The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.
This is a purported class action on behalf of Feiner Family Trust ("Feiner"), Ronald Krissel ("Krissel"), and all others similarly situated ("Plaintiffs"). Plaintiff Feiner initiated this action on March 5, 2007 by filing a two-count complaint. On September 10, 2007, this Court granted Defendants' motion to dismiss the original complaint with leave to file an amended complaint within thirty days. Plaintiffs have since submitted three amended complaints, which contained various theories and claims. After withdrawing two amended complaints, the present action is a motion for leave to file a third amended complaint. For the reasons that follow, Plaintiffs' motion is denied with prejudice.
A. The Original Complaint
On March 5, 2007, Feiner, which is a shareholder of Xcelera.com, Inc. ("Xcelera" or the "Company"), a Cayman Islands corporation, filed a two-count complaint ("Original Complaint"). Count I was a stockholder derivative claim on behalf of Xcelera against Gustav Vik, Alexander Vik, and Michael Kugler ("Director Defendants") for breach of fiduciary duty. Count II was a purported stockholders class action claim against the Director Defendants and VBI Corporation ("VBI"), controlling shareholders of Xcelera, for breach of fiduciary duties owed to all those who currently own Xcelera common stock, or who had sold Xcelera common stock to Gustav Vik and Alexander Vik ("Vik Defendants") during the time of the alleged wrongful conduct.
On April 3, 2007, Xcelera moved for dismissal of the Complaint for: (1) lack of diversity jurisdiction; (2) lack of Article III standing; (3) lack of standing to bring a derivative suit; (4) failure to state a claim for breach of fiduciary duty; and (5) failure to comply with the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. The Director Defendants joined in Xcelera's motion to dismiss and adopted the positions of Xcelera's motion papers by reference.
On September 10, 2007, this Court dismissed Count I of the Complaint for lack of standing under Cayman Islands law to bring a derivative suit and Count II for failure to state a claim for breach of fiduciary duty under Cayman Island Law. See Feiner Family Trust v. VBI Corp., 2007 U.S. Dist. LEXIS 66916 (S.D.N.Y. Sept. 11, 2007). The Opinion granted leave to move to file an amended complaint within thirty days. Id. at *26.
B. The First Amended Complaint
On October 9, 2007, Plaintiffs filed a proposed amended complaint ("First Amended Complaint") with a motion for leave to amend, and it included one class action claim of breach of fiduciary duty. Changes from the Original Complaint included: (1) the addition of Ron Krissel, who had sold his shares of Xcelera, as a Plaintiff; (2) an allegation that Feiner had been solicited by Defendant Kugler to sell his shares; (3) removal of language related to fraud; and (4) removal of derivative claim. Defendants' opposition to Plaintiffs' motion for leave to amend challenged the proposed amended complaint on multiple grounds, including failure to plead federal subject matter jurisdiction.
C. The Second Amended Complaint
In their reply, Plaintiffs sought to file a revised proposed complaint ("Second Amended Complaint") in order to cure some of the defects in the First Amended Complaint. Conceding that "[t]here exists a serious challenge to maintaining federal jurisdiction over these claims if a federal cause of action is not alleged since diversity jurisdiction may ultimately be lacking" (see Plaintiffs' Reply Mem., dated December 14, 2007, at 1-2), Plaintiffs added a claim for violations of Section 10(b) of the Securities and Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5, as well as a claim against VBI, Alexander Vik, and Gustov Vik for violations of Section 20(a) of the Exchange Act. The Second Amended Complaint maintained the claim for breach of fiduciary duty against all Defendants.
In an Order dated December 20, 2007, the Court rejected the Plaintiffs' attempt to introduce the Second Amended Complaint in their reply papers, but allowed Plaintiffs to file another proposed complaint on the condition that they withdraw the then pending motion for leave to amend.
D. The Third Amended Complaint
On January 2, 2008, Plaintiffs filed notice of withdrawal of their original motion for leave to amend and filed a new motion with yet another revised proposed complaint ("Third Amended Complaint"). The Third Amended Complaint includes four claims: the breach of fiduciary duty claim (Count IV); two claims for deceptive and manipulative practices in violation of Section 10(b) of the Exchange Act and Rule 10b-5 and Section 20(a) (Counts ...