Proposed Amended Complaint in that the Defendants allegedly used the RAM partnerships to "cash out" uneconomical mortgages and that Defendants knew that the mortgages to be acquired by the RAM partnerships were worthless. Pls.' Mem. of Law at 4-5.
In the Opinion, the Court considered the Plaintiffs' claims about the nature of the asserted fraud,
but simply did not agree with their characterization of the events surrounding the investment in RAM 86. The Opinion, on no less than four separate occasions, explicitly refers to the Plaintiffs' allegations that the Defendants had failed to disclose that RAM 86 was purportedly designed for the purpose of "cashing out" certain "uneconomical mortgages." See Global III, at 48, 49, 50 n.39, 56 (holding purported design to "cash out" the alleged "uneconomic mortgages" was disclosed at time of investment or soon thereafter).
Plaintiffs further contend that the Opinion overlooked the alleged fraudulent nature of the Supplements which allegedly failed to disclose the valueless nature of the mortgages discussed therein. In the Opinion, the Court noted that the Plaintiffs invested in RAM 86 between January 1986 and May 1, 1987. Global III at 48. The fact that a plaintiff may have invested solely in reliance on the Prospectus, or after one of the Supplements had been released, does not alter the Court's determination that the statute of limitations had started to toll, since these allegations of the purported fraud should have been triggered by the disclosures in the Prospectuses and Supplements received by the investors. This claim is adequately addressed by the Opinion. See Global III at 48-56.
B. The Opinion Did Not Overlook the Second Circuit's Opinion in Cruden
Plaintiffs contend that the Opinion overlooked the Second Circuit's decision in Cruden v. Bank of New York, 957 F.2d 961 (2d Cir. 1992), and, as a result, erroneously tolled the statute of limitations period from the time a reasonable investor would have been aware of their claims instead of the time they alleged that their actual injury occurred in March 1991, that is, when their account statements revealed the value of their investments had dropped.
The Court considered the Cruden decision in reviewing the Second Circuit's law concerning the accrual date of RICO claims, see Global III at 20, but disagreed with the Plaintiffs' reading of that decision. The Second Circuit continues to differentiate cases in which plaintiffs have knowledge, or reasonably should have knowledge, of their alleged injuries from those cases in which an injury is disguised until some later triggering event. Compare Long Island Lighting Co. v. Imo Indus., Inc., 6 F.3d 876, 887 (2d Cir. 1993) (holding Plaintiffs should have known of their injury at earlier date) with Cruden v. Bank of New York, 957 F.2d 961 (2d Cir. 1992) (holding Plaintiffs injuries were disguised and Plaintiffs could not have known of their injury at earlier date).
In Cruden the later triggering event was found to be at the point when certain debentures went into default. Similarly, in another case cited by the Plaintiffs, Rohland v. Syn-Fuel Assocs., 89 Civ. 3325 (S.D.N.Y. Jan. 18, 1994), a subsequent tax court decision which deprived the plaintiffs of their expected tax benefits was found to constitute a triggering event.
Such is not the case here. The RAM/Pate Plaintiffs claim that they were fraudulently induced into investing in RAM 86. However, as discussed in the opinion, all the alleged fraudulent statements were adequately disclosed at the time of the investment itself: in essence, the Plaintiffs' alleged injuries occurred at the time of the investment itself -- not at some later point of time. In other words, a plaintiff's "claim accrues when the plaintiff 'knows or has reason to know' of the injury that is the basis of the action.'" Long Island Lighting Co. v. Imo Indus., Inc., 6 F.3d 876, 887 (2d Cir. 1993) (citations omitted) (reviewing Second Circuit law including the holdings in Cruden and Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir. 1988)). On the basis of these claims the Opinion correctly determined that the Plaintiffs should have been placed on notice of their RICO claims at the time of their investments or shortly thereafter.
C. The Court Did Not Overlook the Fact That RAM 86 Was a Public Offering
Plaintiffs' final contention is that the Court somehow overlooked the fact that RAM 86 was not offered under Regulation D of the 1933 Act, and that the Plaintiffs were not "accredited investors." It is true that, as a preliminary matter, the Court noted that "in general" much of this litigation was a result of investments associated with Integrated Resources or entities associated with Integrated. Global III at 1. The purpose of that preamble was to paint a picture, in general terms, of the nature of the parties, the offerings, and the relative sophistication of the investments which are at issue throughout these actions. See id. at 1-5. It appears that the confusion, cited by the Plaintiffs, was generated by this background preamble.
However, the Court did not apply these general background comments to the specific case of the RAM 86 Plaintiffs. Plaintiffs fail to cite any section of the Opinion discussing the RAM 86 investments in their memorandum of law which would buttress their contention that the Court erroneously believed them to be Regulation D investors. In fact, the Court quotes from a section of the RAM 86 Prospectus which informed potential investors that Integrated was a "publicly-held corporation whose common stock is traded on the New York Stock Exchange." Global III at 51 (quoting RAM 86 Prospectus at 35).
Accordingly, for the reasons set forth above, the RAM 86 Plaintiffs motion to reargue, pursuant to Local Rule 3(j), is denied.
III. The Miami Towers Plaintiffs' Motion to Reargue Is Denied
A. The Affidavit of Martin Mushkin Fails to State a Basis For Reargument
The affidavit of Martin Mushkin, counsel to the Miami Towers and Clovine/Ellingson Plaintiffs, has been proffered to "merely set out factual material that appeared in our Global I and II Memorandum of Law and in our April 15 Submission . . . No new material has been added. . . ." Mushkin Aff. at 2.
Accordingly, as counsel apparently concedes, the Court has considered and reviewed these materials in Global III and IV. Nowhere in this affidavit, nor in the attached letter of August 2, 1993,
does counsel identify material that the Court overlooked and accordingly, the Mushkin affidavit has failed to present a ground for reargument. See Violette v. Armonk Assocs., L.P., 823 F. Supp. 224, 225 (S.D.N.Y. 1993); Weissman v. Fruchtman, 124 F.R.D. 559, 560 (S.D.N.Y. 1989) (denying reargument when it is merely a "wasteful repetition of arguments already briefed, considered and decided.").
B. The Bleistines May Not Reargue the Decision Dismissing Their Securities Fraud Claim
In Global IV, the Court erroneously stated that Philip and Patricia Bleistine were not added to the Complaint until November 20, 1990. Global IV at 64. In reality, it appears that these Plaintiffs were added to the Complaint in a "So Ordered" stipulation by the Honorable John E. Sprizzo on January 30, 1990. Nevertheless, as the Bleistines are residents of Georgia, their Section 10(b) claim remains time-barred under the Georgian statute of limitations. See Global IV at 79-80.
Accordingly, the motion to reargue the decision dismissing the Bleistines' § 10(b) claims is denied.
C. The Miami Towers Plaintiffs Fail to Cite Any Overlooked Aspect of Securities Law Warranting Reargument
The Miami Towers Plaintiffs contend that the Court failed to take into account the "Better Case Law" which reflects the "Realities of the Marketplace." Pls.' Mem. of Law at 10. The Plaintiffs point to Virginia Bankshares Inc. v. Sandberg, 115 L. Ed. 2d 929, 111 S. Ct. 2749 (1991) ("Virginia Bankshares") and the cases cited therein to support their argument that the Opinion places too high of a burden upon the Plaintiffs to inquire about the nature of their investments.
Virginia Bankshares, a proxy case, found it to be fraudulent for directors of a company to express an opinion to the effect that a proposed freeze-out merger price was fair to the shareholders, when in fact the price was unfair and the directors knew so at the time. Id. at 2761. The Court continued to note that while publishing sufficient cautionary facts can render a misleading expression of opinion "too unimportant to ground liability," it is also evident that "not every mixture [of such misleading statements] with the true [statements] will neutralize the deceptive." Id. at 2760. "If it would take a financial analyst to spot the tension between the [true] and the [untrue], whatever is misleading will remain materially so, and liability should follow." Id. (citing Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1297 (2d Cir. 1973)).
However, Plaintiffs misrepresent the breadth of the Virginia Bankshares ruling, especially when considered in the context, or "reality," if they will, of this case. As a recent law review article has noted:
Virginia Bankshares dealt with a fairness opinion ostensibly based on existing value-related factors, not simply a projection or estimate, and the fairness opinion was not qualified by any direct cautionary language at all. . . . The bespeaks caution cases usually do not involve cautionary language of the sort that requires training in investment analysis to comprehend.
Donald C. Langevoort, Disclosures That "Bespeak Caution", 49 The Business Lawyer, 481, 491 (1994).
The ruling of Virginia Bankshares is essentially seen as a contextual one. As such it yields no great insight in contrast to the other rulings which were extensively discussed in the Opinion. See Global IV, at 80-87; see also Global II, 815 F. Supp. 620, 674-75 (S.D.N.Y. 1993). Nevertheless, in that specific context, the First American Bank of Virginia's directors "omitted any mention of the Bank's value as a going concern at more than $ 60 a share, as against the merger price of $ 42," Virginia Bankshares, 111 S. Ct. at 2761, and falsely claimed that the merger price was more than the book value. Here, as the Opinion notes, the Miami Towers Plaintiffs failed to allege any material misrepresentations or omissions which were not in fact adequately disclosed. See Global IV, at 89-92 (holding appraisal and Clark-Biondi report were available for inspection upon request).
Accordingly, the Virginia Bankshares case does not constitute controlling law overlooked by the Court for Local Rule 3(j) purposes.
D. The Miami Towers Plaintiffs May Not Reargue the Dismissal of Their RICO Claims
The Miami Towers Plaintiffs assert that the Court incorrectly found they failed to pled scienter necessary to sustain a claim of securities fraud as a predicate act for their RICO claim. They also assert that if allowed to replead they could allege continuity by establishing a link between the Defendants' alleged acts in two different partnerships -- Miami Towers and Clovine/Ellingson.
Regarding the scienter claim, the Plaintiffs allege that the willfulness standard described by the Second Circuit in Metromedia Co. v. Fugazy, 983 F.2d 350 (2d Cir. 1992), cert. denied, 124 L. Ed. 2d 662, 113 S. Ct. 2445 (1993) ("Metromedia Co."), for a § 12(2) violation was not applied by the Court in the Opinion. This assertion is inconsistent with the Opinion of the Court which simply noted that the standard for the requisite degree of scienter for a predicate act of securities fraud is willfulness. Compare Global IV, at 95 n.56 (finding RICO liability attaches only when alleged predicate acts of racketeering were "knowingly and wilfully committed by defendant"), with Metromedia Co., 983 F.2d at 362-64 (noting standard for a § 12(2) violation is "willful").
The Opinion states that the Miami Tower Plaintiffs' have failed to adequately plead willfulness. As analyzed by this Court, the Complaint, see Compl. PP 29-31, 42-58, does not state a set of facts from which it could be inferred that the Defendants acted with requisite scienter. See Global IV, at 95. Accordingly, the Plaintiffs have yet to present any controlling set of facts or law which would satisfy the standards for reargument under Local Rule 3(j) on the issue of scienter.
The Miami Towers Plaintiffs also seek reargument on the question of continuity under RICO. First, it must be noted that no predicate acts have been sufficiently alleged by the Plaintiffs to establish continuity necessary to sustain a RICO claim. See Global IV at 101-05; H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989). Second, the Plaintiffs may not at this point allege a "pattern of racketeering" by the wholesale incorporation of allegations in another Integrated action -- the Clovine/Ellingson action -- without referring to that action in the Complaint. This is especially odd in light of the fact that the Clovine/Ellingson Plaintiffs maintain that their action is unrelated to the rest of the Multidistrict Litigation involving Integrated. Even if the Court considered the notion of fusing these two actions into a continuous scheme, it would be unlikely to survive the requirements of continuity as set forth by the Supreme Court in H.J. See Id., 492 U.S. at 241-42; Antonoff v. Bushell, 1991 U.S. Dist. LEXIS 7167 (S.D.N.Y. May 28, 1991); Aaronson v. Bushell, 1991 LEXIS 10527 (S.D.N.Y. Aug. 1, 1991).
Accordingly, the Miami Towers Plaintiffs' motion to reargue the dismissal of their RICO claims is denied.
IV. The Clovine/Ellingson Plaintiffs' Motion for Reargument is Denied
It appears that much of the Clovine/Ellingson Plaintiffs' claims for reargument have evaporated. See Letter of Martin Mushkin to David Zensky of Feb. 1, 1994. To the extent the Plaintiffs adopt the contentions of the RAM/Pate Plaintiffs' argument that the Court overlooked Cruden, their motion is denied for the grounds set forth above in Section II.B, supra.
By piecing together the Plaintiffs' affidavit, Memorandum of Law and letter of February 1, 1994, the only serious claim which appears to remain alive for reargument purposes is the Plaintiffs' contention that the Court injected a "special damage" requirement for RICO liability. The Court did not and does not believe that such a requirement exists in the RICO statute. The Opinion merely notes as an aside that the failure of long term business projections to fulfill their cautionary expectations unfortunately cannot constitute a predicate act under RICO. See Global III, at 28-29. The basis for the dismissal of their RICO claims, however, was because they were time-barred. Id. at 29-33.
Accordingly, the Clovine/Ellingson Plaintiffs' motion for reargument, pursuant to Local Rule 3(j), is denied.
For the reasons set forth above, the RAM/Pate, Miami Towers, and Clovine/Ellingson Plaintiffs' motions to reargue, pursuant to Local Rule 3(j), are denied.
It is so ordered.
New York, N. Y.
April 4, 1994
ROBERT W. SWEET