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Clarex Limited v. Natixis Securities America LLC

United States District Court, Second Circuit

June 11, 2013



PAUL A. ENGELMAYER, District Judge.

Plaintiffs Clarex Limited ("Clarex") and Betax Limited ("Betax") (collectively, "plaintiffs"), companies operating in Nassau, Bahamas, bring this action, alleging that defendants Natixis Securities America LLC and its predecessors (collectively, "Natixis"), Delaware corporations operating in New York, New York, violated their contractual and fiduciary duties. Defendants move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike damages pursuant to Rule 12(f). For the reasons that follow, the motion is granted in part and denied in part.

I. Background[1]

A. Pre-Lawsuit Events

Sometime before November 1, 2002, plaintiffs purchased $46 million in Nigerian bonds from Natixis. See Complaint ("Compl.") ¶ 13. Pursuant to industry practice at the time, one "warrant" was supposed to accompany each $1, 000 worth of issued bonds. Id. ¶ 6. These warrants were guaranteed by the Government of Nigeria and provided the holder with the prospect of semi-annual payments based on increases in the price of oil. Id. ¶ 7. As of October 17, 2012, Nigeria had paid out, to the holders, a total of $10, 695, 996.46 in payment rights on the warrants. Id. ¶ 31. As of the same date, the warrants had a market value of $8, 924, 000. Id.

In August 2007, before bringing this lawsuit, plaintiffs assigned all claims in connection with the purchase of the warrants to an affiliated company, Landsdowne Investments Inc. ("Landsdowne"). Id. ¶ 21. On August 21, 2007, Landsdowne filed a complaint against Natixis in this district, alleging breach of contract and negligence in connection with Natixis's alleged failure to deliver the warrants to Landsdowne. Id. ¶ 22. On January 15, 2008, Landsdowne voluntarily dismissed that lawsuit. Id. ¶ 23.

On January 30, 2012, plaintiffs filed suit against Natixis, alleging that Natixis's failure to deliver the warrants constituted a breach of contract, a breach of the duty of good faith and fair dealing, and negligence. Id. ¶ 27.[2] On April 2, 2012, Natixis filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Id. ¶ 28. On October 12, 2012, the Court dismissed plaintiffs' complaint without prejudice, holding that, because Landsdowne had owned the bonds until April 12, 2012, plaintiffs lacked standing to bring the lawsuit as of the date it was brought. See Clarex Ltd. v. Natixis Sec. Am. LLC, No. 12 Civ. 722 (PAE), 2012 WL 4849146 (S.D.N.Y. Oct. 12, 2012).

B. The Current Lawsuit and the Motion to Dismiss

On October 24, 2012, plaintiffs filed the instant lawsuit. Dkt. 1. The three causes of action in this Complaint are, again, breach of contract, breach of the duty of good faith and fair dealing, and negligence.

On January 7, 2013, Natixis filed a motion to dismiss the Complaint, pursuant to Rule 12(b)(6). Dkt. 9-11. On January 28, 2013, plaintiffs filed an opposition brief. Dkt. 14-16. On February 7, 2013, Natixis filed a reply. Dkt. 19-20.

Natixis moves to dismiss the Complaint on four grounds: that (1) Natixis's relationship with plaintiffs was that of a broker and it did not breach any duties of a broker, Def. Br. 8-17; (2) plaintiffs' claims for breach of contract and breach of good faith are duplicative, id. at 17-19; and (3) plaintiffs' claims for breach of contract and negligence are duplicative, id. at 19-21; (4) plaintiffs' negligence claim and a portion of their contract claims are barred by the statute of limitations, id. at 21-22. Natixis also moves to strike plaintiffs' demand for damages, pursuant to Rule 12(f), to the extent these damages exceed the market value of the warrants at the time of the alleged breach. Id. at 22-25.

II. Applicable Legal Standard

To survive a motion to dismiss under Rule 12(b)(6), a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Accordingly, in considering a motion to dismiss, a district court "must accept as true all well-pleaded factual allegations in the complaint, and draw[] all inferences in the plaintiff's favor.'" Allaire Corp. v. Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006); see also Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010) ("We review the district court's grant of a Rule 12(b)(6) motion to dismiss de novo, accepting all factual claims in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor."). A claim will only have "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A complaint is properly dismissed, where, as a matter of law, "the allegations in a complaint, however true, could not raise a claim of entitlement to relief." Twombly, 550 U.S. at 558.

III. Discussion

A. Contract Claim

To state a claim for breach of contract under New York law, [3] a plaintiff must allege: "(i) the formation of a contract between the parties; (ii) performance by the plaintiff; (iii) failure of defendant to perform; and (iv) damages." Johnson v. Nextel Commc'ns Inc., 660 F.3d 131, 142 (2d Cir. 2011) (citing Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004)).

The Complaint adequately alleges these elements. As to the existence of a contract requiring delivery of the warrants to plaintiffs, plaintiffs allege that they placed an order with Natixis "to purchase a total of $46, 000, 000 in Bonds and 46, 000 Warrants." Compl. ¶ 13. They allege that Natixis, in turn, confirmed in writing that it would sell that amount of bonds and warrants to plaintiffs. Id. ¶ 14. Further, the Customer Agreements between plaintiffs and Natixis each state, in a section entitled, "Delivery of Securities, " the following: "Without abrogating any of the Broker's rights under any other portion of this Agreement and subject to any indebtedness of the Customer to the Broker, the Customer is entitled, upon appropriate demand, to receive physical delivery of fully paid securities in the Customer's Account." See Levine Decl. Ex. D ¶ 5; id. Ex. E ¶ 5.[4] As to performance by the parties, the Complaint alleges, plaintiffs "paid in full the agreed consideration, " but Natixis failed to ...

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