The Complaint alleges that Geller Partners acted as a financial advisor to Acorn and/or DHC. Cplt. P 4. Plaintiff also claims that Geller Partners was motivated by its own financial interest in soliciting him to purchase the DHC securities. Id. P 74. "An appended document will be read to evidence what it incontestably shows once one assumes that it is what the complaint says it is (or, in the absence of a descriptive allegation, that it is what it appears to be)." Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 674 (2d Cir. 1995). The engagement letter submitted by the Defendants appears to contain the agreement between Geller and Acorn/DHC. In addition, "to the extent that the written document contradicts the allegations in the complaint, the former controls." Ferber v. Travelers Corp., 802 F. Supp. 698, 702 (D. Conn. 1992) (quoting In re First Chicago Corp. Sec. Litig., 769 F. Supp. 1444, 1450 (N.D. Ill. 1991)). However, Plaintiff is not precluded from demonstrating that the terms in the letter are contradicted by the actual conduct of the parties. Cf. Gant, 69 F.3d at 675 (by attaching a document to a complaint, a plaintiff does not admit as true all assertions contained therein).
A. Intervening Supreme Court Cases
The Supreme Court recently eliminated private causes of action under § 12(2) of the Securities Act of 1933. See Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 131 L. Ed. 2d 1, 115 S. Ct. 1061, 1073-1074 (1995). Therefore, Count I of the Complaint must be dismissed.
Similarly, Count II is dismissed to the extent that the claims therein rely upon an "aiding and abetting" theory against Defendants Geller and Geller Partners. In Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 128 L. Ed. 2d 119, 114 S. Ct. 1439 (1994), the Supreme Court abolished private causes of action against alders and abettors under § 10(b) of the Securities and Exchange Act of 1934.
B. Massachusetts State Action
Defendants seek to dismiss Counts II and III to the extent that those claims are inconsistent with the claims made by DHC against Borden in the Massachusetts state action. Defendants cite no authority for this proposition. Though both actions involve essentially the same facts and the same parties (with the exception of Borden), the claims are not mutually exclusive.
Plaintiff alleges in this action that he was a victim of fraud by Acorn, Gillis, Geller, and Geller Partners. In the Massachusetts action, DHC alleged it was a victim of Borden's fraud. Though the claims are similar, the parties are distinct. The claims made by DHC against Borden in the Massachusetts action do not preclude Cohen from making other claims against different defendants in this forum.
In short, the motion to dismiss these counts is not supported by any authority. Dismissal of the claims at this stage of the litigation would be premature. The motion as to Counts II and III is denied.
C. Lack of Special Relationship
Finally, the Geller Defendants move to dismiss the claims of negligent misrepresentation in Count IV. Under New York law, which the parties concede controls, contractual privity (or a relationship so close as to be its functional equivalent) must be present in order to state a claim for negligent misrepresentation. See Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 419, 541 N.Y.S.2d 335, 539 N.E.2d 91 (1989). Courts have not hesitated to dismiss negligent misrepresentation claims where the complaint is defective as to the allegations of privity or a special relationship. See In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 271 (2d Cir. 1993), cert. denied, 114 S. Ct. 1397, 128 L. Ed. 2d 70 (1994).
Plaintiff does not allege either contractual privity or a special relationship with the Geller Defendants in the Complaint. A court may, however, reasonably infer the requisite special relationship from a fair reading of the complaint. See Mathis v. Yondata, 125 Misc. 2d 383, 480 N.Y.S.2d 173, 178 (Sup. Ct., Monroe Co. 1984); Home Mut. Ins. Co. v. Broadway Bank & Trust Co., 100 Misc. 2d 228, 417 N.Y.S.2d 856, 860 (Sup. Ct., Monroe Co. 1979), aff'd, 76 A.D.2d 24, 429 N.Y.S.2d 948 (4th Dep't 1980), aff'd, 53 N.Y.2d 568, 444 N.Y.S.2d 436, 428 N.E.2d 842 (1981). The court may make this inference from the facts in the complaint, along with the facts from other documents which are integral to the plaintiff's claim. See I. Meyer, 936 F.2d at 762; see also Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 47-48 (2d Cir. 1991), cert. denied, 503 U.S. 960, 112 S. Ct. 1561, 118 L. Ed. 2d 208 (1992).
The letter of engagement between Defendants Geller and Acorn, submitted by Defendants, is clearly integral to Plaintiff's claims. The Complaint contains several allegations which are directly refuted by the engagement letter. For example, the Complaint alleges that Geller Partners acted as a financial advisor to Acorn and/or DHC. Cplt. P 4. However, the engagement letter explicitly states that the advisory agreement was between Acorn and Jeffrey L. Geller individually. See Def. Ex. D. Further, the letter states that "Geller acknowledges that he has no power or authority to make any representations regarding Acorn, Deran Holdings, Inc. or the Deran Confectionery Company." Id. P 3. Geller was simply an advisor to Acorn. There is no showing of any relationship at all, prior to the April 8, 1993 transactions, between Defendant Jeffrey L. Geller and Plaintiff Cohen.
In fact, Plaintiff alleges that he was not informed prior to making his investment in DHC that "Geller had a substantial management role at Acorn and would play a substantial role in managing DHC's business." Cplt. P 65. Plaintiff essentially admits that prior to his purchase of the DHC securities, he knew nothing of Geller, and had no relationship with him. It follows that if Geller individually had no "special" relationship with Plaintiff Cohen, then Geller Partners could not have had a relationship with Cohen either.
The allegations and facts in the Complaint, combined with the facts in the engagement letter between Acorn and Jeffrey L. Geller, fail to show the existence of a special relationship between Cohen and the Geller Defendants. Count IV as against Geller and Geller Partners is dismissed without leave to amend.
For the reasons set forth above, Defendants' motion is granted in part and denied in part.
Shira A. Scheindlin
Dated: New York, New York
June 10, 1996