United States District Court, N.D. New York
SHELLEY T. CAMPBELL, Plaintiff,
TIMOTHY ADUDDELL and JERRY WHITLOCK, Defendant.
Shelley T. Campbell Old Chatham, New York, Plaintiff, pro se.
Trevett Cristo Salzer & Andolina P.C., Eric M. Dolan, Esq., of Counsel, Rochester, New York, Attorney for Defendant Jerry Whitlock.
MEMORANDUM-DECISION AND ORDER
NORMAN A. MORDUE, Senior District Judge.
While represented by counsel, plaintiff filed this action in New York State Supreme Court, County of Oneida, on October 27, 2011. The complaint (Dkt. No. 1) alleges state law causes of action for fraud, breach of contract, and defamation. Defendant Jerry Whitlock, a resident of Florida, removed the action to this Court on the ground of diversity jurisdiction. 28 U.S.C. § 1332. Defendant Timothy Aduddell, alleged in the complaint to be a resident of Oklahoma, has not been served with process. After United States Magistrate Judge Andrew T. Baxter granted plaintiff's attorney's motion for leave to withdraw from representation of plaintiff, plaintiff has been proceeding pro se. Defendant Whitlock moves to dismiss the complaint and for summary judgment. Plaintiff moves for leave to serve an amended complaint. As set forth below, the Court grants Whitlock's motion (Dkt. No. 42) to dismiss the initial complaint, and grants in part and denies in part plaintiff's motion (Dkt. No. 49) for leave to amend the complaint.
The complaint (Dkt. No. 1), filed in New York State Supreme Court, Oneida County on October 27, 2011, claims that defendant Timothy Aduddell was an officer, director, and shareholder of Aduddell Indus., and that defendant Jerry Whitlock was a director and shareholder of Aduddell Indus. According to the complaint, Whitlock "entered into a personal and social relationship with the plaintiff"; knew of her "financial condition and her vulnerability"; and knew that she was not a sophisticated investor.
In the first cause of action for fraud and breach of contract, plaintiff claims as follows: that defendants carried on a course of conduct to misrepresent information with regard to Aduddell Indus. to persuade plaintiff to invest in the company; that Whitlock convinced her that investing and purchasing stock in Aduddell Indus. "would result in significant gains"; that Whitlock "promised to cover any losses incurred by the plaintiff related to the investment in the corporation"; and that defendants "guaranteed to the plaintiff that there would be no loss of her investment and promised to return, at a minimum, the entire $60, 000.00 sum invested in the corporation." The complaint continues:
The various acts conducted by the defendants in relation to their misrepresentations and fraud of the plaintiff are as follows:
A. Defendant Whitlock stated on more than one occasion that he had maxed out his shares in the corporation that he could buy as a director but wished he could buy a lot more of this stock.
B. Defendant Whitlock repeatedly stated that the investment in Aduddell Industries, Inc., was "a sure bet and a sure thing". Defendant Whitlock promised to "cover her investment if anything went wrong".
C. After plaintiff lost her entire investment, Plaintiff requested on many occasions that defendant Whitlock honor his promise to protect her against any loss. Defendant Whitlock refused to return any of the plaintiff's investment in the corporation stock. Defendant Whitlock directed his attorney to advise Plaintiff to stop any further attempts at contacting defendant Whitlock directly and thereby establishing and confirming the breach of this agreement on September 25, 2009, in a letter from the Katten Law Firm (Jonathan Feld, Esq.) of Chicago, Illinois.
D. Upon information and belief, defendant Whitlock manipulated plaintiff into the purchase of Aduddell Industries, Inc., (formerly known as Zenex International, Inc.) shares, with one of his goals to help raise the share price and then without advice to the plaintiff sold his shares earning millions of dollars while the plaintiff lost her investment.
E. Defendant Whitlock knowing that the plaintiff would be investing nearly her entire liquid net worth, took advantage of his "insider" position in order to entice the plaintiff to make the $60, 000.00 purchase of Aduddell stock and then sold his shares resulting in significant gain for his investment and the total loss of the plaintiffs investment.
F. In order to further defendant's scheme to "con" the plaintiff out of her investment he arranged for communication between the CEO of the corporation, defendant Aduddell who during several conversations assured the plaintiff that her investment was safe, that her investment was a wise investment and that her investment would return a significant profit, knowing that the plaintiff would rely on these statements as a result of his position with the corporation.
G. Defendant Whitlock also represented his relationship with defendant Aduddell as a 30 year friendship and that both Whitlock and Aduddell had a substantial investment in the company and therefore encouraging plaintiff to risk nearly all of her net worth into what turned out to be a worthless corporation.
H. Defendants undertook a course of action to prohibit the plaintiff from discovering the fraud and misrepresentation by impeding requests for corporation information including stockholder lists, and information regarding the financial condition of the corporation.
I. Used intimidation against the plaintiff by using one of the corporation employees, namely, Randall Oberlag who stated in a conversation that if the plaintiff were to cause trouble for the corporation and wasn't careful the corporation would send one of their guys to "take care of her". Upon information and belief, Oberlag also monitored plaintiffs computer communications and other telephonic communications at the direction and request of these defendants.
J. Plaintiff requested that defendant Whitlock reimburse her for her losses and the most he would offer was $5, 000.00 and a promissory note to repay defendant Whitlock. Plaintiff under duress and the stress of her financial needs (well known to defendant Whitlock) executed the promissory note to attempt to mitigate the existing financial devastation as a result of the misrepresentations, fraud and "con" like actions by defendant Whitlock with the help and complicity of defendant Aduddell.
17. The plaintiff sent letters as a stockholder requesting information, requesting meeting minutes, and requesting other relevant data be supplied all of which was blocked by the defendants and the corporation which defendants "controlled".
18. Upon information and belief, the plaintiff believes that the defendants engaged in a course of conduct in violation of the securities and exchange act regulations and those laws that regulate publicly traded stock.
19. The defendants saw the plaintiff as an "easy mark" and relied upon their relationship together in order to defraud the plaintiff out of $60, 000.00.
20. The stock became and remains worthless and upon information and belief the defendants made significant gains in their investments in the corporation without alerting plaintiff to the risks associated with her investment.
21. Plaintiff continues to be stonewalled and blocked with regard to her efforts to determine the true facts regarding the corporation and deceitful conduct of the defendants who fraudulently enticed her to purchase worthless stock.
23. Upon information and belief, the defendants knew that the corporation ...