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United States District Court, Southern District of New York

July 30, 2003


The opinion of the court was delivered by: Lewis Kaplan, District Judge


On or about March 31, 2000, plaintiffs acquired for $121,266,000 a part of the consumer telephone business of Lucent Technologies, Inc. ("Lucent"). Shortly before closing on that purchase, it hired defendant PriceWaterhouseCoopers, LLP ("PwC") to help integrate the acquisition into its business. Plaintiffs subsequently came to the conclusion that they had been defrauded in the transaction. They sued Lucent in another action in this Court entitled VTech Holdings Ltd. v. PriceWaterhouseCoopers, LLP, No. 01 Civ. 0612 (JGK), which subsequently was settled. They here sue PwC for breach of fiduciary duty, aiding and abetting alleged fraud by Lucent, breach of warranty, breach of contract, fraud, and accounting malpractice. The gist of the action appears to be that PwC is at least partly responsible for plaintiffs' unsuccessful acquisition on the theory that it misrepresented and withheld material information about the acquired business during the period immediately prior to the closing and that it aided and abetted Lucent's alleged fraud. PwC moves to dismiss on the ground that the complaint fails to allege fraud with particularity or to state a claim upon which relief may be granted.

The complaint in this action is 113 pages and 179 numbered paragraphs in length, exclusive of exhibits and scores (perhaps hundreds) of separate subparagraphs. It is in some degree disorganized. It is verbose and repetitious, repeating endlessly various stock phrases that convey no new meaning. Despite its enormous length and an overabundance of detail, it often its quite conclusory.

Rule 8(a) requires that a complaint "contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Certainly there is nothing short and very little plain about this complaint.

Rule 9(b) in turn requires that the circumstances constituting an alleged fraud be alleged with particularity. In order to satisfy this requirement, "a plaintiff should specify the time, place, speaker, and content of the alleged misrepresentations." Luce v. Edelstein, 802 F.2d 49, 54 (2d Cir. 1986). Further, the pleading must assert facts from which a strong inference of fraud may be drawn. E.g., Chill v. General Electric Co., 101 F.3d 263, 267 (2d Cir. 1996); San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 812 (2d Cir. 1996); Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). "A strong inference of fraudulent intent is made out `either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.'" First Capital Asset Mgmt., Inc. v. Brickelbush, 50 F. Supp.2d 624, 632 (S.D.N.Y. 2001) (quoting Hallwood Realty Partners v. Gotham Partners, L.P., 95 F. Supp.2d 169, 174 (S.D.N.Y. 2000) (in turn quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994)).

This complaint fails in many respects to comply with Rule 9(b). It is not clear exactly what if any statements PwC is alleged to have made, let alone when and by whom and what precisely was incorrect. If the complaint alleges facts giving rise to a strong inference of fraudulent intent with respect to any of the matters complained of on a fraud theory, which is questionable, it certainly does not do so with respect to all such matters.

There are still other problems, several of which are alluded to in the motion papers.

Had plaintiffs filed a well organized complaint of reasonable length, the Court would sort through its allegations one at a time and address each. To do so in this context, however, would be enormously wasteful of resources upon which other litigants have an equal call. In all the circumstances, the interests of justice would be served best by dismissing the complaint with leave to replead.

The complaint is dismissed on the ground that it fails to comply with Rule 8(a) and 9(b). Plaintiffs may file an amended complaint, no later than August 30, 2003. Any amended complaint shall be organized properly, shall contain no evidentiary allegations except to the extent necessary to comply with Rule 9(b) or requirements of substantive law, and shall clearly set forth exactly what misrepresentations or omissions are attributed to PwC, when they were made or occurred, and by whom in addition to satisfying all other applicable requirements.



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