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January 13, 2003


The opinion of the court was delivered by: John G. Koeltl, United States District Judge:


This is a motion brought, pursuant to Fed.R.Civ.P. 12(b)(6) by Keefe, Bruyette & Woods, Inc. ("KBW"), KBW's former Chief Executive Officer, James J. McDermott, Jr. ("McDermott") and a former KBW employee David Berry ("Berry"), (collectively "the defendants") to dismiss two of the six causes of action alleged by the plaintiff, Teresa N. Dooner, in her Second Amended Complaint ("SAC"). The plaintiff raises six causes of action in the Second Amended Complaint. The first cause of action is a claim for common law fraud, alleging that KBW and McDermott committed fraud by misrepresenting and failing to disclose certain facts related to a purported initial public offering ("IPO") of KBW stock. The second through fifth causes of action, respectively, are claims for hostile work environment, discriminatory disparate treatment, and retaliation, and are raised against KBW and Berry and arise out of the alleged treatment of the plaintiff by Berry who served as her supervisor. The plaintiff's sixth and final cause of action, raised against KBW and Berry, is for defamation, and arises out of a statement allegedly made by Berry at a meeting of KBW's board of directors. The defendants now move to dismiss the plaintiff's first and sixth causes of action for fraud and defamation.*fn1


On a motion to dismiss, the allegations in the Second Amended Complaint are accepted as true. See Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir. 1998). In deciding a motion to dismiss, all reasonable inferences are drawn in the plaintiff's favor. See Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). Therefore, the defendant's motion to dismiss should only be granted if it appears that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. See Swierkiewicz v. Sorema, N.A., 122 S.Ct. 992, 998 (2002); Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Grandon, 147 F.3d at 188; Goldman, 754 F.2d at 1065.


The defendants first move to dismiss the plaintiff's first cause of action, for common law fraud.

The plaintiff first filed a complaint in this action on January 27, 2000. The defendants moved to dismiss various causes of action in the complaint pursuant to Fed.R.Civ.P. 12(b)(6) By order dated October 19, 2000, the plaintiff was granted leave to file an amended complaint.

After the filing of the First Amended Complaint, the defendants moved to dismiss, among other things, the plaintiff's fraud claims. In a prior Opinion and Order issued by this Court, dated August 20, 2001, the Court dismissed the plaintiff's causes of action for fraud without prejudice to repleading. Dooner v. Keefe, Bruyette, & Woods, Inc., 157 F. Supp.2d 265, 286 (S.D.N.Y. 2001). Subsequently, the plaintiff filed the Second Amended Complaint.

It is true that "[w]here a party's complaint has been dismissed for failure to adequately to set forth an element of his claim, and he is given leave to replead in an effort to cure the deficiency, it is to be expected that the amended complaint will repeat the other allegations found in the original complaint." Stern v. Leucadia Nat'l Corp., LNC, 844 F.2d 997, 1005 (2d Cir. 1988). However, in this case a plain reading of the two complaints indicates that the allegations with respect to the fraud claim are substantially similar, if not identical, in the two complaints. The plaintiff has not alleged any new facts to remedy the pleading deficiencies in the First Amended Complaint that caused the dismissal of the fraud claims based on the representations regarding KBW's IPO. Consequently, for the reasons explained below and in this Court's prior opinion, the defendants' motion to dismiss the first cause of action for fraud is granted.

Under New York law, a claim for fraud based on false statements must allege the following elements: (1) a material false representation of an existing fact; (2) made with knowledge of its falsity; (3) with an intent to defraud; (4) reasonable reliance; and (5) damages. See, e.g., Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994); Four Finger Art Factory, Inc. v. Dinicola, No. 99 Civ. 1259, 2001 WL 21248, at *3 (S.D.N.Y. Jan. 9, 2001); Channel Master Corp. v. Aluminimum Ltd. Sales, Inc., 151 N.E.2d 833, 835 (N.Y. 1958).

The plaintiff first alleges that the defendants committed fraud by assuring the plaintiff that the IPO was a "sure thing", a "done deal," and that she would "make a lot of money out of [the IPO]." (SAC ¶¶ 151, 157.) Additionally, the plaintiff alleges that the defendants "knew of no set of facts or circumstances" as to why the IPO would not occur. (SAC ¶ 153.) (emphasis in original). For many of the same reasons stated in this Court's previous opinion, these allegations fail to state adequately a cause of action for common law fraud.

First, these allegations fail to satisfy the first element of fraud because they still do not allege a material false representation with respect to an existing fact. The allegations all relate to the defendants' representations about an impending IPO and the probable financial success the plaintiff was likely to achieve. These statements of prophecy cannot be the basis of a fraud claim, precisely because IPO plans are not certain, and are subject to the vagaries of the market and the perceptions of investors. Statements with respect to an IPO, such as those alleged by the plaintiff, reflect only speculative optimism about future events, and cannot satisfy the first element of a fraud claim. See Dooner, 157 F. Supp.2d at 278-79.

The plaintiff's attempt to cure the deficiencies with respect to this first element, by asserting in a conclusory manner, that the defendants asserted that they knew of "no set of facts or circumstances" that would prevent the IPO from going forward, also fails. (SAC ¶ 58) This allegation still fails to allege a misstatement about an existing fact, because the alleged statement still refers to circumstances relating to a future event, the IPO.

Moreover, to the extent the alleged representation by the defendants that they knew of "no facts or circumstances" to call the IPO into doubt is one of a present fact, this representation cannot be the basis of a claim for fraud because it fails to allege facts with sufficient particularity. The plaintiff's allegation that McDermott made such a representation "in words or substance," (SAC ¶ 58.), is insufficiently precise so as to provide the factual foundation required by Rule 9(b). There are no facts alleged with respect to the substance, timing, or place of any of the purported conversations between the plaintiff and the McDermott regarding the IPO, see Feigenbaum v. Marble of Am., Inc., 735 F. Supp. 79, 82 (S.D.N.Y. 1990), and insufficient facts ...

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