United States District Court, S.D. New York
their opposition brief to defendant Ezra Beren's motion
to dismiss the second amended complaint ("SAC"),
plaintiffs Martin Trott and Christopher Smith as Joint
Official Liquidators and Foreign Representatives of Platinum
Partners Value Arbitrage Fund L.P. (in Official Liquidation)
alleged various facts -regarding Beren's role in the
Agera transactions, the Black Elk scheme, the bribery to
Norman Searook, etc. - 'nowhere found in the SAC nor in
the exhibits incorporated by reference into the SAC.
See Plaintiffs' Memorandum of Law in Opposition
to Ezra Beren's Motion to Dismiss, ECF No. 497, at 9-17.
Because "[i]t is axiomatic that the Complaint cannot be
amended by the briefs in opposition to a motion to
dismiss," Red Fort Capital, Inc. v. Guardhouse
Prods, LLC, 397 F.Supp.3d 456, 476 (S.D.N.Y. 2019),
Court directed plaintiffs' counsel to file "a
statement . . . explaining (if they can) why monetary
sanctions should not be imposed for this obvious
misconduct." Memorandum Order dated December 24, 2019,
ECF No. 499, at 3 n.1.
counsel submitted a statement as directed. See
Plaintiffs' Counsel Statement to Court Regarding Possible
Monetary Sanction Related to Opposition to Ezra Beren's
Motions to Dismiss, ECF No. 500 ("Statement"). Upon
review, the Court finds plaintiffs' counsel's
proffered explanations and excuses unpersuasive, for the
plaintiffs' counsel note that Beren, in his moving brief,
(1) made a number of factual denials, (2) invoked the
discovery exchanged to date in the case, and (3) implied that
there was no evidence supporting certain allegations against
Beren, while referencing plaintiffs' continuing
obligation to comply with Rule 11. See Statement 2.
Therefore, they argue, they had an obligation to respond to
Beren's assertions by presenting their supplemental
evidence supporting the allegations in the SAC. Id.
Although it may be true that Beren's counsel violated the
rules in these respects, the obvious remedy was for
plaintiffs' counsel to note the improper references
proffered by Beren's counsel and ask that they be
disregarded or stricken. Instead, plaintiffs' counsel
took the same improper use of supplemental facts to an
extreme, dedicating a majority of their brief to discussing
facts not in the SAC. Furthermore, despite his reference to
Rule 11, Beren was clearly not making a Rule 11 motion, as
should have been apparent to plaintiffs' counsel.
plaintiffs' counsel argue that the supplemental facts
here are "nearly identical to the supplemental
information that Plaintiffs submitted in response to the
prior motions to dismiss." Mem. 3. Specifically, they
refer to an example where they submitted a brief with
supplemental facts on March 11, 2019. See ECF No.
271. But this was specially allowed in response to the
Court's request during an oral argument on motions to
dismiss the first amended complaint ("FAC") held on
March 7, 2019. See Transcript 3/7/2019, ECF No. 293,
at 92-93. Specifically, during the oral argument on that
earlier motion, an issue arose as to what it meant, for
certain allegations against GRD Estates in Paragraphs 163 and
4 60 of the FAC to be asserted "on information and
belief." Id. Here, by contrast, not only had no
such issue been raised, but also the new,
outside-the-complaint facts asserted by plaintiffs'
counsel were submitted for other purposes, and not in
response to a request from the Court.
counsel also cite another example, in which, in their
opposition brief, filed on May 13, 2019, to the motion of
Huberfeld Family Foundation ("HFF") to dismiss the
SAC, they included supplemental facts to show that Murray
Huberfeld controlled HFF and that such dominion was used to
commit a fraud. See ECF No. 355. This, however, was
itself improper, and the mere fact that the Court did not
sua sponte rebuke counsel on that occasion was not
an invitation for counsel to continue with such
improprieties. Moreover, in ruling on the motion of HFF, the
Court did not consider nor rely on those additional facts.
See In re Platinum-Beechwood Litig., No. 18-cv-10936
(JSR), 2019 WL 2569653, at *16 (S.D.N.Y. June 21, 2019).
short, the Court continues to find that plaintiffs'
counsel acted in blatant disregard of the Federal Rules of
Civil Procedure in dedicating the majority of their brief on
a motion addressed to the pleadings to assertions of fact
nowhere referenced in the pleadings. Nevertheless, the Court
will indulge the possibility that counsel were simply carried
away by overzealousness rather than acting in bad faith.
Accordingly, no monetary sanctions will be imposed. See
Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d
323, 336 (2d Cir. 1999) ("In order to impose sanctions
pursuant to its inherent power, a district court must find
that: (1) the challenged claim was without a colorable basis
and (2) the claim was brought in bad faith, i.e.,
motivated by improper purposes such as harassment or
delay."). If there are any further violations of the
rules, however, the Court will not exercise such
 Unless otherwise indicated, in quoting
cases all internal quotation marks, alterations, emphases,
footnotes, and citations are omitted.
 It should also be noted that during a
joint telephone conference on December 16, 2019, the Court
explicitly warned counsel not to attach to their briefs any
documents not incorporated by reference into the SAC.
Although plaintiffs' counsel technically complied with
this order, they violated its spirit by including completely