and act for SG Cowen." (Pl. Mem. at 18). However, the letter, which
welcomes Rozsa to May Davis, a "full service investment banking and
brokerage firm," does not mention SG Cowen and by its terms shows
unequivocally that May Davis was dealing with Rozsa as a principal. Because
it is a document attached to the Amended Complaint which contradicts
Rozsa's allegations based upon an agency relationship between SG Cowen and
May Davis, the agency allegations need not be accepted as true for purposes
of this motion. See DeJesus-Keolamphu, 999 F. Supp. at 563.
The allegations of conversations between SG Cowen and May Davis, and acts
consistent with those conversations, do not create a contractual
relationship with Rozsa.
The breach of contract claim against SG Cowen is dismissed.
The Amended Complaint Fails to State a Claim for Conversion
Rozsa argues that he has pled a claim for conversion in accordance with
the five-element standard that the Court set forth in Rozsa I, 152 F.
Supp.2d at 534, because paragraphs 15 and 16 of the Amended Complaint
allege that, upon information and belief that SG Cowen rejected a
proposal by May Davis to create a separate sub-account for Rozsa, SG Cowen
told May Davis that Rozsa should send his funds to the Foundation's
Account, with the notation that they were for Rozsa's benefit; that May
Davis relayed that information to Rozsa; that Rozsa did so; and that SG
Cowen subsequently transferred funds from the Account at the Foundation's
request. (Pl. Mem. at 18-20).
Irrespective of what SG Cowen told May Davis, and what May Davis told
Rozsa, as shown by the Amended Complaint and documents referred to
therein, Rozsa's funds were deposited into the Account owned by the
Foundation, and the Account itself never contained any designation that
it was for Rozsa's "benefit." (See Am. Compl. ¶¶ 14, 18, 23-24).
Accordingly, when SG Cowen transferred those funds from the Account
pursuant to the Foundation's instructions, Rozsa no longer had "ownership"
of the funds, nor was the Account a "specific and identifiable" fund of
Rozsa. There were no facts alleged upon which it could be assumed that
Rozsa controlled the Account of the Fund. See Pinnacle Consultants, Ltd.
v. Leucadia National Corp., 923 F. Supp. 439, 447 (S.D.N.Y. 1995),
aff'd, 101 F.3d 900 (2d Cir. 1996).
The conversion claim is dismissed.
The Amended Complaint Fails to State a Claim of Negligence
In Rozsa's final claim, he alleges that SG Cowen was negligent in that it
breached two duties to Rozsa: (i) a duty of care to safeguard Rozsa's funds
so as to prevent such funds being "transferred to Rozsa's detriment," and
(ii) a duty of inquiry that it assumed when it purportedly came to know of
"irregularities in the various instructions submitted to it by May Davis."
(Am. Compl. ¶¶ 72-73).
A claim for negligence should be dismissed where a plaintiff has failed
to plead facts that would establish the requisite elements of: (i) the
existence of a duty flowing from defendant to plaintiff; (ii) a breach of
that duty; (iii) a reasonably close causal connection between the acts in
issue and the resulting injury; and (iv) actual loss, harm or damage.
Renner v. Chase Manhattan Bank, No. 98 Civ. 926 (CSH), 2000 WL 781081, at
*21 (S.D.N.Y. June 16, 2000) (citing Integrated Waste Services, Inc. v.
Azko Nobel Salt, Inc., 113 F.3d 296, 299 (2d Cir. 1997)).
Courts have determined that clearing brokers do not owe duties to
plaintiffs who are customers of their introducing brokers. See, e.g.,
939 F. Supp. at 329-332 (dismissing negligence claim against
clearing broker); Greenberg v. Bear Stearns & Co., 220 F.3d 22, 28-29 (2d
Cir. 2000) (no duty of clearing broker to make inquiry re introducing
broker's alleged undisclosed and excessive profits and to inform
introducing broker's customers); In re Blech Securities Litigation,
928 F. Supp. 1279, 1295-96 (S.D.N.Y. 1996) (a clearing broker owed no
duty of disclosure to clients of an introducing broker).
Rozsa contends that the cases holding that clearing brokers do not owe
a duty to customers of their introducing firms are inapplicable because
he was not informed that SG Cowen was acting as May Davis's clearing
broker; and SG Cowen owed Rozsa a duty pursuant to (i) NYSE Rules 382,
405, 406, and 408; (ii) New York UCC § 3-205, concerning restrictive
endorsements; (iii) a release issued by The Society for Worldwide
Interbank Financial Telecommunication ("SWIFT"), a "bank-owned
cooperative," which may have been applicable to the transfer of funds in
issue; and (iv) SG Cowen's alleged failure to comply with the standards
of the brokerage community. (Pl. Mem. at 20-23).
However, the cases cited by SG Cowen for the proposition that clearing
brokers do not owe a duty to customers of their introducing firms are not
predicated on the existence of a fully-disclosed clearing relationship.
See, e.g., Greenberg, 220 F.3d at 28-29. For the reasons set forth above,
the NYSE rules cited by Rozsa do not establish any duty owed by SG Cowen to
him and, in any event, he has not shown that SG Cowen violated any such
rules. UCC § 3-205 addresses restrictive endorsements with respect to
commercial paper, and therefore it is inapplicable to this case. Rozsa has
not alleged or otherwise shown that the alleged transfer of funds from his
bank to SG Cowen's bank was effected through SWIFT, and he has not shown
that SWIFT established any duty owed by SG Cowen to Rozsa. Rozsa's
references to standards within the brokerage community certainly do not
establish any such duty. See Riggs, 939 F. Supp. at 332 n. 15.
The cause of action for negligence is dismissed.
This is Rozsa's second effort to state a claim against SG Cowen. Under
these circumstances, the Amended Complaint is dismissed with prejudice for
failure to state a claim without leave to replead. See Hayden v. County of
Nassau, 180 F.3d 42, 54 (2d Cir. 1999).
It is so ordered.
© 1992-2003 VersusLaw Inc.