UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
November 17, 2009
ILAN ABRAHAM, ET AL., PLAINTIFFS,
ENTREPRENEUR MEDIA, INC., DEFENDANT.
The opinion of the court was delivered by: Seybert, District Judge
MEMORANDUM AND DECISION
Defendant Entrepreneur Media, Inc. ("Entrepreneur") has moved to dismiss Plaintiffs' Complaint. For the foregoing reasons, that motion is GRANTED.
Plaintiffs are a group of individual investors who, prior to January 2009, had invested in Agape World, Inc. ("Agape"). (Compl. ¶ 1). Entrepreneur is an online and print business publication that covers small businesses. (Compl. ¶ 4).
In May 2008, Entrepreneur published its annual "Hot 100" list of fast-growing American companies. (Compl. ¶ 4). This list included Agape. (Compl. ¶ 5). In January 2009, Agape was publicly revealed to be a Ponzi scheme. (Compl. ¶ 11). As a result, Plaintiffs lost a significant portion of their investment in Agape.
(Compl. ¶ 12).
Plaintiffs allege that Entrepreneur's inclusion of Agape in its "Hot 100" list was grossly negligent. According to Plaintiffs, Entrepreneur included Agape on its "Hot 100" list solely based on positive financial information that Agape conveyed. (Compl. ¶¶ 5-6). Plaintiffs claim that Entrepreneur made no effort to verify this information, never visited Agape's headquarters, never met with Agape's principals, and never reviewed Agape's books and records. (Compl. ¶ 6). Plaintiffs proffer that, if Entrepreneur acted "with a minimum of due diligence" it would have discovered that Agape supplied it with false information, and would have concluded that Agape was not eligible for the "Hot 100" list. (Compl. ¶ 7). Plaintiffs thus assert a single cause of action: gross negligence.
I. Standard of Review on Motions to Dismiss
In deciding motions to dismiss brought under Fed. R. Civ. P. 12(b)(6), the Court applies a "plausibility standard," which is guided by "[t]wo working principles," Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009); Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). First, although the Court must accept all of a complaint's allegations as true, this "tenet" is "inapplicable to legal conclusions"; thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Harris, 572 F.3d at 72 (quoting Ashcroft). Second, only complaints that state a "plausible claim for relief" survive a motion to dismiss, and determining whether a complaint does so is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.
II. Plaintiffs Fail to State a Claim
Entrepreneur argues that Plaintiffs fail to state a claim, because, under New York law, a magazine publisher owes no duty of care to subscribers or readers, and thus cannot be found liable for negligently publishing non-defamatory misstatements. Entrepreneur is unquestionably correct.*fn1 Indeed, New York courts have uniformly held this way for 88 years.*fn2 And so have the courts of numerous other jurisdictions.*fn3
In opposition, Plaintiffs present no response at all. Plaintiffs do not address Entrepreneur's argument that New York law bars their cause of action. Indeed, Plaintiffs do not cite a single case concerning either New York law or the common law of negligence. Instead, Plaintiffs: (1) complain that they have "not been afforded the opportunity to conduct discovery"; (2) contend that Entrepreneur's motion is actually one for summary judgment because it concerns "questions of fact"; and (3) seek a "continuance" so that they may take discovery.
Plaintiffs' argument is frivolous. Plaintiffs are not entitled to discovery because, even if everything they pled is true, New York law simply does not permit their cause of action. Indeed, the very point of a motion to dismiss is to shield defendants from having to proceed with discovery when a complaint's allegations fail to state a legally cognizable claim.
Similarly, Plaintiffs' contention that Entrepreneur has actually moved for summary judgment displays a complete ignorance of federal practice. Plaintiffs appear to derive this argument from Entrepreneur's decision to include the actual text from the Agape "Hot 100" list entry within its motion to dismiss papers. But, even on a motion to dismiss, Entrepreneur was wholly within its rights to do so. Plaintiffs' allegations depend upon the allegedly false information contained in the Agape "Hot 100" list entry. Thus, Plaintiffs have incorporated this entry into their Complaint by reference. And, consequently, the Court is entitled to take judicial notice of it even on a motion to dismiss. Samuels v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir. 1993).*fn4 III. Rule 11 Under Fed. R. Civ. P. 11(b)(2), an attorney who files pleadings in federal court is presumed to certify that the pleading's "claims, defenses, and other legal contentions are warranted by existing law or by a non-frivolous argument for extending, modifying, or reversing existing law or for establishing new law." Here, as discussed above, Plaintiffs' claims lack any basis in existing law. That being said, the issuance of sanctions under Rule 11 is discretionary. And, in its discretion, the Court elects not to impose sanctions here. But Plaintiffs' counsel is warned that, should he file another frivolous pleading in this Court again, the Court may exercise its discretion differently.
For the foregoing reasons, Defendant's motion to dismiss is GRANTED. Plaintiffs' Complaint is DISMISSED WITH PREJUDICE. The Clerk of the Court is ordered to mark this matter as closed.
Joanna Seybert, U.S.D.J.