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Szulik v. Tagliaferri

United States District Court, Second Circuit

October 21, 2013

MATTHEW J. SZULIK, KYLE M. SZULIK, and MICHAEL COLLEARY, in his capacity as trustee of the Raymond W. Szulik Revocable Trust dated December 5, 2007, Plaintiffs,
v.
JAMES S. TAGLIAFERRI, PATRICIA J. CORNELL, and BARRY B. FEINER, Defendants.

MEMORANDUM AND ORDER DENYING MOTION TO RECONSIDER

P. KEVIN CASTEL, District Judge.

In a Memorandum and Order dated August 21, 2013 (the "Order"), the Court granted in part and denied in part defendants' motion to dismiss plaintiff's Second Amended Complaint (the "SAC"). Szulik v. Tagliaferri, No. 12 Civ. 1827, 2013 WL 4494684 (Aug. 21, 2013).[1] Plaintiffs now move for reconsideration of the Court's limitation of the scope of the fraud claims, pursuant to Rule 60(b), Fed. R. Civ. P., and Local Civil Rule 6.3.

Put simply, plaintiffs have plausibly and adequately alleged false statements and certain damages that foreseeably flow from those false statements. The false statements relate to the payment of compensation to plaintiffs' financial advisors for the entity, a thoroughbred horse racing operation, that was the subject of the investment. But plaintiffs have not adequately and plausibly alleged that all losses they suffered on the investment foreseeably flowed from the false statements about compensation. Each of the four claims required, as a matter of loss causation or proximate cause, that the plaintiff plausibly and adequately allege that the particular losses claimed foreseeably flowed from the false statements. This plaintiffs have failed to do. As more fully explained below, plaintiffs' motion for reconsideration is denied.

I. LEGAL STANDARD

Motions for reconsideration are governed by Local Civil Rule 6.3 and Rule 60(b), Fed.R.Civ.P. A motion to reconsider is "addressed to the sound discretion of the district court[.]" See Mendell ex rel. Viacom, Inc. v. Gollust , 909 F.2d 724, 731 (2d Cir. 1990). A motion for reconsideration "is generally not favored and is properly granted only upon a showing of exceptional circumstances." Marrero Pichardo v. Ashcroft , 374 F.3d 46, 55 (2d Cir. 2004) (citation omitted). "The standard for granting such a motion is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked-matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc. , 70 F.3d 255, 257 (2d Cir. 1995). "[A] motion to reconsider should not be granted where the moving party seeks solely to relitigate an issue already decided, " Id. at 257.

Motions for reconsideration "should be granted only when the defendant identifies an intervening change of law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Kolel Beth Yechiel of Tartikov, Inc. v. YLL Irrevocable Trust, ___ F, 3d ___, 2013 WL 4609100, at *4 (2d Cir. Aug. 30, 2013) (citation and quotations omitted). As a preliminary matter, plaintiffs have not identified any intervening change of controlling law. Neither have plaintiffs relied on any new evidence. Thus, in order to prevail on their motion, plaintiffs must show the need to correct clear error or prevent manifest injustice. See id.

II. ANALYSIS

A. Timeliness of Motion

The time limit for a motion for reconsideration is set forth in Rule 6.3 of the Local Civil Rules. That Rule provides:

Unless otherwise provided by the Court or by statute or rule... a notice of motion for reconsideration or reargument of a court order determining a motion shall be served within fourteen (14) days after the entry of the Court's determination of the original motion, or in the case of a court order resulting in a judgment, within fourteen (14) days after the entry of the judgment.

Local Civil Rule 6.3. The Court's Order was entered on August 21, 2013. Plaintiffs moved for reconsideration on September 9, 2013, apparently based on a view that the three-day extension of Rule 6(d), Fed.R.Civ.P. applied to their motion. (Pl.'s Reply Mem.1) Because any potential error appears to have been inadvertent, and because in any event the possible delay of three business days is de minimis, the Court will consider the motion timely. See Holtz v. Rockefeller & Co., Inc. , 258 F.3d 62, 73 (2d Cir. 2001) ("A district court has broad discretion to determine whether to overlook a party's failure to comply with local court rules.") (citations omitted).

B. The Court's Causation Analysis

On this motion, plaintiff challenges the limitation of the scope of four claims brought against defendants James S. Tagliaferri and Patricia J. Cornell.[2] (Pl.'s Mem. 2) Count III alleged scheme liability under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j, and Rule 10b-5(a) and (c) promulgated thereunder by the Securities and Exchange Commission, 17 C.F.R. § 240.10b-5. (SAC ¶¶ 367-77) Count IV alleged a primary violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5(b). (SAC ¶¶ 378-87) Count VII alleged a claim arising under the North Carolina Investment Advisers Act, N.C. Gen. Stat. § 78C-1 et seq. (SAC ¶¶ 396-401) Count VIII alleged a claim of "fraudulent concealment, " apparently under North Carolina common law. (SAC ¶¶ 402-07; Pl.'s Mem. 2)

Under the federal securities laws, a securities fraud plaintiff must allege both transaction causation and loss causation. Lentell v. Merrill Lynch & Co. Inc. , 396 F.3d 161, 172 (2d Cir. 2005). Transaction causation is analogous to reliance, and requires only "an allegation that but for the deceptive act, the plaintiff would not have entered into the securities transaction." Stoneridge Inv. Partners, LLC v. Scientific-Atlanta , 552 U.S. 148, 171 (citing Lentell at 172). Thus, the "but for" causation required to show transaction causation is "not a difficult hurdle to clear" in a private fraud claim under § 10(b). Stoneridge at 171. Plaintiffs adequately and plausibly alleged transaction causation.

Loss causation, on the other hand, has been described "in terms of the tort-law concept of proximate cause, i.e., that the damages suffered by plaintiff must be a foreseeable consequence of any misrepresentation or material omission[.]" Lentell , 396 F.3d at 172 (citation and quotations omitted). The loss causation inquiry "typically examines how directly the subject of the fraudulent statement caused the loss, and whether the resulting loss was a foreseeable outcome of the fraudulent statement." Suez Equity Investors, L.P. v. Toronto-Dominion Bank , 250 F.3d 87, 96 (2d Cir. 2001). "Loss causation is the causal link between the alleged misconduct and the economic harm ultimately suffered by plaintiff." Lentell , 396 F.3d at 172 (citation and quotations omitted). "[A] misstatement or omission is the proximate ...


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