The opinion of the court was delivered by: SCHEINDLIN
SHIRA A. SCHEINDLIN, U.S.D.J.
Defendants Acorn International Ltd. ("Acorn"), Geller Partners, Inc. ("Geller Partners"), and Jeffrey L. Geller ("Geller") (together, "Defendants") move, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss a number of Plaintiff's claims for failure to state a claim upon which relief can be granted.
For the reasons set forth below, the motion is granted in part and denied in part.
In early 1993, Deran Holding Company ("DHC") was incorporated in Delaware for the purpose of acquiring from Borden the assets of Borden's candy division. Complaint ("Cplt.") P 20. At the time of DHC's incorporation, Defendant Acorn was its sole shareholder. Id. P 21.
On April 8, 1993, Plaintiff Steven A. Cohen ("Cohen") purchased 60% of DHC's common stock for three million dollars. Id. P 27. On the same day, DHC completed its acquisition of Borden's candy division. Id. P 28. Defendant Geller acted as Acorn's financial advisor with respect to these two transactions. See Defendants' Exhibit ("Def. Ex.") D, Exhibit Book to Defendants' Motion to Dismiss and for Summary Judgment.
During this time, Defendant Robert E. Gillis was Acorn's Chairman and Chief Executive Officer. See Cplt. P 5.
By early 1994, DHC had incurred substantial operating and net losses. Id. P 10. As a result, DHC defaulted on its senior loan, filed for bankruptcy, and ceased its business operations. Id. On February 28, 1994, DHC filed a multi-million dollar action against Borden, alleging, inter alia, breach of contract, misrepresentation, and fraud. That action has since been settled and dismissed.
The instant action was filed in September 1994, alleging securities fraud, common law fraud, and negligent misrepresentation. Plaintiff alleges that Defendants solicited his purchase of the DHC securities by means of false and misleading investment materials which they prepared for his use. See Cplt. PP 7-8, 80.
The Complaint contains four counts. Count I alleges misrepresentation or omission of a material fact, in violation of § 12(2) and § 15 of the Securities Act of 1933, 15 U.S.C. § 77e(2) and 15 U.S.C. § 77o, respectively. Count II asserts similar misconduct under the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. Count III alleges common law fraud, and Count IV asserts a claim of negligent misrepresentation.
Defendants argue that in light of the recent decision of the U.S. Supreme Court in Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 131 L. Ed. 2d 1, 115 S. Ct. 1061 (1995), all claims under Count I should be dismissed. Further, Defendants contend that the claims in Count II should be dismissed to the extent that they assert "aiding and abetting" claims against Geller and Geller Partners, citing another recent Supreme Court decision, 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). Defendants also move to dismiss Counts II and III to the extent that the claims are inconsistent with the claims asserted by DHC against Borden in the Massachusetts state action. Finally, Defendants seek dismissal of Count IV, the negligent misrepresentation claims, as against Geller and Geller Partners because Plaintiff fails to allege privity or a special relationship between Plaintiff and the Geller Defendants.
In evaluating a motion to dismiss, a court must accept as true all factual allegations in the complaint. See Cohen v. Koenig, 25 F.3d 1168, 1171-72 (2d Cir. 1994). The court must also draw every reasonable inference in favor of the non-moving party. See Allen v. WestPoint Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991). Additionally, a court may not dismiss a complaint unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). Generally a court may take into consideration only those facts which appear in the complaint, but it may also consider documents which are integral to plaintiff's claims. See I. Meyer Pincus & Assoc., P.C. v. Oppenheimer & Co., 936 F.2d 759, 762 (2d Cir. 1991).
The engagement letter between Acorn and Geller submitted by the Defendants, is "integral" to Plaintiff's claims.
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)). ...