulation of the When-Issued, Secondary and Financing Markets in Treasury notes may have adversely impacted positions plaintiffs took in the Treasury bill and eurodollar futures markets, Treasury notes are not the commodity "underlying" either Treasury bill futures or eurodollar futures. Since plaintiffs have not adequately pled the "condition precedent" in § 22(a)(1)(D), *fn18" defendants' motion to dismiss plaintiffs claim under Section 9 of the CEA is granted. *fn19"

  The RICO Claims

 The complaint alleges several violations of RICO. Claim four charges all the defendants with acquiring or maintaining, through a pattern of racketeering activity, interest in or control of the Relevant Markets in United States Treasury Notes in violation of 18 U.S.C. § 1962(b). Claims three and six charge the defendants with conducting the affairs of various enterprises, affecting foreign and interstate commerce, through a pattern of racketeering activity in violation of § 1962(c). Claim five charges the defendants with conspiracy to violate the aforementioned provisions in violation of § 1962(d).

 Rule 12(b)(6) Motion

 The Caxton and Soros Defendants argue that the RICO claims should be dismissed pursuant to Rule 12(b)(6), F.R.Civ.P. because plaintiffs have not alleged "continuity", and continuity is an essential element of a RICO "pattern". See, e.g., Indelicato, 865 F.2d at 1381. The Supreme Court recently elaborated on this aspect of a RICO claim:

 

"'Continuity' is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition. . . . A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement: Congress was concerned in RICO with long-term criminal activity. Often a RICO action will be brought before continuity can be established in this way. In such cases liability depends on whether the threat of continuity is demonstrated." H.J. Inc v. Northwestern Bell Tel. Co., 492 U.S. 229, 241, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989) (citation omitted; emphasis in original).

 The Caxton and Soros defendants contend that the alleged conduct was too short-term to constitute "closed-ended continuity." Since the alleged manipulation of the April and May Two-Years ended in mid-September, 1991, the duration of the scheme was at most six months. Six months is inadequate to establish closed-ended continuity. See F. N. Wolf & Co. v. Estate of Neal, [1990-91 Transfer Binder]Fed. Sec. L. Rep. (CCH) P 95,805 at 98,875 (S.D.N.Y. Feb. 25, 1991) (Haight, J.) (one year insufficient to satisfy closed-ended continuity); Azurite Corp. Ltd. v. Amster & Co., 730 F. Supp. 571, 581 (S.D.N.Y. 1990) (Leisure, J.) (seven months insufficient); Airlines Reporting Corporation v. Aero Voyagers, Inc., 721 F. Supp. 579 (S.D.N.Y. 1989) (Sweet, J.) (thirteen months insufficient).

 Since plaintiffs do not show closed-ended continuity, the complaint must suggest a "distinct threat of long-term racketeering activity, either implicit or explicit," H.J., Inc., 492 U.S. at 241-42 (i.e., "open-ended continuity"), in order to satisfy the pattern requirement. Such a threat can be inferred from the nature of the enterprise if it existed for criminal purposes or the predicate acts were part of the defendant's regular way of doing business. Id., 492 U.S. at 242-43. *fn20" Since the alleged enterprises were not criminal organizations and the complaint has not alleged any facts from which it could be inferred that the Caxton or Soros defendants' acts were part of their regular way of doing business, *fn21" proof of open-ended continuity must be found in some factor other than the enterprise itself. See, e.g., Beauford v. Helmsley, 865 F.2d 1386, 1391 (2d Cir. 1989).

 Open-ended continuity can be demonstrated from the sheer number of predicate acts or schemes, Procter & Gamble v. Big Apple Indus. Bldgs., Inc., 879 F.2d 10, 17 (2d Cir. 1989) (five schemes raised the "spectre of continuity"), however the plaintiffs merely allege that the Caxton defendants participated in the April scheme, and the Soros defendants participated in the May scheme. *fn22" Plaintiffs contend that the complaint nevertheless suggests open-ended continuity because a threat of continuity "may be established without proof of multiple schemes, multiple episodes, or multiple transactions," see, e.g., Indelicato, 865 F.2d at 1381; Beauford, 865 F.2d at 1391. In the case of a single scheme, however, the complaint must plead some "basis from which it could be inferred that the acts of racketeering activity were neither isolated nor sporadic." Beauford, 865 F.2d at 1391. *fn23" "To infer a threat of repeated fraud [merely] from a single alleged scheme would in effect render the pattern requirement meaningless." Continental Realty Corp. v. J.C. Penney Co., Inc., 729 F. Supp. 1452, 1455 (S.D.N.Y. 1990) (Sand, J.). Since the complaint falls short of suggesting closed- or open-ended continuity with regard to the Soros and Caxton defendants, their motions to dismiss all the RICO claims are granted.

 In light of plaintiffs' November 13, 1992 letter, *fn24" which contains additional allegations concerning the Soros defendants, the second amended complaint will likely contain sufficient factual allegations suggesting continuity as to them. Thus, in the interest of judicial economy, the Soros defendants' alternate arguments for dismissal of the RICO claims under Rule 12(b)(6) will be considered.

 Soros contends that the fourth claim must be dismissed because the alleged "enterprise," the Relevant Markets in United States Treasury Notes, cannot constitute an "enterprise" for RICO purposes. *fn25" However, the Second Circuit has interpreted "enterprise" very broadly. See, e.g., Brennan v. United States, 867 F.2d 111, 121 (2d Cir. 1989); United States v. Bagaric, 706 F.2d 42, 55-57 (2d Cir.), cert. denied, 464 U.S. 840 (1983). The defendants have failed to distinguish the Relevant Treasury Note Markets adequately from the gamut of enterprises which have been found to fall within RICO's scope. See, e.g., United States v. Angelilli, 660 F.2d 23, 30-35 (2d Cir. 1981), cert. denied, 455 U.S. 945 (1982); United States v. Mazzei, 700 F.2d 85, 88-89 (2d Cir. 1983); United States v. Errico, 635 F.2d 152, 156 (2d Cir. 1980). *fn26"

 Soros further contends that the sixth claim must be dismissed as to him because it does not allege that the person participating in the enterprise (Soros) was distinct from the enterprise (SFM). Section 1962(c) "clearly envisions" that the enterprise and person are two different entities. Bennett v. United States Trust Co. of New York, 770 F.2d 308, 315 (2d Cir. 1985). *fn27" Since SFM is a sole proprietorship owned by Soros and he is the president and chairman of the board, Complaint PP 14,15, they are not distinct entities for the purpose of Section 1962(c). Compare Jacobson v. Cooper, 882 F.2d 717, 720 (2d Cir. 1989) ("Where the overlap between the alleged defendants and the alleged RICO enterprise is only partial, a RICO claim may be sustained.") *fn28" Thus, claim six must be dismissed as to the Soros defendants on this additional ground. *fn29"

 Rule 9(b) motion.

 The Steinhardt, Caxton and Soros defendants contend that plaintiffs' RICO claims must be dismissed as to them because the plaintiffs have failed to allege "racketeering activity" with sufficient particularity as required by Rule 9(b), F.R.Civ.P.. *fn30" Since plaintiffs' predicate security fraud claims are inadequate under Rule 9(b), they cannot provide a basis for their RICO claims. See, e.g., Lou v. Belzberg, 728 F. Supp. 1010, 1025 (S.D.N.Y. 1988) (Sweet, J.); Continental Realty Corp., 729 F. Supp at 1455. Similarly, since plaintiffs' predicate mail and wire allegations are based on their securities fraud claims, they are also defective. See, e.g., Lou, 728 F. Supp. at 1025; Bresson v. Thomson McKinnon Securities, Inc., 641 F. Supp. 338, 348 (S.D.N.Y. 1986) (Goettel, J.). Thus, the RICO claims are dismissed as to all the defendants for failure to plead fraud with particularity.

 The Sherman Act Claims.

 The complaint also charges the defendants with conspiring to restrain trade in the When-Issued, Secondary, and Financing Markets for the April and May Two-Years in violation of the Sherman Act § 1, and conspiring to monopolize these markets in violation of the Sherman Act § 2. *fn31" The Caxton, Soros and Steinhardt defendants claim that the antitrust causes of action are insufficient to satisfy the pleading requirements of Rule 8(a), F.R.Civ.P. and should be dismissed under Rule 12(b)(6). *fn32" Their moving papers cite a laundry list of purported shortcomings in the complaint, e.g., that plaintiffs: fail to provide adequate notice to them of their respective roles in the alleged conspiracy; do not cite any specific incidents of concerted action; and do not describe who coordinated the conspiracy, what was agreed, or when and where the combination took place.

 However, the degree of specificity demanded by defendants is clearly not required by Rule 8(a), F.R.Civ.P.. Nagler v. Admiral Corp., 248 F.2d 319, 322-23 (2d Cir. 1957), repudiated the idea that some special pleading is required in antitrust cases, and the law of this Circuit has been clear ever since. *fn33" See, e.g., George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 554 (2d Cir. 1977) ("a short plain statement of a claim for relief which gives notice to the opposing party is all that is necessary in antitrust cases."); Newburger, Loeb & Co. v. Gross, 365 F. Supp. 1364, 1367-68 (S.D.N.Y. 1973) (Ward,J.) ("skeletal" allegations sufficient to withstand a motion to dismiss). *fn34"

 Moreover, in antitrust cases, where proof is often in the control of the alleged conspirators, Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962), "dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 48 L. Ed. 2d 338, 96 S. Ct. 1848 (1976). Although "antitrust law limits the range of permissible inferences from ambiguous evidence[,]" Matsushita Electric Industrial Co., Ltd. v. Zenith Radio, 475 U.S. 574, 588, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir. 1987), the evidence of conspiracy "must be viewed as a whole to determine the reasonableness of [the] inferences drawn[.]" International Distribution Centers, Inc. v. Walsh Trucking, 812 F.2d 786, 794 (2d Cir. 1987).

 The requisite elements of a Section I claim are: (1) concerted action; (2) by two or more persons; (3) that unreasonably restrains interstate or foreign trade or commerce. Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 837, 838 n.9 (S.D.N.Y. 1988) (Leisure, J.). Under Section 2, the elements of conspiracy to monopolize are: "(1) proof of concerted action deliberately entered into with the specific intent to achieve an unlawful monopoly, and (2) the commission of an overt act in furtherance of the conspiracy." Paralegal Institute, Inc. v. American Bar Ass'n, 475 F. Supp. 1123, 1132 (E.D.N.Y. 1979), aff'd mem., 622 F.2d 575 (2d Cir. 1980); International Distribution Centers, Inc., 812 F.2d at 795-96. The alleged facts, viewed as a whole, provide sufficient basis from which all the elements in plaintiffs' Section 1 and 2 claims can be inferred *fn35" and constitute adequate notice to the defendants. *fn36" The discovery process and other pretrial procedures will provide "whatever additional sharpening of the issues is necessary." George C. Frey Ready-Mixed Concrete, 554 F.2d at 554 (2d Cir. 1977); See Rules 12(e), 16 26-35, and 56, F.R.Civ.P..

 Nevertheless, since plaintiffs have not connected the Caxton defendants to the Relevant May Markets or the Soros defendants to the Relevant April Markets, the Caxton and Soros defendants' motions to dismiss are granted as to the antitrust claims involving the Relevant May and April Markets, respectively.

 Intentional Infliction of Emotional Distress

 The Caxton and Steinhardt defendants move to dismiss plaintiff Hauptfuhrer's intentional infliction of emotional distress claim on the grounds that plaintiffs fail to allege either the "outrageous conduct" or the "specific intent" elements of that offense. Plaintiffs add credence to defendants' contentions because their opposition brief did not even attempt to refute the defendants' attacks on this claim.

 Plaintiff Hauptfuhrer alleges as "outrageous" conduct defendants' "manipulating the Treasury market". Complaint P 188. New York, which uses the Restatement 2(d) of Torts definition of intentional infliction of emotional distress, requires that the alleged conduct be "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society." Martin v. Citibank, N.A., 762 F.2d 212, 220 (2d Cir. 1985) (quoting Fischer v. Maloney, 43 N.Y.2d 553, 558, 402 N.Y.S.2d 991, 373 N.E.2d 1215 (1978)). New York courts have been very strict in applying this principle. Id. while deception and fraud associated with the purchase and sale of securities and commodities can create emotional distress and may be hurtful to the economy, manipulation of a market without more is not conduct which satisfies this strict standard for "outrageous" conduct. See, Kimmel v. Peterson, 565 F. Supp. 476, 499 (E.D. Pa. 1983) (complaint alleging securities fraud insufficient to state cause of action for negligent or intentional infliction of emotional distress).

 In addition, plaintiff Hauptfuhrer did not plead intent sufficiently. Under New York law, the conduct alleged must be "intentionally directed at the plaintiff and lack any reasonable justification." Id.; see also, Green v. Leibowitz, 118 A.D.2d 756, 500 N.Y.S.2d 146 (2d Dept 1986) ("gravamen of a cause of action for intentional infliction of emotional distress is that the conduct complained of 'is especially calculated to cause, and does cause, mental distress of a very serious kind'"). Although the complaint states that defendants "engaged in extreme and outrageous conduct with intent to cause plaintiff Hauptfuhrer to suffer emotional distress," manipulation of a market by its very nature is not aimed at any particular individual, and is calculated to cause profits for the manipulators as opposed to emotional distress for particular individuals. Complaint P 188 *fn37"

 For the foregoing reasons, plaintiff Hauptfuhrer's intentional infliction of emotional distress claim is dismissed.

 Common Law Fraud

 Plaintiffs assert a common law fraud claim alleging that the defendants actively concealed or intentionally failed to disclose to both plaintiffs and the Treasury market material facts relating to defendants' manipulative activities, with intent to defraud both plaintiffs and the Treasury market. Complaint P 175-179.

 Arguing that they had no duty to disclose the alleged manipulation to the plaintiffs, the Steinhardt and Soros defendants move to dismiss this claim pursuant to Rule 12(b)(6), F.R.Civ.P.. The defendants rely on case law which holds that under New York law, where a claim of common law fraud is based upon nondisclosure or concealment as opposed to actual misrepresentation, there must be shown "an obligation to disclose arising from some fiduciary or confidential relationship." Coface v. Optique du Monde, Ltd., 521 F. Supp. 500, 504 (S.D.N.Y. 1980) (Conner, J.); see also, Metropolitan Securities v. Occidental Petroleum, 705 F. Supp 134, 141 (S.D.N.Y. 1989) (Sweet, J.). Were this the full extent of applicable law, a motion to dismiss would be appropriate since the complaint does not allege any fiduciary duty or confidential relationship between the defendants and plaintiffs. However, the plaintiffs correctly point out that where defendants are accused of creating an "artificial market" or a "price mirage," defendants have a duty to disclose regardless of whether they have a fiduciary or confidential relationship with plaintiffs. See, Minpeco, S.A. v. Conticommodity Services, Inc., 552 F. Supp. 332, 336-338 (S.D.N.Y. 1982) (Lasker, J.). Since plaintiffs are alleging that defendants created artificial market conditions by causing a "squeeze," plaintiffs do not have to allege the existence of a fiduciary or confidential relationship in order to charge defendants with failure to disclose. *fn38" Thus, the defendants' motion to dismiss pursuant to Rule 12(b)(6), F.R.Civ.P., is denied.

 The Steinhardt, Soros and Caxton defendants are correct, however, in their contention that the complaint fails to comply with the requirements of Rule 9(b), F.R.Civ.P.. Rule 9(b) applies to common law fraud claims. See Hutton v. Klabal, 726 F. Supp. 67, 70-71 (S.D.N.Y. 1989) (where allegations of common law fraud are founded on information and belief, and no facts or events are pleaded to support such a claim, dismissal required) (Broderick, J.); Raffaele v. Designers Break, Inc., 750 F. Supp. 611, 613 (S.D.N.Y. 1990) (Carter, J.).

 To prove that their common law fraud claim is sufficiently particularized, plaintiffs rely on the same six "factual predicates" which they argued demonstrated a "strong inference" of § 10(b) securities fraud. However, plaintiffs' common law fraud claim suffers the same defect as plaintiffs' § 10(b) claim: plaintiffs fail to set forth a particularized basis from which an inference of fraud might fairly be inferred.

 Service of Process

 Defendant George Soros moves to dismiss the entire action against him pursuant to Rule 12(b)(5), F.R.Civ.P., because the plaintiffs failed to serve process on him in accordance with the requirements of Rule 4, F.R.Civ.P..

 Objections to sufficiency of process must be specific and point out the manner in which plaintiff has failed to satisfy requirements of the service provision utilized. King v. Best Western Country Inn, 138 F.R.D. 39, 43 (S.D.N.Y. 1991) (Haight, J.) (citing Photolab Corp. v. Simplex Specialty Co., 806 F.2d 807 (8th Cir. 1986)). Despite this requirement, defendant Soros did not provide any detail as to how plaintiffs failed to satisfy the requirements of Rule 4 until his reply brief. Therefore, the plaintiffs were forced to respond to the defendant's accusation by affidavit and letter.

 According to defendant Soros, although the plaintiffs purported to serve Soros pursuant to Rule 4(c)(2)(C)(i), F.R.Civ.P., which allows process in a federal action to be served by a method approved by the law of the state in which the federal court sits, the plaintiffs did not satisfy the requirements of N.Y. C.P.L.R. 308(2). Indeed, plaintiffs' Affidavit of Service by Fredric Salzberg states that Salzberg served the summons and complaint "pursuant to F.R.Civ.P. § 4(c)(2)(C)(i) and CPLR § 308.2 . . . ." Affidavit of Frederic E. Salzberg, attached to Affidavit of Kenneth I. Schacter, Esq. as Exhibit F, submitted with plaintiffs' Omnibus Memorandum of Law.

 Pursuant to CPLR § 308(2) personal service may be made by: (1) delivering the summons within the state to a person of suitable age and discretion at the dwelling place of the person to be served; and (2) by mailing the summons to the person to be served at his last known residence in an envelope bearing the legend "personal and confidential" and not indicating on the outside thereof that the communication is from an attorney or concerns an action against the person to be served; and (3) such delivery and mailing must be effected within twenty days of each other; and (4) proof of such service shall be filed with the clerk of the court designated in the summons within twenty days of either such delivery or mailing, whichever is effected later. Service shall be complete ten days after such filing.

 Defendant Soros contends that plaintiffs did not satisfy the fourth requirement of CPLR § 308(2) because proof of service was not filed with the clerk of the court within twenty days of mailing or delivery. According to the Salzberg affidavit, the summons and First Amended Complaint were delivered on August 14, 1992 and were mailed on August 17, 1992, but the court's docket sheet, annexed as Exhibit A to defendant Soros' Affidavit of Gerald Kerner, shows that proof of service was not filed until November 9, 1992, well past the twenty day limit.

 Once the validity of service of process has been contested, the plaintiffs bear the burden of establishing its validity. Lee v. Carlson, 645 F. Supp. 1430, 1432 (S.D.N.Y. 1986) (Weinfeld, J.), aff'd without op., 812 F.2d 712; King, 138 F.R.D. at 43. The plaintiffs respond by letter dated December 14, 1992 that Salzberg's assertion in the Affidavit of Service that service was made pursuant to Rule 4(c)(2)(C)(i) and CPLR § 308(2) was mistaken. According to plaintiffs Salzberg's mistake "cannot negate the undisputed fact that service was, in fact, made under Rule 4(d)(1)." *fn39"

  *fn39" Consideration of the purpose of Rule 4(c)(2)(C)(i), F.R.Civ.P., supports plaintiffs' contention that Salzberg was mistaken as to the provision of Rule 4 by which defendant Soros was served. Rule 4(c)(2)(C)(i), F.R.Civ.P. is designed to enable federal courts to take advantage of state long-arm statutes which commonly permit personal service without the state in a variety of instances in which defendant has had some contact with the state. 4 Wright & Miller, Federal Practice and Procedure: Civil 2d, § 1112, at 229 (1987). Salzberg states in the Affidavit of Service that he delivered the summons and First Amended Complaint to Soros' Manhattan residence. As this court is also within New York State, plaintiffs clearly had no need for service without New York State with respect to Soros. Thus, plaintiffs had no reason to rely on the more cumbersome service requirements of Rule 4(c)(2)(C)(i), F.R.Civ.P., and CPLR § 308(2).

 Ordinarily in such a case insufficient service of process will be quashed and the action preserved, provided there is a reasonable prospect that plaintiff ultimately will be able to serve the defendant properly. See Montalbano v. Easco Hand Tools, Inc., 766 F.2d 737, 740 (2d Cir. 1985); Securities & Exchange Commission v. Gilbert, 82 F.R.D. 723, 727 (S.D.N.Y. 1979) (Lasker, J.). In this case, plaintiffs in essence assert that they have already corrected insufficient service pursuant to Rule 4(c)(2)(C)(i) by serving Soros in accordance with the requirements of a different provision of Rule 4. Plaintiffs should be able to correct a reference to the wrong provision of Rule 4, F.R.Civ.P., provided they can prove that service satisfied the requirements of the provision on which they rely and was completed within 120 days after filing the complaint as required by Rule 4(j), F.R.Civ.P. Since the complaint was filed on June 3, 1992 and delivery of the summons and complaint to Soros was complete on August 14, 1992, 72 days after filing of the complaint, the plaintiffs have satisfied the service of process requirements of Rule 4(d)(1), F.R.Civ.P., and Rule 4(j), F.R.Civ.P..

 Under Rule 4(d)(1), F.R.Civ.P., service may be made "upon an individual other than an infant or an incompetent person, by delivering a copy of the summons and the complaint to the individual personally or by leaving copies thereof at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein . . . ." Thus, unlike CPLR § 308(2), Rule 4(d)(1) contains no mailing or filing requirement. The Salzberg affidavit, despite its reference to Rule 4(c)(2)(C)(i), F.R.Civ.P., contains sufficient details from which to conclude that service was effected pursuant to Rule 4(d)(1), F.R.Civ.P. The affidavit states that Salzberg delivered a true copy of the summons and complaint to Soros' doorman who was of "suitable age and discretion," and was described as approximately 20 years old. Thus, defendant Soros' motion to dismiss for insufficient service of process is denied.

 Conclusion

 For the foregoing reasons, the defendants' motions are granted in part and denied in part. Since plaintiffs have demonstrated a likelihood that they will be able to cure some of the deficiencies in their Securities Exchange Act and common law fraud claims, their RICO claims as to the Steinhardt defendants, and their Sherman Act and RICO claims three, four, and five as to the Soros defendants, plaintiffs are given until March 19, 1993, to further amend their complaint as to those claims. Based on this decision and the commonalities between this action and related litigation presently before Judge Robert P. Patterson, defendant Salomon Brothers' application to transfer and consolidate this action before Judge Patterson pursuant to Rule 15, Southern District of New York Rules for the Division of Business bong District Judges, is granted.

 IT IS SO ORDERED.

 Dated: New York, New York

 February 18, 1993

 Robert L. Carter

 U.S.D.J.


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