Cohen v. S.A.C. Trading Corp.

• Decision Date: 03 April 2013
• Docket Number: Docket No. 11–1390–cv.
• Citation: 711 F.3d 353
• Parties: Patricia COHEN, Plaintiff–Appellant, v. S.A.C. TRADING CORP., S.A.C. Capital Management, Inc., S.A.C. Capital Management, LP, S.A.C. Capital Management, LLC, S.A.C. Capital Advisors, LLC, S.A.C. Capital Associates, LLC, Sigma Capital Management, LLC, Brett Lurie, Edward Bao, Defendants, Steven A. Cohen, Donald T. Cohen, C.P.A., P.A., Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

711 F.3d 353

Patricia COHEN, Plaintiff–Appellant,

v. S.A.C. TRADING CORP., S.A.C. Capital Management, Inc., S.A.C. Capital Management, LP, S.A.C. Capital Management, LLC, S.A.C. Capital Advisors, LLC, S.A.C. Capital Associates, LLC, Sigma Capital Management, LLC, Brett Lurie, Edward Bao, Defendants,Steven A. Cohen, Donald T. Cohen, C.P.A., P.A., Defendants–Appellees.

Docket No. 11–1390–cv.

United States Court of Appeals, Second Circuit.

Argued: Feb. 22, 2012.

Decided: April 3, 2013.

Howard W. Foster, Foster PC, Chicago, IL, for Appellant.

Martin Klotz (John R. Oller, Jeffrey B. Korn, on the brief), Willkie Farr & Gallagher LLP, New York, NY, for Appellees.

Before: LEVAL, SACK, HALL, Circuit Judges.

LEVAL, Circuit Judge:

Plaintiff Patricia Cohen appeals from the judgment of the United States District Court for the Southern District of New York (Holwell, J.) dismissing her claims against her ex-husband Steven Cohen and his brother Donald Cohen for failure to state a claim and untimeliness. Against both defendants, the complaint alleges a fraud-based violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(d), common law fraud, and breach of fiduciary duty. Against Steven, it alleges also unjust enrichment. We hold that the district court's reasons for dismissing the fraud-based claims were erroneous and that the court erred in ruling on the existing record that the RICO, common law fraud, and breach of fiduciary duty claims were time-barred. We sustain the dismissal of the unjust enrichment claim as untimely.

I. BACKGROUND

The Second Amended Complaint (the “complaint”) alleges the following facts: Patricia and Steven were married in 1979. At the time, Steven was a trader at Gruntal & Co. (“Gruntal”). In January 1986, Steven created S.A.C. Trading Corporation (“SAC”), and served as its President, while his brother, defendant Donald, served as Treasurer, and Brett Lurie served as its Secretary and attorney. Donald also served as Patricia and Steven's personal accountant and financial advisor, and Lurie served as Patricia's attorney.

In early 1986, Steven, through SAC, invested approximately $9 million with Lurie to purchase interests in real estate in New York City to be converted to co-op apartments (the “Lurie Investment”). Later that year, Steven and Donald told Patricia that the entire value of the Lurie Investment had been lost, whereas in fact, by January 1987, Lurie had returned $5.5 million of the investment in settlement of a claim Steven had brought against him. Patricia was never told of Lurie's payment. Steven continued to carry the Lurie Investment on SAC's books at $8,745,169. According to the complaint, Steven and Donald told Patricia that it was worthless but could not be written off until the properties went into foreclosure or bankruptcy.

The 1989 Separation Agreement

Steven and Patricia separated in 1988 and eventually divorced. They reached a separation agreement in 1989 (the “1989 Separation Agreement”). The 1989 Separation Agreement provided that:

14.4. Each party has acknowledged a degree of familiarity with and knowledge of the financial circumstances of the other and each party is of the opinion that he and she are sufficiently informed of income, assets, property and financial prospects of the other. Husband has provided wife with his net worth statement and the statement of financial condition dated as of July 1, 1988, provided, however, that Husband makes no representation as to the value of the interest in a second and third mortgage on various properties involved in cooperative conversions in Queens, New York [the Lurie Investment] in which the investment was listed on his statement of financial condition dated as of July 1, 1988 at a value of $8,745,169.

14.5 Each party acknowledges that respective counsel have advised that under the Equitable Distribution Law of the State they are each entitled to a full disclosure and valuation of all property owned by the other party and that the complete financial disclosure which could be required if this matter continued in litigation has not been obtained, but both parties have advised their counsel that they are aware of these facts and desire to curtail discovery, are unwilling to litigate the issues and desire to proceed with this Agreement on the limited financial data supplied to date and their own knowledge of the other party's financial affairs.

Joint App'x at 165–66 (emphasis added). It also included a provision to the effect that the agreement is “entire and complete” and that “[n]o representations or warranties have been made by either party to the other, or by anyone else, except as expressly set forth in this Agreement.” Id. at 172.

During the negotiations leading to the 1989 Separation Agreement, Donald and Steven prepared and sent to Patricia a “Statement of Financial Condition” (“Financial Statement”), which purported to disclose all of Steven and Patricia's marital assets as of July 1, 1988. The Financial Statement listed Steven's assets as totaling $18,229,527 (of which approximately $200,000 was cash) and liabilities as totaling $1,298,990, for a total net worth of $16,930,537. The Financial Statement reflected the Lurie Investment valued at $8,745,169. Steven's lawyer told Patricia that the Lurie money was “lost.” Id. at 76.

The 1992 Separation Agreement

In 1991, Patricia brought a motion in the Supreme Court of New York, seeking to increase maintenance, child support, and other relief from the 1989 Separation Agreement and the March 13, 1990 divorce decree. She sought to set aside the financial provisions of the 1989 Separation Agreement “upon the grounds that it is unconscionable and was procured by fraud and economic duress.” Order to Show Cause for Modification Upward of Child Support and Maintenance at 2, Cohen v. Cohen, No. 62593/90 (N.Y.Sup.Ct. Mar. 21, 1991). Patricia swore in an affidavit in support of her motion that Steven did not disclose his income for 1989, and “[t]his failure to disclose by itself should be sufficient to set aside the maintenance and support provisions of the Separation Agreement.” Affidavit of Patricia Cohen at 2–3, Cohen v. Cohen, No. 62593/90 (N.Y.Sup.Ct. Mar. 20, 1991). She also claimed that Steven “took everything else of value, primarily art works and his investment of $9.5 million in a real estate deal with Brett Lurie.” Id. at 3. Additionally, her attorney affirmed in an affidavit:

[Patricia] and I believe that Mr. Cohen has not truthfully stated his income. Upon information and belief, Mr. Cohen did one of the following: (1) had payments of his income made to his wholly owned corporation, S.A.C. Trading Corp., (2) had payments of his income made directly to his brother Donald, who is his accountant, or (3) deferred payment of his compensation to a later year so that his income tax return during 1989 did not show his true income.

Reply Affirmation of Martin S. Kera at 2, Cohen v. Cohen, No. 62593/90 (N.Y.Sup.Ct. May 8, 1991). Patricia also claimed that Steven misrepresented income he received from Gruntal.

In opposition, Steven stated that “[t]he Brett–Lurie deal is presently involved in bankruptcy proceedings. Even [at the time the Financial Statement was prepared,] I suspected that this would happen because the general partner [Lurie] was in default. I am writing it off as totally worthless. Subtracting the value of Brett–Lurie from my net assets at that time means that my net worth was $8,185,368.” Affidavit of Steven Cohen at 9, Cohen v. Cohen, No. 62593/90 (N.Y.Sup.Ct. May 1, 1991).

Patricia later withdrew her argument that the 1989 Separation Agreement was procured by fraud and economic duress. Decision and Order, Cohen v. Cohen, No. 62593/90 (N.Y.Sup.Ct. Aug. 6, 1991). Instead, she and Steven executed an amended Settlement Agreement in January 1992.

The Lawsuit

In 2006, Patricia read an article about the fraud conviction of an individual who worked at Steven's former employer, Gruntal, and began investigating the representations Gruntal had made to her during the 1989 and 1991 proceedings. Patricia asserts that, as a result of the investigation, in August 2008 she chanced upon a court file of a suit brought by Steven against Brett Lurie, Steven Cohen and SAC Trading Corp. v. Brett Lurie and Conversion Funding Corp., No. 8981/87 (N.Y.Sup.Ct.), where she found reference to the $5.5 million payment from Lurie to Steven. As a result of that discovery, on December 16, 2009, Patricia commenced this action in the United States District Court for the Southern District of New York, alleging that, in falsely representing the Lurie Investment as worthless and concealing the $5.5 million received on its account, defendants conspired in violation of RICO, committed common law fraud, and breached fiduciary duties, and that Steven was unjustly enriched.

On March 30, 2011, the district court granted a motion to dismiss all Patricia's claims, ruling that the complaint did not adequately allege fraud and that the claims were time-barred.

II. DISCUSSIONA. Sufficiency of the Pleading

Patricia contends the court erred in concluding that the allegations of her complaint were insufficient. We review a district court's grant of a motion to dismiss de novo, accepting as true the complaint's factual allegations and drawing all inferences in the plaintiff's favor. First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 173 (2d Cir.2004). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). Claims that sound in fraud are subject to the heightened pleading standards of Fed.R.Civ.P. 9(b), which requires that averments of fraud be “state[d] with particularity.” To satisfy this requirement, a complaint must “specify the time,...