Enron Corp. v. Enron Corp.

Decision Date02 August 2016
Docket NumberMDL 1446,CIVIL ACTION NO. H-01-3624 AND CONSOLIDATED CASES,CIVIL ACTION NO. H-03-4359 COORDINATED CASE
PartiesIn Re ENRON CORPORATION SECURITIES, DERIVATIVE & "ERISA" LITIGATION, MARK NEWBY, ET AL., Plaintiffs v. ENRON CORPORATION, ET AL., Defendants SAMUEL GIANCARLO, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. UBS FINANCIAL SERVICES, INC., UBS SECURITIES, L.L.C., and and UBS AG, Defendants.
CourtU.S. District Court — Southern District of Texas
OPINION AND ORDER OF DISMISSAL

Pending before the Court in the above referenced putative class action,1 alleging violations of Section 20A of the SecuritiesExchange Act of 1934 (a/k/a "the 1934 Act"),2 as amended, 15 U.S.C. §§ 78j(b)3 and 78(t),4 et seq.,5 and the Private SecuritiesLitigation Reform Act ("PSLRA"), 15 U.S.C. §§ 78(u)(4) and 78(a), et seq., is Defendants UBS Financial Services, Inc.,6 UBS Securities LLC ("Warburg"),7 and UBS AG's8 (collectively, "the UBS Defendants'" or "UBS's") motion to dismiss (instrument #84) the First Amended Class Action Complaint (#81). Also pending are Lead Plaintiffs' motion for class certification (#124) and Plaintiffs' opposed joint motion for amended scheduling order, for additional briefing, and for a ruling (instrument #173).

Plaintiffs Giancarlo and Alsina, two Paine Webber (sometimes referred to as "PW") retail-brokerage customers, in this suit against the UBS Defendants, have elected to proceed independently of the consolidated amended complaints in the Newby and Tittle actions. #79.

I. Standards of Review
A. Rule 12(b)(6)

When a district court reviews a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), it must construe the complaint in favor of the plaintiff and take all well-pleaded facts as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011), citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009). The plaintiff's legal conclusions are not entitled to the same assumption. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)("The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."), citing Bell Atlantic Corp. v. Twombly, 556 U.S. 662, 678 (2007); Hinojosa v. U.S. Bureau of Prisons, 506 Fed. Appx. 280, 283 (5th Cir. Jan. 7, 2012).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, . . . a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels andconclusions, and a formulaic recitation of the elements of a cause of action will not do . . . ." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007)(citations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965, citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004)("[T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action"). "Twombly jettisoned the minimum notice pleading requirement of Conley v. Gibson, 355 U.S. 41 . . . (1957)["a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief"], and instead required that a complaint allege enough facts to state a claim that is plausible on its face." St. Germain v. Howard, 556 F.3d 261, 263 n.2 (5th Cir. 2009), citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)("To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead 'enough facts to state a claim to relief that is plausible on its face.'"), citing Twombly, 127 S. Ct. at 1974). "'A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Montoya v. FedEx Ground Package System, Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal,556 U.S. 662, 678 (2009). The plausibility standard is not akin to a "probability requirement," but asks for more than a "possibility that a defendant has acted unlawfully." Twombly, 550 U.S. at 556. Dismissal is appropriate when the plaintiff fails to allege "'enough facts to state a claim to relief that is plausible on its face'" and therefore fails to "'raise a right to relief above the speculative level.'" Montoya, 614 F.3d at 148, quoting Twombly, 550 U.S. at 555, 570. "[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice" under Rule 12(b). Iqbal, 129 S. Ct. at 1949.

Dismissal under Rule 12(b)(6) is proper not only where the plaintiff fails to plead sufficient facts to support a cognizable legal theory, but also where the plaintiff fails to allege a cognizable legal theory. Kjellvander v. Citicorp, 156 F.R.D. 138, 140 (S.D. Tex. 1994), citing Garrett v. Commonwealth Mortgage Corp., 938 F.2d 591, 594 (5th Cir. 1991); ASARCO LLC v. Americas Min. Corp., 832 B.R. 49, 57 (S.D. Tex. 2007). "A complaint lacks an 'arguable basis in law' if it is based on an indisputedly meritless legal theory' or a violation of a legal interest that does not exist." Ross v. State of Texas, Civ. A. No. H-10-2008, 2011 WL 5978029, at *8 (S.D. Tex. Nov. 29, 2011).

As noted, on a Rule 12(b)(6) review, although generally the court may not look beyond the pleadings, the court may examine thecomplaint, documents attached to the complaint, and documents attached to the motion to dismiss to which the complaint refers and which are central to the plaintiff's claim(s), as well as matters of public record. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010), citing Collins, 224 F.3d at 498-99; Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n.6 (5th Cir. 1994). See also United States ex rel. Willard v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 379 (5th Cir. 2003)("the court may consider . . . matters of which judicial notice may be taken"). Taking judicial notice of public records directly relevant to the issue in dispute is proper on a Rule 12(b)(6) review and does not transform the motion into one for summary judgment. Funk v. Stryker Corp., 631 F.3d 777, 780 (5th Cir. 2011). "A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b).

B. Rule 9(b)

Federal Rule of Civil Procedure 9(b) provides,

In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person must be averred generally.

"In every case based upon fraud, Rule 9(b) requires the plaintiff to allege as to each individual defendant 'the nature of the fraud, some details, a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants." Hernandez v. Ciba-Geigy Corp. USA, 200 F.R.D. 285, 291 (S.D. Tex. 2001). In a securities fraud suit, the plaintiff must plead with particularity the circumstances constituting the alleged fraud: Rule 9(b) requires the plaintiff to "'specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.'" Southland Securities Corp. v. INspire Ins. Solutions, Inc., 365 F.3d 353, 362 (5th Cir. 2004), quoting Williams v. WMX Technologies, Inc., 112 F.3d 175, 177-78 (5th Cir. 1997), cert. denied, 522 U.S. 966 (1997). "'In cases concerning fraudulent misrepresentation and omission of facts, Rule 9(b) typically requires the claimant to plead the type of facts omitted, the place in which the omissions should have appeared, and the way in which the omitted facts made the representations misleading.'" Carroll v. Fort James Corp., 470 F.3d 1171, 1174 (5th Cir. 2006), quoting United States ex. rel. Riley v. St. Luke's Hosp., 355 F.3d 370, 381 (5th Cir. 2004).

Unlike the alleged fraud, Rule 9(b) allows a plaintiff to plead intent to deceive or defraud generally. Nevertheless a mere conclusory statement that the defendant had the required intent isinsufficient; the plaintiff must set forth specific facts that raise an inference of fraudulent intent, for example, facts that show the defendant's motive. Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1068 (5th Cir. 1994)("Although scienter may be averred generally, case law amply demonstrates that pleading scienter requires more than a simple allegation that a defendant had fraudulent intent. To plead scienter adequately, a plaintiff must set forth specific facts that support an inference of fraud."); Melder v. Morris, 27 F.3d 1097, 1102 (5th Cir. 1994).

The particularity requirement of Rule 9(b) also governs a conspiracy to commit fraud. Southwest Louisiana Healthcare System v. MBIA Ins. Corp., No. 05-1299, 2006 WL 1228903, *5 & n.47 (W.D. La. May 6, 2006); Hernandez v. Ciba-Geigy Corp. USA, No. Civ. A. B-00-82, 2000 WL 33187524, *4 (S.D. Tex. Oct. 17, 2000)("The weight of Fifth Circuit precedent holds that a civil conspiracy to commit a tort that sounds in fraud must be pleaded with particularity."); In re Ford Motor Co. Vehicle Paint Litigation, No. MDL 1063, 1994 WL 426548, *34 (E.D. La. July 30, 1996); and Castillo v. First City Bancorporation of Texas, Inc., 43 F.3d 953, 961 (5th Cir. 1994).

A dismissal for failure to plead with particularity in accordance with Rule 9(b) is treated as a Rule 12(b)(6) dismissal for failure to state a claim. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996).

C. The Exchange Act and the PSLRA's Heightened Pleading...

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