in common law fraud in connection with Baffa's purchase of these securities.
Defendants are various individuals and entities associated with the Offering of the Rickel units. Friedman, Korn, Borshadel, Henry and Levison were all Rickel directors and/or officers at the time of the Offering. Defendant DLJ was the underwriter for the Offering. Defendants EOS and GE Capital each owned 44.2% of Rickel's common stock at the time of the Offering.
Defendants have filed a motion seeking to dismiss Baffa's complaint pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure ("FRCP").
For the reasons set forth below, defendants' motion to dismiss is denied.
II. THE STANDARD FOR DISMISSAL UNDER RULE 12(B)(6)
A motion to dismiss for "failure to state a claim upon which relief can be granted" pursuant to Rule 12(b)(6) should be granted only if 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); see Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985); Seagoing Uniform Corp. v. Texaco, Inc., 705 F. Supp. 918, 927 (S.D.N.Y. 1989). Therefore, on a motion to dismiss, all factual allegations of the complaint must be accepted as true. See Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); Frasier v. General Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991). Additionally, all reasonable inferences must be made in plaintiff's favor. See Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); Meilke v. Constellation Bancorp, 1992 U.S. Dist. LEXIS 2368, 1992 WL 47342 (S.D.N.Y. 1992). As the Second Circuit noted, "the court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d at 1067.
III. REQUIREMENTS UNDER SECTION 10(b) AND RULE 10b-5
In order to have a cause of action for securities fraud under Section 10(b) and Rule 10b-5 of the 1934 Act, a plaintiff "must plead that the defendant made a false statement or omitted a material fact, with scienter, and that plaintiff's reliance on defendant's action caused plaintiff injury." San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Companies, Inc., 75 F.3d 801, 808 (2d Cir. 1996) (citations omitted).
IV. REQUIREMENTS UNDER RULE 9(b)
Since plaintiff's complaint entails allegations of fraud, the complaint must also meet the requirements of Rule 9(b) of the FRCP. Rule 9(b) provides as follows:
"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."