United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
TAYLORS WAIN UNITED STATES DISTRICT JUDGE
Securities and Exchange Commission (“Plaintiff”)
brings this action against Defendant Todd David Alpert
(“Defendant”), alleging that Defendant violated
Section 10(b) of the Securities Exchange Act of 1934
("the Exchange Act") and Rule 10b-5 promulgated
thereunder by trading in securities on the basis of
misappropriated material non-public information. The Court
has jurisdiction of this action pursuant to 28 U.S.C. §
moves to dismiss Plaintiff's complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6) for failure to state
a claim against him upon which relief may be granted and,
pursuant to Federal Rule of Civil Procedure 9(b), for failure
to state with particularity the circumstances alleged to
Court has reviewed thoroughly all of the parties'
submissions and arguments. For the following reasons, the
motion to dismiss the complaint is denied.
purposes of this motion, the Court takes the following facts
drawn from the Complaint (“Compl.”) as true.
January 2011, through his employment with a security company,
Defendant began work as one of several
“dispatchers” for a member of the Board of
Directors of H.J. Heinz Company (“Heinz”).
(Compl. ¶ 17.) At the start of his employment with the
security company, Defendant signed an employment contract
including a confidentiality agreement, which provided that
Defendant “may acquire access to confidential and
private information about the personal or business affairs of
the Board Member and his family” and prohibited
Defendant from “disclosing such information to a third
party or from using ‘any of such information for any
purpose other than rendering the Services [he was] engaged to
provide' to the Board Member and his family.”
(Id. ¶ 18.) Defendant's employment duties
as a “dispatcher” included “answering phone
calls, receiving requests from the Board Member and his
family . . . [and] reviewing email messages sent to a
designated email account” for security dispatchers.
(Id. ¶ 21.) He performed these tasks in a
security booth located on the Board Member's property.
January and February 2013, Defendant gained access to
information about a potential acquisition of Heinz from
emails sent by the Board Member to the security email account
for printing. (Id. ¶¶ 22-24.) These emails
included attachments such as detailed board meeting agendas
and status updates on the proposed transaction from the Heinz
CEO. (Id. ¶¶ 25-35.) At least one of these
emails included as an attachment a letter labeled
“CONFIDENTIAL” on the header of the document.
January 25, 2013, to February 13, 2013, Defendant purchased a
total of 1, 000 shares in Heinz stock and 30 Heinz call
options while he had access to the security email account.
(Id.) He sold all of these securities at a $43,
873.32 profit on February 14, 2013, the day the acquisition
was announced publicly. (Id. ¶¶ 36-38.)
More than two years later, Defendant admitted his trading
activity to the Heinz Board Member, who “considered
this to be a breach of his trust” and a violation of
the Defendant's employment contract. (Id. ¶
40.) Defendant was fired shortly thereafter. (Id.
asserts that Defendant violated Section 10(b) of the Exchange
Act and Rule 10b-5 by trading for his own benefit upon
possession of material non-public information misappropriated
from the Board Member, in breach of a fiduciary duty or
similar duty of trust and confidence to the Board Member.
(Id. ¶¶ 42-47.)
moves, pursuant to Federal Rules of Civil Procedure 12(b)(6)
and 9(b), to dismiss Plaintiff's Complaint in its
entirety, arguing that the Complaint fails to state a claim
of fraud against him or, alternatively, fails to state with
particularity the circumstances constituting fraud.
(See Docket Entry No. 18.)
determining whether a plaintiff has set forth the
“short and plain statement of the claim showing that
[he is] entitled to relief” required by the Federal
Rules (see Fed.R.Civ.P. 8(a)(2)), the Court looks to
whether the allegations in the complaint establish the
“facial plausibility” of the plaintiff's
claims. Ashcroft v. Iqbal, 556 U.S. 662, 678-79
(2009). “A claim has 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.” Iqbal, 556 U.S.
at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S.
544, 556 (2007)). Such a showing “must be enough to
raise a right to relief above the speculative level, ”
requiring “more than labels and conclusions, [or] a
formulaic recitation of the elements of a cause of
action.” Twombly, 550 U.S. at 555 (internal
quotation marks omitted). In deciding a Rule 12(b)(6) motion
to dismiss, the Court assumes the truth of the facts asserted
in the complaint and draws all reasonable inferences from
those facts in favor of the plaintiff. See Harris v.
Mills, 572 F.3d 66, 71 (2d Cir. 2009).
9(b) of the Federal Rules of Civil Procedure governs pleading
in fraud actions generally, providing that "[i]n
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or
mistake." Fed.R.Civ.P. 9(b). The particularity standard
requires the plaintiff to "(1) specify the statements
that the plaintiff contends were fraudulent, (2) identify the
speaker, (3) state where and when the statements were made,
and (4) explain why the statements were fraudulent."
ATSI Comm., Inc. v. Shaar Fund, Ltd., 493 F.3d 87,
99 (2d Cir. 2007) (citing Novak v. Kasaks, 216 F.3d
300, 306 (2d Cir. 2000)). "In cases involving insider
trading, however, where the specific facts are
'peculiarly within the knowledge of defendants, ' the
application of Rule 9(b) is 'relaxed' to allow
circumstantial evidence to plead the specific content and
circumstances of insider tips." SEC v.
Alexander, 160 F.Supp.2d 642, 649 (S.D.N.Y. 2001)
(quoting Energy Factors, Inc. v. Nuevo Energy Co.,
1991 U.S. Dist. LEXIS 16983, *12, No. 91 Civ. 4273, 1991 WL
259425, at *4 (S.D.N.Y. 1991)). Such claims, however,
“must be ...