Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

ISANAKA v. SPECTRUM TECHNOLOGIES USA INC.

February 18, 2001

RAM ISANAKA, INDIVIDUALLY AND ON BEHALF OF ALL OTHER NON-RESIDENT INDIAN INVESTORS IN SPECTRUM POWER GENERATION LIMITED, PLAINTIFF,
V.
SPECTRUM TECHNOLOGIES USA INC.; SPECTRUM TECHNOLOGIES USA INC. OF MAURITIUS; SPECTRUM INFRASTRUCTURES LIMITED, MAURITIUS; SPECTRUM INFRASTRUCTURES LIMITED, CHANNEL ISLANDS; A.V. MOHAN RAO; AND BRIJ BHARTEEY, DEFENDANTS. SPECTRUM TECHNOLOGIES USA INC.; SPECTRUM TECHNOLOGIES USA INC. OF MAURITIUS; SPECTRUM INFRASTRUCTURES LIMITED, MAURITIUS; SPECTRUM INFRASTRUCTURES LIMITED, CHANNEL ISLANDS; AND A.V. MOHAN RAHO, COUNTER-CLAIMANT, V. RAM ISANAKA, COUNTER-DEFENDANT.



The opinion of the court was delivered by: Kahn, District Judge.

MEMORANDUM — DECISION AND ORDER

Presently before the Court is a motion to dismiss by defendant Brij Bharteey, a motion to dismiss by defendants Spectrum Technologies USA Inc. ("STUSA"), Spectrum Technologies USA Inc. of Mauritius ("STUSA-Mauritius"), Spectrum Infrastructures Limited, Mauritius ("SIL-Mauritius"), Spectrum Infrastructures Limited, Channel Islands ("SIL-Channel Islands"), and A.V. Mohan Rao (collectively "Corporate Defendants"), and a motion by plaintiff Ram Isanaka for leave of the Court to voluntarily dismiss his class claims and continue his individual claims*fn1 and for leave to amend his complaint to add up to seventeen new plaintiffs. For the following reasons, defendant Bharteey's motion is GRANTED, Corporate Defendants' motion is GRANTED; and Plaintiffs motion is GRANTED in part and DENIED in part.

I. BACKGROUND

The current suit concerns alleged misrepresentations made to Plaintiff regarding his investment in a power plant project located in India and operated by Spectrum Power Generation, Ltd. ("SPGL"). Plaintiff alleges that, during the second half of 1994 and the first half of 1995, defendant Rao solicited him to invest in the SPGL power plant project via STUSA.*fn2 Plaintiff accepted this offer and purchased 1500 shares of unregistered securities from defendant Rao in February 1995. Around this same time, Plaintiff offered to assist Defendants with the procurement of additional investment funds for the project from Indians residing in this country ("Non-Resident Indians" or "NRIs").

Defendants hired Plaintiff as their agent to solicit investments from NRIs in the states of New York, New Jersey, Illinois, Florida, Arkansas, and California and paid him a 6% commission on all investments he obtained in the form of additional stock in the investment project. Ultimately, according to Plaintiff, over $9.3 million was collected from Non-Resident Indian investors and placed, through STUSA, in two off-shore accounts. According to defendant Rao, the accounts, based in Mauritius and the Channel Islands, were established to benefit the NRIs by taking advantage of favorable tax laws.

Plaintiff alleges that defendant Rao utilized these off-shore accounts, not to protect his investment in the Indian power plant project, but to defraud him and other investors out of money. In particular, Plaintiff claims that the offshore accounts, although holding ninety percent of the NRI's investments, were never utilized to obtain an equity share for the investors in the SPGL project. Instead, Plaintiff claims that, contrary to the express promises of defendant Rao, he and other NRI investors were granted unregistered stock certificates representing partial ownership in SIL-Mauritius, a holding company of STUSA-Mauritius.

In response to these allegations, Defendants argue that, through defendant STUSA-Mauritius, they transferred all the NRI investment funds, including Plaintiffs, to SPGL. This allowed STUSA-Mauritius, and the NRIs through their ownership interest in SIL-Mauritius, to gain a direct ownership in SPGL. That STUSA-Mauritius, Plaintiff, and the NRI investors have not received any dividends from the power plant project, according to Defendants, does not negate the fact that they complied with the express terms of the investment agreement offered to the NRIs. Instead, Defendants claim that they are currently engaged in litigation with SPGL in the Delhi High court to enforce a promoters agreement that entitles STUSA-Mauritius to unpaid dividends.

Plaintiff filed suit on August 27, 1999 alleging that Defendants' actions violated § 12(2) of the Securities Act of 1933 ("Securities Act"),*fn3 § 10(b) of the Securities Exchange Act of 1934 ("Securities Exchange Act"),*fn4 and Rule 10b-5*fn5 promulgated thereunder by utilizing an instrumentality of interstate commerce to engage in manipulative and deceptive securities practices. Plaintiff also asserted various pendent state law claims against defendants.

II. DISCUSSION

A. Standard for Motion to Dismiss

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), for "failure to state a claim upon which relief can be granted," must be denied "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim [that] would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In assessing the sufficiency of a pleading, "all factual allegations in the complaint must be taken as true," LaBounty v. Adler, 933 F.2d 121, 123 (2d Cir. 1991), and all reasonable inferences must be construed in favor of the plaintiff, see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); see also Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1099 (2d Cir. 1988) (applying the principle of construing inferences in favor of plaintiff). As this Circuit has stated, when determining the merits of a motion to dismiss,

consideration is limited to the factual allegations in [the] complaint, which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit.

Brass v. American Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993).

The Rules do not require the plaintiff to set out in detail the facts upon which the claim is based, but only that the defendant be given "fair notice of what the . . . claim is and the grounds upon which it rests." Conley, 355 U.S. at 45-46, 78 S.Ct. 99. Individual allegations, however, that are so baldly conclusory that they fail to give notice of the basic events and circumstances of which the plaintiff complains are meaningless as a practical matter and, as a matter of law, insufficient to state a claim. See Barr v. Abrams, 810 F.2d 358, 363 (2d Cir. 1987) (applying this standard to a complaint based upon civil rights statutes).

B. Defendants' Liability Under the Securities Act and Securities Exchange Act
i. Statute of Limitations on Plaintiffs Section 10(b) and Rule 10b-5 Claims

Plaintiffs Section 10(b) and Rule 10b-5 claims are subject to the statute of limitations contained in section 9(e) of the Securities Exchange Act.*fn6 See Lampf Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 360-61, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991); Ceres Partners v. GEL Assocs., 918 F.2d 349, 364 (2d Cir. 1990). Under this portion of the Securities Exchange Act, a party must commence an action to maintain or enforce liability "within one year after the discovery of facts constituting the violation and within three years after such violation." 15 U.S.C. § 78i(e).

Plaintiffs complaint indicates that defendant Rao misrepresented to him and other NRIs that any funds invested through STUSA would be invested directly in SPGL. The complaint further indicates that defendant Rao, and possibly others, continued to make false misrepresentations to him and other NRIs concerning their investment up until, at the latest, June 1999.*fn7 Thus, Plaintiff argues that the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.