The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge
MEMORANDUM OPINION AND ORDER
In this action arising out of the management of an offshore brokerage
account, Plaintiff Donald Rampersad ("Rampersad") asserts claims for
securities fraud under section 10(b) of the Securities and Exchange Act
of 1934 ("Section 10(b)") and Rule 10b-5 promulgated thereunder, and for
violation of the Racketeer Influenced Corrupt Organization Act ("RICO").
Plaintiff also asserts common law fraud, conversion, and breach of
fiduciary duty claims. Plaintiff amended his original complaint following
initial dispositive motion practice. Defendants Deutsche Bank Securities.
Inc., formerly known as Deutsche Bank Alex.Brown Inc. ("Alex.Brown"),
Richard DeBoe ("DeBoe"), and Langtry Trust Group ("Langtry") move for
dismissal of the Amended Complaint pursuant to Federal Rules of Civil
Procedure 9(b) and 12(b)(6). Alex.Brown and DeBoe also seek, pursuant to
Federal Rule of Civil Procedure 12(f), an order striking certain
allegations in the Amended Complaint.
The Court has jurisdiction of Plaintiff's Section 10(b) and RICO claims
pursuant to 2S U.S.C. § 1331. The Court has considered thoroughly
all submissions in connection with
the instant motions. For the following reasons, Defendants' motions
The following facts, which are alleged in the Amended Complaint (the
"Complaint"), are taken as true for purposes of the motions to dismiss.
In October or early November 1998, Rampersad, a citizen of Trinidad and
Tobago, telephoned Robert Parry ("Parry"), his cousin residing in the
United States, about the possibility of investing approximately $500,000
(U.S. dollars) in the U.S. stock market. (Compl. ¶¶ 1, 10.) Parry
contacted Steven Harrison ("Harrison"), an individual previously
introduced to Rampersad by Parry, to discuss investment options for
Rampersad. (Id. ¶¶ 8, 12.) Harrison suggested Rampersad
contact Peter Brant ("Brant"), a convicted felon who managed Harrison's
personal investments at Alex.Brown with DeBoe as broker. (Id.
¶¶ 12, 13.)
On November 8, 1998, Brant recommended that Rampersad invest his money
offshore. (Id. ¶ 15.) Once in the offshore account, the
money would be transferred to an account at Alex.Brown that would be
managed and traded by Brant with DeBoe as broker. (Id. ¶
16.) So as to avoid U.S. tax liability, Rampersad agreed to the structure
of the transaction. (Id.) Rampersad and Brant also agreed that
Brant would receive a management fee equal to 20% of any gains realized
by the account under his management. (Id. ¶ 17.) In
connection with this arrangement, Rampersad urged Brant to "mind the
money safely," to which Brant replied that he would invest the funds only
in "renowned" stocks. (Id. ¶ 18.)
On December 7, 1998, Rampersad received from Langtry, the offshore
entity, a letter containing wiring instructions. (Id. ¶
19.) Upon Brant's confirmation that the wiring instructions were
legitimate, Rampersad wired $300,000 to Langtry, on December 16, 1998.
(Id. ¶ 22.) The funds transfer report states that Rampersad
was the "customer" with respect to the funds located in
the account established with Langtry. (Id. ¶ 23.) In
late December 1998 or early January 1999,* Langtry directed Lloyd's Bank
to send the sum of approximately $300,000 to an account at Alex.Brown.
(Id. ¶ 27.) This account was opened in Langtry's name;
Brant was authorized to trade in this account. (Id. ¶ 26.)
In late December 1998 or early January 1999, Rampersad telephoned DeBoe
requesting, among other things, confirmation that his account with
Alex.Brown had been "performing well." (Id. ¶ 26.) DeBoe
told him that the $300,000 had been received into an account at
Alex.Brown and that the account would be established under the name
"Langtry", though Rampersad would be the "owner." (Id.)
Furthermore, DeBoe told Rampersad that Brant was going to trade the
Langtry account, that Rampersad's account information was being sent to
Brant and not Rampersad, that DeBoe would make him a copy of the account
information, and that Brant was a "good client" of Alex.Brown.
(Id.) Finally, Rampersad alleges that, based on this
conversation with DeBoe, he wired the remaining $200,000 to Langtry.
(Id. ¶ 29.)
Langtry, on January 15, 1999, transferred the $200,000 to the same
Alex.Brown account, held in its name, that contained the original
deposit. (Id. ¶¶ 32-33.) Rampersad did not wire money
directly to Alex.Brown but rather sent money directly to Langtry, which
then forwarded the funds to the Alex.Brown account in Langtry's name.
((Id., ¶¶ 26, 29, 32.)
In mid-January 1999, Rampersad alleges, he once again spoke to DeBoe,
who continued receipt of the second set of funds. (Id. ¶
34.) During this conversation, Rampersad further alleges, he asked DeBoe
for certain forms in connection with avoiding U.S. tax liability and for
copies of the monthly account statements. (Id.) DeBoe directed
Rampersad to ask Brant for the paperwork. (Id.)
Over the next year, the value of the Alex.Brown account began to drop
precipitously.*fn1 Account statements reveal that the account was on
margin as early as May 1999. (Id. ¶ 37.) Also, as of July
1999, the account only held Global Telesystems Group stock.
(Id. ¶ 39.) If Rampersad had known that his portfolio was
being managed in this way, he would have objected. (Id.) Funds
from the Alex.Brown account were transferred to Lloyds Bank at the
instruction of Langtry, to an account not belonging to Rampersad.*fn2
(Id. ¶¶ 35-38.) Rampersad alleges that DeBoe was aware that
the wire transfers were without Rampersad's knowledge or consent.
(Id. ¶¶ 35-38.)
Rampersad asserts that DeBoe called him at least two times during 1999
seeking business from Rampersad's friends and/or family. (Id.
¶ 42.) During one of these conversations, Rampersad and DeBoe
discussed the Alex.Brown account; the discussion, however, was limited to
a request for the account statements and there was no discussion
concerning the account's performance. (Id. ¶ 43.) Rampersad
further alleges that he and Brant spoke occasionally throughout 1999, and
Brant "continually informed" Rampersad that his investments were "doing
well." (Id. 11 45.) Towards the end of 1999 Brant, suddenly and
without warning, told Rampersad that the Alex.Brown account was negative
by several hundred thousand dollars. (Id. 148.)
On August 14, 2000, Rampersad submitted his claims against Alex.Brown,
DeBoe and Matthew Kolb (Alex.Brown's New York City branch manager)
arising out of the account to arbitration before the New York Stock
Exchange, Inc. ("NYSE"). (Id. 1| 52; Uniform Submission
Agreement, Ex. A to DeBoe Not. of Mot.) Langtry was not a party to
these proceedings. On March 7, 2002, the arbitration panel dismissed
Rampersad's claim without prejudice. (Compl. ¶ 52.) On September 4,
2002, Rampersad commenced this action in New York Supreme Court, New York
County. Alex.Brown and DeBoe removed the ...