United States District Court, Southern District of New York
January 29, 2003
G-I HOLDINGS, INC., PLAINTIFF,
BARON & BUDD; FREDERICK BARON; RUSSELL BUDD; NESS, MOTLEY, LOADHOLT, RICHARDSON & POOLE; RONALD MOTLEY; JOSEPH RICE; WEITZ & LUXENBERG; PERRY WEITZ AND ROBERT GORDON, DEFENDANTS.
The opinion of the court was delivered by: Sweet, District Judge
Defendant law firm Weitz & Luxenberg ("W&L"), and individual defendants Perry Weitz ("Weitz") and Robert Gordon ("Gordon") (collectively, the "W&L Defendants") have moved pursuant to Federal Rule of Civil Procedure 12(b)(6) for an order dismissing Count XIII of the Fourth Amended Complaint (the "Complaint") of plaintiff G-I Holdings ("Holdings"). Holdings was given permission to replead Count XIII, which alleges common law fraud against the W&L Defendants on the basis of an alleged backdating of a complaint, after it was first pled in Holdings' Third Amended Complaint.
Although the W&L Defendants have done a remarkable amount of work to discredit Holdings' allegations, this Court is limited by the constructs of Rule 12(b)(6) from entertaining some, but not all, of their arguments. As a result, and for the following reasons, the W&L Defendants' motion is granted in part and denied in part.
This action was initiated by the filing of an action by Holdings against the Defendants on January 10, 2001, alleging violations of the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). The First Amended Complaint (the "FAC") was filed on April 30, 2001 and alleged inter alia that the Defendants engaged in a scheme to inundate the judicial system and Holdings with hundreds of thousands of asbestos cases without regard to their merit, and in various illegal acts in connection with such litigation including suborning false testimony. That complaint was dismissed in part on December 11, 2001, but leave was granted to replead.
In a Second Amended Complaint, filed on January 25, 2002, Holdings repled certain of its state law claims, asserted a cause of action against Baron & Budd for common law fraud, and amended the allegations with regard to its witness tampering theory. Defendants moved to dismiss the Second Amended Complaint. On March 18, 2002, however, Holdings filed a Third Amended Complaint, in which it, inter alia, added the common law fraud claim at issue here against the W&L Defendants. At a hearing on April 17, 2002, leave to file the Third Amended Complaint was granted, and the Defendants' motions to dismiss the Second Amended Complaint and strike certain allegations were denied inasmuch as they no longer targeted the current complaint. The Defendants were then given leave to renew their motions with regard to the Third Amended Complaint.
On July 17, 2002, Count XIII was dismissed with leave to replead. G-I Holdings v. Baron & Budd, 2002 WL 158328 (July 17, 2002) (the "July 17 Opinion"). That opinion directed Holdings to identify the universe of cases in which fraud was alleged to have occurred, by looking to the strictures of the New York Civil Practice Law and Rules as related to the timeline for serving complaints. Id. at *26. Holdings was instructed that if it "can identify the amended complaint that was backdated — or at least a potential group of cases — and can otherwise add greater specificity to the allegations, then Holdings may have a viable claim and should have the opportunity to replead it." Id. at *26.
On August 21, 2002, Holdings filed the Fourth Amended Complaint (the "Complaint"), which repled Count XIII in light of the July 17 Opinion. The W&L Defendants made the instant motion on October 4, 2002. Holdings responded in opposition on November 12, 2002, and the W&L Defendants replied on December 6, 2002. The motion was heard on December 11, 2002 and considered fully submitted at that time.
The Factual Allegations of the Complaint
The Complaint adopts most of the factual allegations of the Third Amended Complaint. These facts were described in greater detail in the July 17 Opinion, familiarity with which is presumed. Thus, this section will outline only the allegations that constitute the repled Count XIII. As befits a motion to dismiss under Rule 12(b)(6), the facts are assumed to be as alleged in the complaint for purposes of the instant motion and do not constitute findings of fact by the Court.
In order to pursue claims against asbestos defendants that would otherwise be time-barred, Weitz & Luxenberg has allegedly backdated documents filed in asbestos personal injury cases and tampered with and falsified records of the Supreme Court of the State of New York. (Complaint, ¶ 97.)
In the spring of 2000, Weitz & Luxenberg maintained an office at 120 Wall Street in Manhattan that oversaw the prosecution of asbestos personal injury cases on behalf of clients who had died. In May 2000, W&L attorneys recognized that they had failed to amend in a timely fashion a complaint filed in New York County. Holdings alleges that W&L remedied the problem by backdating the amended pleading, falsifying the filing stamp and altering the books and records of the New York County Supreme Court to reflect the fact that the amendment had been filed before it actually was filed. (Id., ¶ 98.)
All pleadings filed in the New York County Supreme Court bear an official court stamp, affixed by court employees, reflecting the date upon which the pleading was filed in the County Clerk's office (the "Filed Stamp"). The filing date, reflected in the Filed Stamp, is relied upon by both the Court and by litigants (including GAF) in calculating the timeliness of the filing. In the spring of 2000, GAF was a named defendant in all, or substantially all, of the asbestos liability actions brought in New York County by Weitz & Luxenberg on behalf of its clients. (Id., ¶ 99.)
Sometime after Weitz & Luxenberg discovered the error, W&L personnel, acting under the direction of senior W&L attorney Marie Ochigrossi, also known as Marie Ianniello ("Ochigrossi"), purportedly undertook to ensure that the amended complaint would be filed with a false backdated Filed Stamp and that the court's records would be falsely altered to reflect that the pleading had been filed before it actually was filed. Ochigrossi was a department head at W&L. The only other attorneys in the department were William Nugent and Marissa Cunningham, both of whom reported directly to Ochigrossi. The remainder of the department was comprised of paralegals. The two supervising paralegals in the department were Alisha Ostacher and Vanessa Ostacher, both of whom are daughters of Elba Aguilar ("Aguilar"). Mary Jo Sci, a third daughter of Aguilar, also worked as a W&L paralegal for some period of time.*fn1 While the average W&L paralegal was paid approximately $25,000 annually, Alisha Ostacher was paid approximately $65,000. (Id. ¶ 100.)
Aguilar is and was at that time a court employee at the New York County Supreme Court building at 60 Centre Street in Manhattan. Aguilar's duties at the courthouse are such that she has, and at all relevant times had, access to the New York County Clerk's Filed Stamp and New York County Supreme Court case records. (Id. ¶ 102.)
Holdings alleges that under the direction of Ochigrossi, W&L personnel first prepared a back-dated amended complaint. When the new papers were ready, Ochigrossi summoned a W&L paralegal to her office where paralegal Alisha Ostacher was also waiting. Ochigrassi instructed the paralegal that he was "to take something down to Alisha's mother" and "to follow Alisha's instructions." Ostacher handed the paralegal an envelope containing the amended complaint and indicated that she had called her mother who would be waiting to meet him at 60 Centre Street. (Id., ¶ 101.)
It is further alleged that Ostacher instructed the paralegal to meet her mother inside the entrance to the courthouse at 60 Centre Street. When the paralegal arrived, Aguilar told him to go downstairs to the records department of the courthouse ahead of her, to make a copy of the document he had brought with him and to fill out a request form for the case file. He did so. As he was being handed the case file, Aguilar appeared by his side and showed the filing clerk her badge so that the file could be removed from the clerk's view. Aguilar also requested a document log book, which the clerk gave her. (Id., ¶ 103.)
Aguilar and the paralegal took the file, the logbook, and the documents to a space near the copy machine. Aguilar purportedly stamped the amended complaint with the court's Filed Stamp to reflect falsely that it had been filed at an earlier date. Aguilar then added a false entry in the court's log book. The entry Aguilar placed in the log book falsely indicated that the amended complaint had been filed on the false filing date. At Aguilar's instruction, the paralegal then took the case file to the copy machine, copied a document in it (so as to suggest that was the reason he had requested it) and then placed the falsely stamped pleading in the case file. The log book and case file were then returned to the filing clerk. (Id., ¶ 104.)
Holdings claims that this incident was not isolated. On several other occasions, the paralegal was instructed by Ochigrossi or Ostacher to take blue-backed documents to Aguilar so that false Filed Stamps could be affixed on them. Once Aguilar took the paralegal upstairs at the courthouse at 60 Centre Street and made him wait on a bench. She then took the documents into another room and brought them back, all with back-dated Filed Stamps newly affixed. On another occasion, they met at the courthouse's rotunda on the first floor. At that time, Aguilar simply ducked behind a column and quickly stamped the documents with the earlier false filing dates. On yet another occasion, Aguilar met the paralegal outside the side entrance to 60 Centre Street to effectuate the falsification of filing stamps on case documents generated by W&L. On every occasion, Aguilar took steps to ensure that her conduct was not being observed by others. (Id., ¶ 105.)
Under Rule 3025 of New York's Civil Practice Law & Rules, amended complaints must be served on each party to the action, including each named defendant, and each named defendant must serve and file a response thereto. W&L's filing of fraudulently time-barred claims increased the litigation costs for all defendants in those cases. (Id., ¶ 106.)
Holdings has attempted to identify the particular action in which the above-described fraud occurred. Because a document back-dated in the fraudulent manner described herein would be indistinguishable from a document affixed with a Filed Stamp in a non-fraudulent manner, the nature of the fraud is such that mere review of the falsely affixed, yet genuine Filed Stamp is insufficient to reveal the fraud. Further, because the complaints filed by W&L and served on GAF did not in all instances provide information concerning the date of the claimant's discovery of his alleged injury or, where applicable, the claimaint's date of death, plaintiff cannot, without further discovery, accurately ascertain the deadlines at issue in each of the actions that may be implicated in this scheme. As such, Holdings admits that it is impossible to allege with absolute certainty the particular action or actions in which the fraud took place. (Id., ¶ 107.)
In an attempt to do so, Holdings, inter alia, sought to review in the New York County Clerk's Office the request forms for case files because the individual described in paragraph 101 herein made such application to obtain the case file of the action at issue. The records for the relevant time would have revealed the names of each case for which that individual made such a request and thereby would have defined a more limited universe of cases in which the fraud occurred. Holdings learned, however, that such records are retained for only three months and that no such records from the relevant time period are in existence. (Id., ¶ 107 n. 3.)
Holdings has identified 23 asbestos personal injury actions brought by Weitz & Luxenberg against GAF in which W&L served on GAF within 120 days after mid-May 2000 an amended complaint stamped with a filed date of fewer than 120 days prior to mid-May 2000. Based on these criteria, Holdings alleges, upon information and belief, that the back-dating incident occurred in one or more of the following cases, identified by the claimant name and index number:
• Alfred J. Filippelli, No. 11855998 (filed stamp
dated Feb. 22, 2000 and served on June 20, 2000);
• Michael Link, No. 98122001 (filed stamp dated Feb.
28, 2000 and served on June 27, 2000);
• George Owen, No. 99110974 (filed stamp dated Feb.
28, 2000 and served on June 26, 2000);
• Harry J. Bullock, Jr., No. 99115492 (filed stamp
dated March 3, 2000 and served on June 26, 2000);
• Robert Fiorillo, No. 99109515 (filed stamp dated
March 3, 2000 and served on June 19, 2000);
• Julius Paul Nosewicz, No. 98111486 (filed stamp
dated March 3, 2000 and served on June 22, 2000);
• Louis Peris, No. 98112132 (filed stamp dated March
3, 2000 and served on June 26, 2000);
• Francis J. Schaefer, No. 98111482 (filed stamp
dated March 3, 2000 and served on June 20, 2000);
• Tony Felice, No. 11855198 (filed stamp dated March
20, 2000 and served on June 28, 2000);
• Richard D. Keller, No. 99108181 (filed stamp dated
March 20, 2000 and served on July 12, 2000);
• Anthony Litterello, No. 99117281 (filed stamp dated
March 20, 2000 and served on June 28, 2000);
• Ralph Marsillo, No. 10001799 (filed stamp dated
March 20, 2000 and served on June 27, 2000);
• William J. Schuler, No. 10422599 (filed stamp dated
March 20, 2000 and served on July 11, 2000);
• Eugene P. Sullivan, No. 12427297 (filed stamp dated
March 20, 2000 and served on June 26, 2000);
• Joseph Sbuttoni, No. 99101612 (filed stamp dated
April 17, 2000 and served on May 17, 2000);
• Paul Townsley, No. 99123461 (filed stamp dated
April 17, 2000 and served on May 26, 2000);
• Carmen Trotta, No. 99123493 (filed stamp dated
April 19, 2000 and served on May 31, 2000);
• David F. Cameron, No. 99122330 (filed stamp dated
April 20, 2000 and served on May 26, 2000);
• Donald F. Mooney, No. 99122066 (filed stamp dated
April 20, 2000 and served on May 26, 2000);
• Rosamarie Elia, No. 00110184 (filed stamp dated May
15, 2000 and served on May 25, 2000);
• William J. Wright, No. 99119067 (filed stamp dated
May 15, 2000 and served on June 5, 2000);
• Robert C. Dick, No. 99118272 (filed stamp dated May
16, 2000 and served on May 26, 2000);
• Raymond J. Altrock, No. 00110561 (filed stamp dated
May 17, 2000 and served on May 25, 2000).
(Id., ¶ 107.) Holdings states that it is possible that the scheme involved other complaints in addition to the one or more of those listed above. (Id., ¶ 111.)
Determination of the purpose of the purported backdating scheme requires knowledge of the specific deadlines which Weitz & Luxenberg sought to avoid. The following deadlines apply to any asbestos action brought in New York State: (1) the three-year statute of limitations for personal injury actions under CPLR §§ 214 and 214-a; (2) the two-year statute of limitations for wrongful death actions under EPTL § 5-4.1; and (3) the one-year limitation imposed after the death of a claimant under CPLR § 210(a). In addition, asbestos actions commenced in New York County (as was each of the cases listed above) are subject to the restrictions imposed by the Amended Case Management Order in In re New York Asbestos Litigation (the "Order"). Section VI of the Order states that if an amendment to a complaint that adds defendants is filed fewer than 60 days before the trial date set for the case's respective "cluster," the trial date of that case is subject to a delay at the request of the newly added defendants. (Id., ¶ 108.)
For instance, in Georgine J. Sbuttoni v. AC & S, No. 99-101612 (listed above), claimant Joseph Sbuttoni allegedly discovered his injury on April 18, 1997. The Amended Complaint in Sbuttoni, which added defendants not named in the original complaint, bears a stamp indicating that it was filed on April 17, 2000 — exactly one day short of three years from the purported date of discovery. The Amended Complaint was not served until one full month later, on May 17, 2000. Had the Amended Complaint been filed with the Court nearer to the date on which it was served, the claim would have been time-barred. Assuming that this complaint was backdated, W&L rendered the claimant's time-barred claim viable and GAF, as a defendant in the action, was required to expend costs associated with the receipt and processing of a time-barred Amended Complaint that should never have been served on it. (Id., ¶ 109.)
The Plaintiff's Initial Fact Sheet in Sbuttoni, filed pursuant to the Amended Case Management Order, bears a Filed Stamp date of May 16 200,*fn2 one day prior to service, and approximately one month after the Filed date stamped on the Amended Complaint. While the Amended Case Management Order permits a Plaintiff's Initial Fact Sheet to be filed subsequent to the Complaint, the Filed stamp date on the Plaintiff's Initial Fact Sheet in Sbuttoni indicates that a representative of W&L filed this document — and thus was physically present — at the courthouse on May 16, 2000. (Id., ¶ 110.)
When initially questioned about the above allegations, Aguilar falsely denied that she knew anyone at W&L, other than defendants Weitz and Gordon, failing to mention her three daughters who had been employed there. She also falsely denied knowing Nugent, despite the fact that he was representing her reconciled husband free of charge in the Sci litigation. When confronted with information regarding her daughters' employment at W&L and Nugent's representation of her husband, Aguilar responded that her daughters' employment was their own business, and stated that she really did not know Nugent and that W&L did a lot of pro bono work. When confronted with the allegations of backdating described above, Aguilar refused to respond and simply walked away. (Id., ¶ 112.)
I. Standard for a Motion to Dismiss
In reviewing a motion to dismiss under Rule 12(b)(6), courts must "accept as true the factual allegations of the complaint, and draw all inferences in favor of the pleader." Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993) (citing IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1052 (2d Cir. 1993)). Review must be limited to the complaint and documents attached or incorporated by reference thereto. Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991). A complaint may only be dismissed when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). See also Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991); Berheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996).
II. For the Purposes of This Motion, Reference May Be
Made to Some, But Not All, of the Documents Relied
Upon by the W&L Defendants
The parties dispute whether the approximately five-inch thick appendices submitted by the W&L Defendants — containing information related to each of the 23 complaints identified by Holdings as potentially backdated — may be reviewed by this Court for the purposes of determining this motion. Before reaching the merits of the defendants' arguments, therefore, it must be determined whether the items relied upon by the W&L Defendants are procedurally available.
A. Materials Relating to Twelve Cases That
Purportedly Are Not Time-Barred
The W&L Defendants list twelve cases that they claim are indisputably timely and thus do not satisfy the claims in the complaint. These twelve cases are: Altrock, Cameron, Elia, Felice, Fillippelli, Keller, Link, Litterello, Marsillo, Schuler, Trotta and Wright. In making this argument, the W&L Defendants rely upon: (1) the initial complaint or some early amended version thereof; (2) the complaint whose amendment is at issue; (3) death certificates*fn3
; and (4) Plaintiff's Initial Fact Sheets*fn4
Holdings concedes that the W&L Defendants likely may make use of the underlying complaints*fn5 in the above actions for the purposes of this motion.*fn6 Pl.'s Mem. at 15; see also Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) ("Because this standard has been misinterpreted on occasion, we reiterate here that a plaintiff's reliance on the terms and effect of a document in drafting the complaint is a necessary prerequisite to the court's consideration of the document on a dismissal motion; mere notice or possession is not enough." (emphasis in original)). Holdings does assert, however, that the other materials should not be considered because it did not rely on them. Each will be addressed in turn.
The W&L Defendants rightly state that a court is not limited to construing only documents on which plaintiffs relied in drafting their complaint. Courts may also consider "matters of which judicial notice may be taken." Hertz Corp. v. City of New York, 1 F.3d 121, 125 (2d Cir. 1992); see also Travelers Indem. Co. of Illinois v. Hunter Fan Co., No. 99 Civ. 4863, 2000 WL 1041670, at *3 (S.D.N.Y. Jul 27, 2000). "A judicially noticed fact must be one not subject to reasonable dispute in that it is . . . capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b).
1. Initial or Early Amended Complaints
The W&L Defendants seek the Court to take judicial notice of the original claims set forth in the initial complaints (or a later iteration thereof prior to the amended complaints at issue). The complaints are a part of the official court record of the Supreme Court of the State of New York, County of New York, and the copies provided have a filed stamp showing that they have been processed by the state court system. Moreover, the facts of which the W&L Defendants seek this Court to take judicial notice may be obtained from this document with accuracy and without any reasonable question as to their accuracy.*fn7 Therefore, the Court will take judicial notice of the original claims alleged by claimants in their initial complaints.
2. Death Certificates
The W&L Defendants ask the Court to take judicial notice of the date of decedents' deaths, where applicable, in order to show that the statute of limitations could not have expired on wrongful death claims prior to the mid-May time period during which Holdings alleges the backdating occurred. They have attached copies of death certificates for this purpose. While the W&L Defendants did not attach certified copies of the death certificates, the uncertified copies are sufficiently accurate and not reasonably subject to question for the Court to take judicial notice of the dates of deaths as shown by the certificates. E.g., Norfolk Southern Ry. Co. v. Shulimson Bros. Co., 1 F. Supp.2d 553, 555 n. 1 (W.D.N.C. 1998) (holding that information concerning dates of death were "matters of public record" that may be considered on motion to dismiss); United States v. Arneson, No. 70-C-183, 1974 WL 634, at *1 n. 2 (W.D.Wis. July 10, 1974) (taking judicial notice of date of decedent's death based upon certified copy of death certificate). See also Johnson v. Morgenthau, 160 F.3d 897, 898 (2d Cir. 1998) (taking judicial notice of fact of appellant's death based upon death certificate). But see Bohrer v. County of San Diego, 163 Cal.Rptr. 419, 424 (Cal.App. 1980) (concluding court had erred in taking judicial notice of decedent's death certificate and that cause of death was suicide). As a result, the Court will take judicial notice of the dates of decedents' deaths based upon the copies of death certificates provided.
3. Initial Fact Sheets
The final items relevant to these twelve complaints are the Plaintiffs' Initial Fact Sheets. Section VI.A of the Amended Case Management Order states that an Initial Fact Sheet is to be included in the complaint or served upon the defendants in a specific asbestos-related action. The Amended Case Management Order annexes a model Initial Fact Sheet, and the model indicates that the Fact Sheets are to include information such as the name of a claimant, his date of birth, the job sites at which he worked, the asbestos-related disease from which he suffers, and the date on which he was diagnosed as suffering from that disease.
Holdings relied upon one Initial Fact Sheet, in the Sbuttoni case, in the Complaint. Sbuttoni is not one of the cases at issue with regard to timeliness. As a result, the Court may only rely on the Initial Fact Sheets discussed if it may take judicial notice of them or the facts contained therein.
Thus the W&L Defendants seek to have the Court take judicial notice of the date of diagnosis of the asbestos illness as alleged on the Plaintiffs' Initial Fact Sheets. While the Court could take judicial notice of the fact that the Initial Fact Sheets claim a certain date of diagnosis, it cannot do as the W&L Defendants ask and find that the date of diagnosis as alleged on the Initial Fact Sheets is the actual date of diagnosis and date of discovery.*fn8 The Initial Fact Sheets are unsworn assertions, signed only by a W&L attorney. These cases involve serious allegations of fraud, and the Court must certainly respect the possibility, at this stage in the proceedings, that the purported fraud has permeated the case. More pertinently, without discovery, it is impossible to determine whether the dates are accurate or whether scrivener's errors could have infected the Initial Fact Sheets at issue.*fn9 These factors mean that the date of discovery, as alleged on the Initial Fact Sheets, is not so irrefragable that the Court must take judicial notice of it. As a result, any claims relying on the Court's taking judicial notice of the date of discovery alleged in the Initial Fact Sheet as the date of discovery must be rejected at this time.
Therefore, Count XIII, as it relates to the following cases, may not be dismissed at this time: Elia,*fn10 Felice, Filippelli, Keller,*fn11 Link, Litterello, Marsillo and Schuler. Four of the twelve cases — Altrock, Cameron, Trotta and Wright and — are based solely on the materials deemed admissible, and thus the merits of the arguments will be reached.
B. Four Cases That Purportedly Involved Other
In four cases (Bullock, Elia, Sbuttoni and Keller), the W&L Defendants seek to have the Court take judicial notice of the defendants named in the original complaint (or some later iteration thereof) and of the defendants added in the amended complaints at issue. For the reasons discussed above, judicial notice will be taken of these facts, which appear in official records of the Supreme Court. Therefore, the merits also will be reached in these claims.
C. Six Actions Where the Amendments Were Cosmetic
The W&L Defendants argue that the amendments were cosmetic rather than substantive in six actions: Dick, Fiorillo, Mooney, Owen, Peris and Townsley. To gauge whether the amendments were substantive, they compared the original complaints (or a later iteration thereof) with the amended complaint at issue. For the reasons discussed above, the Court may take judicial notice of what was included in the original complaint (or a later iteration thereof), which is part of the official record. Therefore, this argument is available. Holdings does not contest that Count XIII should be dismissed as it involves these cases if the W&L Defendants' arguments are procedurally available. Pl.'s Mem. at 26 n. 22.
D. Three Actions that Were Settled
The W&L Defendants also point to three actions which were settled prior to the service of the amended complaint: Nosewicz, Schaefer and Sullivan. To support this claim, they submitted the affidavit by a W&L attorney.*fn12 This affidavit raises some of the same concerns addressed above, with regard to accuracy. Therefore, the Court may not take judicial notice of the purported fact that the three cases above were settled, and Count XIII may not be dismissed on a motion to dismiss as against those cases.
It is in the interests of judicial economy, however, to dispose of the claims as related to these cases. As with the cases involving cosmetic changes only, Holdings does not contest that, if the W&L Defendants' arguments were procedurally available, the three cases should not be considered as potentially fraudulent. Pl.'s Mem. at 26 n. 22. Nor does Holdings dispute that the settlements were consummated prior to GAF's being served with the allegedly backdated amended complaints in those cases. See id. As a result, the Court will convert the motion to dismiss to one for summary judgment.
Rule 12(b)(6) permits the district court to consider matters outside the pleadings and to treat a motion for dismissal as one for summary judgment provided "all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Rule 56(c), in turn, provides that "[t]he motion shall be served at least 10 days before the time fixed for the hearing" and that the adverse party may serve opposing affidavits. Compliance with these requirements, however, is not an end in itself. The essential inquiry is whether the appellant should reasonably have recognized the possibility that the motion might be converted into one for summary judgment or was taken by surprise and deprived of a reasonable opportunity to meet facts outside the pleadings. Resolution of this issue will necessarily depend largely on the facts and circumstances of each case. E.g., In re G. & A. Books, Inc., 770 F.2d 288, 295 (2d Cir. 1985) ("Even where only the party moving to dismiss has submitted extrinsic material such as depositions or affidavits, the opposing party may be deemed to have had adequate notice that the motion to dismiss would be converted. . . .") (citations omitted).
Given Holdings' concession that these cases may be excluded from the group of 23 listed in the Complaint, there is no need to grant additional time for discovery. As a result, Count XIII is dismissed as it relates to the three actions cited above.
III. The Complaints Amended to Assert Only Wrongful
Death Claims Cannot Support Count XIII
In four cases listed above as potentially involving the fraudulent backdating (Altrock, Cameron, Trotta and Wright), the amended complaint added only wrongful death claims. Section 5-4.1(1) of the New York Estates, Powers and Trusts Law provides that a decedent's personal representative has two years from the date of the decedent's death within which to bring a wrongful death claim, provided the decedent's personal injury claims are timely at the time of death. All of the amended complaints were brought well within two years after the decedents' deaths, even gauging the timeliness of the amendment by the date of service, rather than the purportedly fraudulent date of filing:
Date of Death: January 22, 2000
Date on which GAF Served: May 25, 2000
Expiration of Wrongful Death Claim: January 22, 2002
Date of Death: December 17, 1999
Date on which GAF Served: May 26, 2000
Expiration of Wrongful Death Claim: December 17, 2001
Date of Death: April 6, 2000
Date on which GAF Served: May 31, 2000
Expiration of Wrongful Death Claim: April 6, 2002
Date of Death: November 29, 1999
Date on which GAF Served: June 5, 2000
Expiration of Wrongful Death Claim: November 29, 2001
Holdings raises a difficult problem for the W&L Defendants, however. Under New York law, as noted above, a wrongful death claim is timely only if, at the time of the decedent's death, the statute of limitations had not yet run on the decedent's action for personal injury. E.g., Kelliher v. New York Cent. & H.H.R. Co., 212 N.Y. 207, 212-213, 105 N.E. 824, 825 (1914); Lanni v. Sekar, 249 A.D.2d 515, 516, 672 N.Y.S.2d 113, 114 (2d Dep't 1998) ("[I]f the Statute of Limitations has expired on the underlying cause of action to recover damages for personal injuries . . ., the wrongful death cause of action is also time-barred."). Further, Holdings points out that it is impossible for this Court to determine at this time whether the statute of limitations had run on decedents' personal injury claims (without resort to the Initial Fact Sheets and the impermissible conclusion that the dates of diagnoses are the legal dates of discovery).
The Court is nonetheless sympathetic to the W&L Defendants' arguments that such allegations do not make sense and are not adequately alleged in the Complaint. Holdings' argument would mean that the W&L Defendants potentially backdated four amended complaints to allege wrongful death claims that appeared to be timely because they had some knowledge or belief that the complaints would not be timely because it would be found that the statute of limitations for the personal injury claims had run after the filed stamp date but prior to the date of actual service of the complaint. For instance — and at the most unlikely end of the spectrum — the W&L Defendants would have to have knowledge or belief that the underlying personal injury claims in Altrock would have been timely on the filed stamp date of May 17, 2002 (and thus the wrongful death claims also would have been timely), but the underlying personal injury claims would not have been timely by the date of the alleged backdating (mid-May) or of service, on May 25, 2002. In the absence of allegations in the Complaint that the plot 28 was as thick as the above example reveals, Count XIII will be dismissed as it relates to these four cases.*fn13
Holdings also argues that the Complaint does not focus only on statutes of limitation as a rationale for the backdating, but also cites the restrictions set forth in the Amended Case Management Order in In re New York City Asbestos Litigation. This Order requires that a plaintiff in an accelerated trial cluster who amends his or her complaint to add a defendant fewer than sixty days before trial is automatically removed from that cluster and placed in the next accelerated cluster. However, it was not adopted until May 2, 2001 — almost a full year after the alleged backdating incident.*fn14 Therefore, the W&L Defendants cannot have attempted to backdate complaints to avoid a time limitation not yet imposed.
Holdings finally claims that the W&L defendants could have backdated the complaint(s) for some other reason unknown to Holdings. Because Count XIII alleges fraud, such speculative assertions do not meet the specificity required by Fed.R.Civ.P. 9(b) and cannot save these claims. Therefore, Count XIII is dismissed as it relates to Altrock, Cameron, Trotta and Wright.
IV. Count XIII Is Not Dismissed as to Claims Brought
gainst Non-GAF Defendants
Holdings does not dispute that the amended complaints at issue in Bullock,*fn15
brought claims only against defendants other than GAF. Based on this undisputed fact, the W&L Defendants assert that Holdings has failed as a matter of law to allege reliance and scienter.
The W&L Defendants present two arguments with regard to reliance. First, they claim that Holdings cannot have reasonably relied upon even time-barred claims in these cases because the exercise of a modest degree of diligence would have indicated that the newly added claims had no bearing against GAF. Second, they claim that Holdings could not in any case have relied to its detriment on the amendments at issue because GAF's potential liability was not affected at all by the amendments, and it did not even have to respond to or answer the complaints.*fn19 The W&L Defendants conclude that GAF, at most, would have had "to open the envelope, determine if new claims were asserted against it, and put the pleading into its files." Defs.' Mem. at 32. Holdings responds that there is not a de minimis exception for fraud under New York law, and that the W&L Defendants acknowledge that GAF suffered at the minimum, an injury in its receipt, analysis and processing of the fraudulent document.
"[T]he pleading requirements for fraud demand no minimum damage claim. Plaintiffs have satisfied their obligation by alleging any injury. The size of that damage awaits a fact finder's determination." von Bulow by Auersperg v. von Bulow, 634 F. Supp. 1284, 1302 (S.D.N.Y. 1986) (emphasis in original); see also Union Pacific R. Co. v. Village of South Barrington, 1998 WL 102517, at *7 (N.D.Ill. Feb. 23, 1998) (denying motion to dismiss common law fraud claim on basis of failure to plead reliance as "there is no requirement that the injury caused by the fraud must be `material'"). As a result, Holdings has satisfied the pleading requirement by alleging even the de minimis injury pointed out by the W&L Defendants.
The W&L Defendants also argue that Holdings has not plead scienter because it cannot be claimed that they were attempting to defraud GAF, as any fraud would have been practiced upon the defendants who were added to the amended complaints.
In a common law fraud action, scienter is not subject to Rule 9(b) and can be pleaded by alleging motive and clear opportunity, or by alleging facts constituting strong circumstantial evidence of conscious behavior or recklessness on the part of defendants. Powers v. British Vita, P.L.C., 57 F.3d 176, 184 (2d Cir. 1995). To plead motive, one must allege facts indicating "concrete benefits that could be realized by one or more of the false statements and wrongful nondisclosures." Novak v. Kasaks, 216 F.3d 300, 307 (2d Cir.) (citation omitted), cert. denied, 531 U.S. 1012 (2000). To plead opportunity, one must allege facts that demonstrate that the defendant is "well 32 positioned to carry out the fraudulent transaction." Powers, 57 F.3d at 185.
The Complaint adequately alleges that the W&L Defendants had motive and opportunity. The W&L Defendants could reap concrete benefits from the alleged backdating — the avoidance of a statute of limitations. It does not matter that the brunt of the detriment that would result from the alleged benefit is suffered by a party other than the plaintiff's predecessor, GAF.*fn20 Further, Holdings has alleged that the W&L Defendants were well-positioned to carry out the purported fraudulent activity by the placement of the mother of several W&L paralegals as an employee of the Supreme Court of New York County.
The Complaint also alleges sufficient facts to suggest a conscious or reckless behavior on the part of the W&L Defendants. Holdings has put forward the testimony of a W&L paralegal who claims to have taken part in the fraud at the direction of a supervisor at W&L. These facts alone suggest, at the very least, reckless behavior on the part of W&L.
As a result, the W&L Defendants' arguments with regard to scienter fail, and the claims stand as against the four cases where the amendments at issue involved only the addition of defendants other than GAF.
For the foregoing reasons, the W&L Defendants' motion to dismiss is granted in part and denied in part. The motion is granted as to Count XIII to the extent the claim alleges that the fraudulent activity took place in the following cases: the six cases in which cosmetic changes only occurred in the amendment (Dick, Fiorillo, Mooney, Owen, Peris and Townsley); the three actions settled prior to the amendment (Nosewicz, Schaefer and Sullivan); and the four cases involving only wrongful death claims where the statute of limitations had not expired prior to service of the amended complaint (Altrock, Cameron, Trotta and Wright). That leaves ten cases in which the alleged fraudulent activities still could have occurred, based on the materials to which this Court had recourse for the purposes of deciding this motion. Therefore, Count XIII may not be dismissed in its entirety at this time.
It is so ordered.