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.
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).
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
and constitute adequate notice to the defendants.
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
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.
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)."
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.
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