Faye L. Roth Revocable Trust v. Ubs Painewebber

Decision Date30 March 2004
Docket NumberNo. 02-22546-CIV.,02-22546-CIV.
Citation323 F.Supp.2d 1279
PartiesFAYE L. ROTH REVOCABLE TRUST, by and through its Trustee, et al., Plaintiffs, v. UBS PAINEWEBBER INC., PW Aspen Management, L.L.C. PW Fund Advisor, L.L.C. and Mark Advisors, et al., Defendant.
CourtU.S. District Court — Southern District of Florida

Curtis Carlson, Esq., Payton & Carlson, P.A., Miami, FL, for Plaintiffs.

Brian Spector, Esq. Miami, FL, Jonathan Greenblatt, Esq., Neil Koslowe, Esq., Washington, D.C., for Mark Advisors, LLC.

John Quaranta, Esq., Thomas Tew, Esq., Miami, FL, Charles Gilman, Esq., Leonard Spivak, Esq., New York City, for UBS PaineWebber.

ORDER GRANTING SUMMARY JUDGMENT

GOLD, District Judge.

THIS CAUSE is before the Court upon Defendant UBS PaineWebber, Inc.'s Motion for Summary Judgment (DE # 91, filed December 8, 2003) seeking to dismiss Plaintiffs' Second Amended Complaint (DE # 52, filed March 3, 2003). Plaintiffs filed their Response to Defendant's Motion for Summary Judgment (DE # 107) on January 5, 2004. Defendant UBS PaineWebber, Inc. (UBS or Defendant) filed its Reply (DE # 121) on January 20, 2004. Defendant Mark Advisors L.L.C. (Mark Advisors) also filed a Motion for Summary Judgment (DE # 97) on December 8, 2003, and Plaintiffs filed their Response (DE # 106) on January 5, 2004. Defendant Mark Advisors filed its Reply (DE # 118) on January 20, 2004. Finally, Plaintiffs filed a Motion for Class Certification (DE # 83, filed August 29, 2003). Defendant Mark Advisors filed its Opposition to the Motion (DE # 101) on December 22, 2003, and Defendant UBS filed its Opposition (DE # 103) on the same day. Plaintiffs filed their Reply (DE # 115) on January 9, 2004. The Court held oral argument regarding these Motions on January 30, 2004.1 After the Oral Argument, Plaintiffs filed a Motion to Supplement Motion to Certify Class Action (DE # 133, filed February 24, 2004).

Upon review of the parties' arguments, the record, and the relevant statutes and case law, and for the reasons stated in this Order, Defendant UBS' Motion for Summary Judgment is GRANTED. Plaintiffs have not stated a claim for fraud pursuant to Section 12(a)(2) of the Securities Act, 15 U.S.C. § 77l. Specifically, I conclude that Defendants did not offer investment opportunities in the PW Aspen Fund ("Fund") through the use of a registered public offering, and therefore, as a matter of law, Plaintiffs cannot bring a Section 12(a)(2) claim in connection with their investments in the Fund.2 Thus, it is unnecessary to reach Defendant Mark Advisor's Motion for Summary Judgment because regardless of whom the defendant is, Plaintiffs cannot allege violations of Section 12(a)(2) involving the offering at issue in this case. I do not enter final judgment, however, because I am allowing Plaintiffs the opportunity to amend their complaint to allege violations of Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b) (Section 10(b)), and 17 C.F.R. § 240.10b-5 (Rule 10b-5). Plaintiffs have twenty days from the date of entry of this Order to amend their complaint, or ten days to file an immediate appeal with the Eleventh Circuit pursuant to the certification process described in 28 U.S.C. § 1292(b).3 In the event that they choose the latter route, the twenty-day period within which they may file an Amended Complaint and the statute of limitations for bringing a Section 10(b) claim will be automatically stayed pending Eleventh Circuit review.4 Because the Motion for Summary Judgment is GRANTED, Plaintiffs' Motion for Class Certification and Plaintiffs' Motion to Supplement are DENIED AS MOOT.

Jurisdiction

This Court has subject-matter jurisdiction pursuant to federal question jurisdiction, 28 U.S.C. § 1331, and diversity jurisdiction, § 1331.

Factual Background5

Plaintiffs' sole claim in this action is that Defendants violated § 12(a)(2)6 of the Securities Act of 1933 (the Securities Act or the Act or the 1933 Act) by making misrepresentations in the offering, and communications relating to the offering, through which they sold interests in the PW Aspen Fund. (Statement ¶ 1). UBS and Mark Advisors formed the Fund in 1999. (Plaintiff's Statement ¶ 5). Morris Mark, the sole member and President of Mark Advisors, was the portfolio manager of the Fund. (Id. at ¶ 2). Bruce Rudenberg, Plaintiffs' Financial Advisor or FA, represented that Mark would use hedging7 strategies in his management of the Fund. (Id. at ¶¶ 17, 18).

The offering of investments in the Fund was not registered under the 1933 Act. (Statement ¶ 2; Brousseau Declaration Exh. 1, Plaintiffs' Response to PaineWebber's Discovery Requests ("Plaintiff [sic] admit that Defendants did not file a registration statement with the Securities and Exchange Commission in connection with their offering and sale of interests of PW Aspen Fund.")). The offering was made pursuant to materials referred to as a Confidential Offering Memorandum (COM). (Brousseau Declaration ¶ 11 and at Exhibit D). The COM reads as follows:

The interests in PW Aspen Fund, L.L.C. (the "Fund") which are described in this Confidential Memorandum ("Memorandum") have not been and will not be registered under the Securities Act of 1933, as amended ("1933 Act"), or the securities laws of any of the States of the United States. The offering contemplated by this Memorandum will be made in reliance upon an exemption from the registration requirements of the 1933 Act for offers and sales of securities which do not involve any public offering, and analogous exemptions under state securities laws.

(Brousseau Declaration at Exhibit D). According to UBS' Statement of Material Facts, the offering and issuance of interests in the Fund was made pursuant to Rule 506 of Regulation D, 17 C.F.R. § 230.506.8 (¶ 10, citing Brousseau Declaration Exh. N, Form D filed with the Securities and Exchange Commission (SEC) in 1999). The Investor Application included a section titled "Accredited Investor Representation," which reads as follows: "The Undersigned is an `accredited investor' under Regulation D [generally, net worth in excess of $1 million for individuals (together with spouse) or total assets in excess of $5 million for entitles]...." (Brousseau Declaration Exh. E, Investor Application at 11 (brackets in original)). Further, UBS states that there were less than 35 "purchasers"9 of interests in the PW Aspen Fund as the term is defined in SEC Regulation D. (Statement ¶ 16). Plaintiffs state that whether Defendants met the requirements of Regulation D are subject to dispute.10 (Plaintiffs' Statement at 19, ¶ 8).

Beginning in February 2000, Plaintiffs received monthly brokerage account statements and semi-annual reports regarding the status of their investments in the Fund. (Statement ¶¶ 4, 6). They received quarterly letters beginning April 2000 (Statement ¶ 5). They also received offers to purchase their interests in the Fund on two separate occasions more than a year before they filed this action. (Statement ¶ 7). Many of these materials stated that Mark's investment strategy was to make long-term investments. (Brousseau Declaration Exh. F). In April 2002, Defendants arranged a conference call to give Plaintiffs the opportunity to ask Mark questions regarding the Fund. (Plaintiffs' Statement ¶ 12). Plaintiffs state that it was during this call that they first learned that Mark had not been managing the Fund in the manner in which they had been informed that he would. (Id. at ¶ 23). Accordingly, Plaintiffs brought this action, initially in state court, on August 9, 2002. (Statement ¶ 3).

Standard of Review

Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment when the pleadings and supporting materials show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The court's focus in reviewing a motion for summary judgment is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997). The moving party has the burden to establish the absence of a genuine issue as to any material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Tyson Foods, Inc., 121 F.3d at 646. Once the moving party has established the absence of a genuine issue of material fact, to which the nonmoving party bears the burden at trial, it is up to the nonmoving party to go beyond the pleadings and designate "specific facts showing that there is a genuine issue for trial." Celotex v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Issues of fact are genuine only if a reasonable jury, considering the evidence presented could find for the nonmoving party. See Anderson, 477 U.S. at 247-51, 106 S.Ct. at 2510-11, 106 S.Ct. 2505. In determining whether to grant summary judgment, the district court must remember that, "credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Id., 477 U.S. at 255, 106 S.Ct. at 2513.

Analysis

Upon review of the record, the parties' arguments, and applicable case law, I conclude that Plaintiffs' claim is not time-barred, but that Defendants are entitled to summary judgment as a matter of law because Section 12(a)(2) does not apply to type of offering at issue here. Thus, Plaintiffs cannot bring a Section 12(a)(2) claim against any of the Defendants for this offering. I am allowing Plaintiffs the opportunity to amend their Second Amended Complaint within twenty days to allege violations of Section 10(b) of the Securities Exchange Act. In the alternative, they can file an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) based...

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