Enron Corp. v. Ubs Painewebber, Inc., MDL 1446

• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
• Parties: In Re ENRON CORPORATION SECURITIES, DERIVATIVE & "ERISA" LITIGATION, KEVIN LAMPKIN, JANICE SCHUETTE, ROBERT FERRELL, AND STEPHEN MILLER, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. UBS PAINEWEBBER, INC. AND UBS WARBURG, LLC, Defendants.
• Docket Number: CIVIL ACTION NO. H-02-0851,MDL 1446
• Decision Date: 28 February 2017

In Re ENRON CORPORATION SECURITIES,
DERIVATIVE & "ERISA" LITIGATION,

KEVIN LAMPKIN, JANICE SCHUETTE, ROBERT FERRELL,
AND STEPHEN MILLER,
Individually and on Behalf
of All Others Similarly Situated, Plaintiffs,
v.
UBS PAINEWEBBER, INC. AND UBS WARBURG, LLC, Defendants.

MDL 1446
CIVIL ACTION NO. H-02-0851

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

February 28, 2017

OPINION AND ORDER

The above referenced putative class action alleges violations of the following securities fraud statutes through Defendants' scheme to optimize revenue in investment banking fees from UBS Securities LLC's corporate client, Enron Corp. ("Enron"), at the expense and defrauding of UBS Financial Service's brokerage retail clients, Lead Plaintiffs Kevin Lampkin, Janice Schuette, Bobby Ferrell, Stephen Miller, Terry Nelson, Diane Swiber, Franklin Gittess, and Joe Brown and similarly situated individuals: §§ 11, 12(a)(2) and 15 of the Securities Act of 1933 ("the 1933 Act"), 15 U.S.C. §§ 77k, 77l, and 77o, et seq.; §§ 10(b) and 20 of the Securities Exchange Act of 1934 ("the 1934 Act"), 15 U.S.C. §§ 78j(b) and 78(t), et seq., and Rule 10b-5, 17 C.F.R. § 240.10b-5;

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and the Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C.§ 78u-4. The 1933 Act claims are brought against UBS Financial Services, Inc. f/k/a UBS Paine Webber, Inc. ("PW") only. #122 ¶¶ 228, 269.

Pending before the Court are (1) a motion to dismiss the Third Amended Complaint,¹ filed by Defendants PW² and UBS Securities LLC f/k/a UBS Warburg LLC (Warburg"),³ (collectively, "UBS Defendants") (Notice of Motion to Dismiss, instrument #125; Memorandum in support, #126); (2) an alternative motion for leave to amend complaint from Lead Plaintiffs Kevin Lampkin, Janice Schuette, Bobby Ferrell, Stephen Miller, Terry Nelson, Diane Swiber, Franklin Gittess, and Joe Brown; (#164);(3) a motion to certify class (#166), filed by Lead Plaintiffs; and (4) an opposed motion for amended scheduling order, for additional briefing, and for a ruling (#223), filed by Plaintiffs.

Plaintiffs in this action have elected to proceed independently of the complaints in the Newby and Tittle actions in

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MDL 1446.

As housekeeping matters, given the age of this litigation, the lengthy discovery period now closed, and the extensive briefing already filed in this case regarding the claims against the UBS Defendants, the Court denies the motion for amended scheduling order and for additional briefing as unnecessary (#223). In addition because Plaintiffs have already been permitted to file four complaints (#1, 6, 20, and 122), the Court denies their alternative motion for leave to file another (#164). Finally, in light of the issuance of this Opinion and Order, the Court finds that the remaining motion for a ruling (also part of #223) is MOOT.

The Court leaves aside the name-calling, subjective accusations, and denigrating remarks in the various documents it reviews and focuses on the merits of the parties' contentions.

I. Standards of Review

A. Rule 8(a)

Federal Rule of Civil Procedure 8(a) states,

A pleading that states a claim for relief must contain:

(1) a short and plain statement of the grounds for the court's jurisdiction, unless the court already has jurisdiction, and the claim needs no new jurisdictional support;

(2) a short and plain statement of the claim showing that the pleader is entitled to relief; and

(3) a demand for the relief sought, which may

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include relief in the alternative or different types of relief.

Under the Rule's requirement of notice pleading, "defendants in all lawsuits must be given notice of specific claims against them." Anderson v. U.S. Dept. of Housing and Urban Development, 554 F.3d 525, 528 (5^th Cir. 2008). While a plaintiff need not plead specific facts, the complaint must provide "the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). If the complaint lacks facts necessary to put a defendant on notice of what conduct supports the plaintiff's claims against it, the complaint is inadequate to meet the notice pleading standard. Anderson, 554 at 528. The complaint must not only name the laws which the defendant has allegedly violated, but also allege facts about the conduct that violated those laws. Id.

B. 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 (5^th Cir. 2011), citing Gonzalez v. Kay, 577 F.3d 600, 603 (5^th 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

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in a complaint is inapplicable to legal conclusions."), citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Hinojosa v. U.S. Bureau of Prisons, 506 Fed. Appx. 280, 283 (5^th 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 and conclusions, and a formulaic recitation of the elements of a cause of action will not do . . . ." Twombly, 550 U.S. at 555 (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 (5^th Cir. 2009), citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5^th Cir. 2007)("To survive

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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 [550 U.S. at 570]). "'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 (5^th 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. "[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice" under Rule 12(b). Iqbal, 556 U.S. at 678.

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 (5^th 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).

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As noted, on a Rule 12(b)(6) review, although generally the court may not look beyond the pleadings, the court may examine the complaint, 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 (5^th Cir. 2010), citing Collins, 224 F.3d at 498-99; Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n.6 (5^th Cir. 1994). See also United States ex rel. Willard v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 379 (5^th 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 (5^th 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).

Plaintiffs object to Defendants' attachment of significant amounts of extrinsic evidence to their motion and then arguing fact issues utilizing extrinsic evidence as support, both of which are

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inappropriate in a motion to dismiss.⁴ The Court finds this objection to be unfounded.

"'[D]ocuments that a defendant attaches to its motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [its] claim.'" Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5^th Cir. 2000), quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7^th Cir. 1993). "[W]hen a plaintiff does not attach a pertinent document to the complaint, a 'defendant may introduce the exhibit as part of his motion...