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GABRIEL CAPITAL, L.P. v. NATWEST FINANCE

October 4, 2001

GABRIEL CAPITAL, L.P., A DELAWARE LIMITED PARTNERSHIP, AND ARIEL FUND LTD., A CAYMAN ISLANDS CORPORATION, PLAINTIFFS,
V.
NATWEST FINANCE, INC., F/K/A GLEACHER NATWEST INC.; NATWEST CAPITAL MARKETS LIMITED; NATIONAL WESTMINSTER BANK PLC; MCDONALD INVESTMENTS INC, F/K/A MCDONALD & COMPANY SECURITIES, INC.; AND STEEL DYNAMICS INC., DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

Plaintiffs Gabriel Capital, L.P. ("Gabriel Capital") and Ariel Fund Ltd. ("Ariel Fund") sued defendants NatWest Finance, Inc. ("NatWest"), McDonald Investments Inc. ("McDonald"), and Steel Dynamics Inc. ("SDI") for securities fraud arising from plaintiffs' purchase of bonds issued by a Thailand corporation, Nakornthai Strip Mill Public Company Limited (the "NSM Notes").*fn1 Plaintiffs alleged that NatWest violated section 10(b) of the Securities and Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, by making or participating in the making of untrue statements and by omitting material facts in order to induce plaintiffs to purchase the NSM Notes. Plaintiffs also alleged that through the same conduct, NatWest committed common law fraud, conspired to commit fraud, and aided and abetted fraud in violation of New York law.

On May 8, 2000, this Court denied NatWest's and McDonald's motion to dismiss plaintiffs' first Amended Complaint and granted in part and denied in part SDI's motion to dismiss. See Gabriel Capital, L.P. v. NatWest Finance, Inc., 94 F. Supp.2d 491, 512 (S.D.N.Y. 2000) ("Gabriel I"). On May 30, 2000, plaintiffs filed their Second Amended Complaint ("SAC"), which added claims against two new defendants, NatWest Capital Markets Limited ("NatWest Capital") and National Westminster Bank PLC ("NatWest Bank"), and attempted to cure the deficiencies in the allegations against SDI. SDI, NatWest Capital and NatWest Bank moved to dismiss the SAC. These motions were also denied. See Gabriel Capital, L.P. v. NatWest Finance, Inc., 122 F. Supp.2d 407, 437 (S.D.N.Y. 2000) ("Gabriel II ".)

Currently before this Court is a motion for summary judgment brought by NatWest, NatWest Capital and NatWest Bank (collectively the "NatWest defendants" or "defendants") seeking to dismiss all aspects of the SAC that rely upon any alleged misrepresentations contained in the Offering Memorandum and conveyed during the "road show" presentation.*fn2 The NatWest defendants claim that plaintiffs cannot prove that they relied on such misrepresentations and that summary judgment in their favor should be granted. For the following reasons, defendants' motion is granted in part and denied in part.

I. BACKGROUND

The allegations in the Amended Complaint have already been exhaustively summarized in Gabriel I, see 94 F. Supp.2d at 495-98, as have the allegations in the SAC, see Gabriel II, 122 F. Supp.2d at 411-17. Familiarity with both opinions and the facts contained therein is assumed for purposes of this motion. For the sake of brevity, only the facts uniquely relevant to this motion will be reiterated.

A. The Alleged Misrepresentations

Plaintiffs allege that the NatWest defendants made misrepresentations in both the Offering Memorandum and the road show presentation concerning the following:

(i) the status of the hot mill, see SAC ¶¶ 25 and 26;
(ii) the design of the mini-mill, see id. ¶¶ 27 and 28;
(iii) the ability of NSM to secure an adequate supply of scrap metal, see id. ¶¶ 29 and 30;
(iv) the existence of "off-take" agreements, see id. ¶¶ 31 and 32; and

(v) the management of NSM, see id. ¶¶ 33-35.

Additionally, plaintiffs allege that the Offering Memorandum contained misrepresentations concerning the use of proceeds from the ...


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