United States District Court, S.D. New York
For Terence Taylor, Plaintiff: Joshua David Brinen, Brinen & Associates, LLC, 10007, NY.
For Westor Capital Group, Inc., Jonathan Lienwand, individually, Richard Bach, individually, Defendants: Simon S. Kogan, LEAD ATTORNEY, Simon Kogan, Esq., Staten Island, NY.
DECISION AND ORDER
VICTOR MARRERO, United States District Judge.
Plaintiff Terence Taylor (" Taylor" ) filed a first amended complaint (the " First Amended Complaint" ) against defendants Westor Capital Group (" Westor" ), Jonathan Leinwand (" Leinwand" ), and Richard Bach (" Bach," and collectively, the " Westor Defendants" ) asserting violations of Securities Exchange Act Rule 10b-5 (" Rule 10b-5" ), and Securities Exchange Act § 20(a) (" Section 20(a)" ), as well as common law claims for breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, two claims of conversion (one against all three defendants and the other against Westor and Bach), aiding and abetting conversion (against Leinwand), and unjust enrichment (against Westor and Bach). (See Dkt. No. 18.) Westor subsequently moved to dismiss the First Amended Complaint. (See Dkt. No. 23.) As part of his memorandum of law in opposition to Westor's motion to dismiss, Taylor argued that " consideration of the declarations and exhibits [submitted by the Westor Defendants] in support of the motion requires conversion to one for summary judgment." (Dkt. No. 24 at ¶ 24.) In their reply, the Westor Defendants stated " no objection to the Court treating the motion [to dismiss] as a motion for Summary Judgment," and in fact they " urge the Court to do that." (Dkt. No. 25 at 4.) The Court finds conversion unnecessary in this matter because the four corners of Taylor's First Amended Complaint fail to state a federal securities law claim. The Westor Defendants' motion to dismiss is GRANTED.
Taylor is an individual residing in New York State. Westor is a brokerage firm located in New York State. Bach is the CEO of Westor, and Leinwand is the General Counsel and Director of Compliance of Westor. Taylor opened a brokerage account (the " Account" ) at Westor on November 2, 2012 and subsequently deposited' various amounts of cash and securities to maintain the Account.
In or about August 2012, Taylor deposited in the Account securities for the company TNI Biotech, Inc. Roughly two months later, on or about October 9, 2012, Taylor requested that $80,000 in cash be transferred to him from the Account, which had a cash value of $105,000 on or about the day before his request. Westor denied the request and informed Taylor that the Account had been frozen. On or about October 10, 2012, Leinwand and Bach engaged in a conference call with Taylor and informed him that the Account would remain frozen. Then, on or about October 11,
2012, Leinwand informed Taylor that the Account would be unfrozen that afternoon and Taylor reiterated his request for $80,000 from the Account, but Bach separately stated that the Account would not be unfrozen that day, and would instead remain frozen pending an investigation into Taylor's trades. On or about the following day, October 12, 2012, Bach informed Taylor that the Account would be unfrozen if Taylor would sell the securities in the Account to Bach for roughly one-half of their market value. Taylor declined to sell the securities, and on or about October 15, 2012, Leinwand reiterated to Taylor's counsel that the Account would remain frozen.
Taylor's repeated attempts to access the Account were triggered by the terms of his probation agreement for an income tax violation, which require him to make monthly restitution payments of at least $2,000, and to support his dependents and meet other family responsibilities. On October 19, 2012, Taylor's counsel requested a wire transfer of $44,114.85 from the Account, which represents the minimum amount needed for Taylor to comply with his probation requirements. Leinwand disputed certain items in this request, but he ultimately informed Taylor's counsel on October 22, 2012 that he expected the transfer to occur that afternoon. Although not mentioned in the First Amended Complaint, the parties agree that Westor subsequently wired the remaining money in the Account to Taylor's counsel. (See Dkt. No. 23 at 6; Dkt. No. 24 at ¶ ¶ 1-6.)
II. LEGAL STANDARD
A. THE COURT DECLINES TO TREAT DEFENDANT'S MOTION AS SEEKING SUMMARY JUDGMENT
The Westor Defendants moved to dismiss for improper service of process pursuant to Federal Rule of Civil Procedure 12(b)(5) (" Rule 12(b)(5)" ) and for failure to state a claim upon which relief could be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) (" Rule 12(b)(6)" ). Declarations from Bach, Leinwand, and Simon Kogan (the Westor Defendants' counsel) accompanied the motion (see Dkt. Nos. 9, 10, & 13) and primarily seek to bolster two of the Westor Defendants' arguments in favor of dismissal: lack of proper service, and lack of cognizable damages under federal securities laws. Taylor argues that the Court's consideration of these declarations is improper under Rule 12(b) (6), and requires that the Westor Defendants' motion be converted to a motion for summary judgment under Federal Rule ...