The opinion of the court was delivered by: Robert W. Sweet, United States District Judge
The defendants Investment Management Services, Inc. ("IMS"),
International Fund Services (Ireland) ("IFSI"), International Fund
Services, Inc. ("IFS"), European Fund Services Limited ("EFS") and Thomas
Grizzetti ("Grizzetti") (collectively, the "IMS defendants"), defendant
Jonathan Vinnik ("Vinnik"), and defendants Rosenman & Cohn LLP and Fred
M. Santo ("Santo") (collectively the "Rosenman defendants"), have moved
pursuant to Rules 9(b) and 12(b)6, Fed.R.Civ.P. to dismiss the Amended
Complaint of plaintiff The Jordan (Bermuda) Investment Company, Ltd.
("Jordan"). For the reasons set forth below, the motion is granted.
The initial complaint in this action (the "Complaint") was dismissed by
opinion of this Court on July 18, 2001 (the "July 18 Opinion"), The Jordan
(Bermuda) Investment Co., Ltd. v. Hunter Green Investments Ltd.,
154 F. Supp.2d 682 (S.D.N.Y. 2001), and the issue presented is whether or
not Jordan has cured the previously held defects. The parties and the
background of the litigation, including the prior proceedings, were set
forth in the July 18 Opinion and will not be repeated here since
familiarity with that opinion is presumed.
Count I of the Amended Complaint alleges a Racketeer Influenced and
Corrupt Organization ("RICO") claim under 18 U.S.C. § 1962(b) only
against "the Investment Manager Defendants, Administrator Defendants and
Director Defendants," which include Vinnik and each of the IMS
Defendants, but not the Rosenman defendants.*fn1 The Amended Complaint
asserts that Vinnik and the IMS Defendants "maintained, directly or
indirectly, an interest in" Beacon Emerging Debt Fund, Ltd. ("Beacon" or
the "Fund") and Beacon Emerging Growth Fund LP ("Beacon Growth") "through
a pattern of racketeering activity." (Am. Compl. at ¶ 71).
One difference between the Complaint and the Amended Complaint is the
addition of new allegations (i) that a scheme existed to induce an
investor other than The Jordan Trust, Baldwin Enterprises, Inc.
("Baldwin"), to invest $5,000,000 in Beacon on or about July 10, 1997,
based on a misrepresentation as to the existence of non-existent "Series
9" shares, and (ii) that a scheme existed to induce that same investor
one year later — on or about June 11, 1998 — to invest an
additional $14,000,000 based on similar misrepresentations in yet another
non-existent class of Beacon shares (the "Class H shares").
The Amended Complaint also contains allegations that (i) a scheme
existed consisting of the misappropriation of $472,945 of Beacon's money
for the benefit of the Beacon Growth to the detriment of Beacon, its
creditors, its investors and The Jordan Trust; and (ii) a similar
corporate waste scheme existed, which consisted of the misappropriation
of $751,384 of Beacon's participatory interests in currency instruments
for the benefit of United European Securities Ltd., a company affiliated
with the IMS defendants, and to the detriment of Beacon, its creditors,
its investors, and The Jordan Trust. The Amended Complaint alleges that
the alleged corporate waste schemes were separate and apart from the
scheme directed specifically at the Trust.*fn3
In all other respects, Count I of the Amended Complaint appears to be
identical with the allegations of the Complaint, except, as noted
earlier, Count I of the Amended Complaint is not brought against and,
thus seeks no relief, from the Rosenman defendants.
Count II of the Amended Complaint repeats all of the prior allegations
and then alleges that Vinnik and the IMS Defendants (again included
within the categories Investment Manager Defendants, Administrator
Defendants, and Director Defendants) conducted the operations and affairs
of Beacon and Beacon Growth through a pattern of racketeering activity.
Count II is not brought against the Rosenman defendants.
Count III alleges a RICO conspiracy claim against the Rosenman
defendants and all of the other defendants. After realleging all of the
prior allegations, Jordan alleges that the defendants "unlawfully and
willfully conspired, combined, confederated and agreed with each other to
violate 18 U.S.C. § 1962(b) and/or (c)" and that as "part of and in
furtherance of this conspiracy, each of the defendants committed two or
more predicate acts, agreed to the commission of two or more predicate
acts by some member of the conspiracy or knew, or should have known, that
predicate acts were part of a pattern of racketeering in violation of
18 U.S.C. § 1962(b) or (c)." (Am. Compl. ¶¶ 83-84).
The Amended Complaint also alleges four common law fraud counts
(including concerted action, conspiracy, and aiding and abetting),
negligent misrepresentation and omission, four counts of breach of
fiduciary duty, negligence, and conversion, all of which are identical to
the allegations of the original Complaint. The Amended Complaint also
adds a new claim under New York's Consumer Protection Law, Section 349 of
the General Business Law. As to the state law claims, the Amended
Complaint alleges diversity and supplemental jurisdiction.
The instant motions to dismiss were filed on October 5, 2001. The
parties submitted briefing papers through January 2001, and argument was
held on February 13, 2002, at which time the motions were deemed fully
I. Standards for Motion to Dismiss
In analyzing a motion to dismiss pursuant to Rule 12(b)(6), a court
must view the complaint in the light most favorable to plaintiff and
accept all allegations contained in the complaint as true. See Scheur v.
Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974);
Annis v. County of Westchester, 36 F.3d 251, 253 (2d Cir. 1994) A
complaint should not be dismissed for failure to state a claim unless "it
is clear that no relief could be granted under any set of facts that
could be proved consistent with the allegations." Hishon v. King &
Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) (citing
Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
To the extent the claims in Jordan's Amended Complaint are based on
allegations of fraud, they must also satisfy the pleading requirements of
Fed.R.Civ.P. 9(b), which states that "[i]n all averments of fraud or
mistake, the circumstances constituting fraud or mistake shall be stated
with particularity." Thus, to satisfy Rule 9(b), the Amended Complaint
must "adequately specify the statements it claims were false or
misleading, give particulars as to the respect in which plaintiff
contends the statements were fraudulent, state when ...