The opinion of the court was delivered by: VICTOR Marrero, United States District Judge.
DECISION AND AMENDED ORDER
Plaintiffs Jay M. Wolff, David Bliss, Tim Barber, and Steve O'Brien
(collectively, the "Plaintiffs"? brought this action against defendants
Rare Medium, Inc., ICC Technologies Inc. n/k/a Rare Medium Group, and
Rare Medium Texas I, Inc. ("Rare Medium"), alleging breach of contract,
tortious interference with contract, and tortious interference with
prospective business advantage. Plaintiffs, who were former principal
shareholders of Big Hand, Inc. ("Big Hand"), base their claims upon an
Agreement and Plan of Merger (the "Merger Agreement") entered into in
April 1999 by Big Hand and Rare Medium.
On June 27, 2002, the Court issued an Order granting Rare Medium's
motion to dismiss Plaintiffs' Amended Complaint. The June 27, 2002 Order
indicated that the Court's reasoning would be set forth in a subsequent
decision. For the reasons discussed below, the Court grants Rare Medium's
motion to dismiss Plaintiffs' Amended Complaint and amends the June 27,
2002 Order to incorporate the discussion herein.
In April 1999, Plaintiffs entered into a Merger Agreement with Rare
Medium to sell Big Hand in exchange for shares of Rare Medium's stock.
The Merger Agreement contained several time-sensitive restrictions on
Plaintiffs' ownership rights in the exchanged stock. It provided that for
twelve months after the merger, Plaintiffs were restricted from selling
or entering into any transaction related to the Rare Medium stock.
However, within the interim period of twelve months to eighteen months
after the merger, Plaintiffs were
permitted to enter a limited set of
transactions as prescribed by section 4.4(a) of the Merger Agreement.*fn1
During the end of the twelve-month waiting period, Rare Medium's share
price began to drop rapidly. Soon after the one year anniversary,
Plaintiffs sought to enter into transactions ("Attempted Transactions")
to "collar"*fn2 their stock with the brokerage firm of Morgan Stanley so
that they could lock in a price range for the stock. (Am. Compl. ¶¶
27-28.
Plaintiffs allege that they entered into a brokerage agreement (the
"Brokerage Agreement") with Morgan Stanley to engage in the Attempted
Transactions, whereby Plaintiffs agreed to pay fees in exchange for
Morgan Stanley to undertake certain actions to collar the stock.
Plaintiffs allege that the agreement provided for Morgan Stanley to
collar certain amounts of the stock at certain times. (Am. Compl. ¶
31.) Morgan Stanley was aware of the restrictions on the stock and
requested that Rare Medium "authorize" the Attempted Transactions. (Am.
Compl. ¶ 32.)
Plaintiffs assert that Rare Medium knew that the Attempted Transactions
were permitted under the Merger Agreement but prevented such transactions
from taking place by informing Morgan Stanley otherwise. (Am. Compl.
¶ 38.) In addition, Plaintiffs allege that Rare Medium prevented the
Attempted Transactions from taking place by notifying Morgan Stanley that
it would bring a legal action against Morgan Stanley if Morgan Stanley
proceeded with the Attempted Transactions. (Id.)
Moreover, Plaintiffs allege that due to Rare Medium's fraudulent
misrepresentation about the permissibility of the Attempted Transactions
under the Merger Agreement the Attempted Transactions did not proceed and
Plaintiffs were precluded from locking in a favorable price range for the
Rare Medium stock. (Am. Compl. ¶ 41.)
On December 27, 2001, Rare Medium moved under Federal Rule of Civil
Procedure 12(b)(6) to dismiss Plaintiffs' original complaint dated May
18, 2001 (the "Original Complaint") for failure to state a claim upon
which relief could be granted. In an Order dated October 31, 2001,
amended by a Decision and Order dated November 13, 2001 (the "November
2001 Order"), the Court granted Rare Medium's motion with leave to
re-plead.*fn3
Following the dismissal, Plaintiffs filed an amended complaint on
December 7, 2001 (the "Amended Complaint") which purported to remedy the
deficiencies the Court found in the Original Complaint. The Court
presumes familiarity with the Original Complaint, which was discussed in
the November 2001 Order. In the Amended Complaint, Plaintiffs essentially
repeat the same allegations contained in the Original
Complaint. In the
Original Complaint, Plaintiffs asserted that Rare Medium breached the
Merger Agreement by telling Morgan Stanley that the Attempted
Transactions were not permitted. (Compl. ¶ 5.) Plaintiffs assert the
same claim in the Amended Complaint. (Am. Compl. ¶¶ 38, 54, 62, 70,
72.) Furthermore, Plaintiffs reassert the same claim that Rare Medium
knew that the Attempted Transactions were permissible under the Merger
Agreement. (Compl. ¶¶ 34, 48, 41 and Am. Compl. ¶ 37.)
When deciding a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), a court must accept as true all well-pleaded factual
allegations of the complaint, and draw all reasonable inferences in favor
of the plaintiff. See City of Los Angeles v. Preferred Communications,
Inc., 476 U.S. 488, 493 (1986); Jaghory v. New York Dep't of Educ.,
131 F.3d 326, 329 (2d Cir. 1997). A court may properly dismiss a
complaint when it appears beyond doubt that plaintiff cannot prove a set
of facts in support of his claim which would entitle him to relief. See
Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In determining a Rule 12(b)
(6) motion, a court's function "`is not to weigh the evidence that might
be presented at trial but merely to determine if the complaint itself is
legally ...