Kruse v. GS Pep Tech. Fund 2000 LP

• Decision Date: 19 September 2012
• Docket Number: Case No. 1:10–CV–323–JD.
• Citation: 897 F.Supp.2d 769
• Court: U.S. District Court — Northern District of Indiana
• Parties: Dean V. KRUSE and Kristin McGrade Kruse, Individually and on behalf of all others similarly situated, Plaintiffs, v. GS PEP TECHNOLOGY FUND 2000 LP, GS Pep Tech 2000 Advisors LLC, and Goldman Sachs & Co. LP, Defendants.

897 F.Supp.2d 769

Dean V. KRUSE and Kristin McGrade Kruse, Individually and on behalf of all others similarly situated, Plaintiffs,

v.GS PEP TECHNOLOGY FUND 2000 LP, GS Pep Tech 2000 Advisors LLC, and Goldman Sachs & Co. LP, Defendants.

Case No. 1:10–CV–323–JD.

United States District Court,

N.D. Indiana,

Fort Wayne Division.

Sept. 19, 2012.

David A. Brown, David A. Brown Attorney at Law PC, Fort Wayne, IN, for Plaintiffs.

Brian E. Casey, Barnes & Thornburg LLP, South Bend, IN, for Defendants.

OPINION AND ORDER

JON E. DEGUILIO, District Judge.

Now before the Court is Defendants' Motion to Dismiss [DE 41, 42] Plaintiffs' Third Amended Complaint. Plaintiffs' counsel did not file a response. Based on the foregoing reasons, Defendants' Motion to Dismiss Plaintiffs' Third Amended Complaint is hereby GRANTED IN PART and DENIED IN PART [DE 41].

I. INTRODUCTION

Plaintiffs, Dean V. Kruse and Kristin McGrade Kruse (“Plaintiffs”), filed their original Complaint with Class Action Requested on September 13, 2010 [DE 1]. Because the Complaint lacked a jurisdictional basis, an Amended Complaint was ordered and filed soon thereafter [DE 4]. After Plaintiffs' original attorney withdrew his appearance [DE 13] and Plaintiffs' present attorney entered his appearance [DE 16], a Second Amended Complaint was filed in June 2011 [DE 18]. After several extensions and various motions, a Third Amended Complaint (“TAC”) [DE 32] was filed on August 26, 2011. It is on the TAC for which Defendants Goldman, Sachs & Co. LP, GS Pep Technology Fund 2000 LP, and GS Pep Tech 2000 Advisors LLC (“Defendants”) now move to dismiss with prejudice [DE 41].

Relative to jurisdiction, Plaintiffs maintain that jurisdiction is proper pursuant to the Class Action Fairness Act (“CAFA”), under 28 U.S.C. § 1332(d) [DE 32, ¶ 4]. The CAFA gives federal district courts original jurisdiction over class actions in which (1) the aggregate amount in controversy exceeds $5 million, (2) any member of a class of plaintiffs is a citizen of a state different from any defendant (“minimal diversity”), and (3) the proposed class consists of 100 or more persons.¹28 U.S.C. § 1332(d)(2), (d)(5)(B), and (d)(6). Defendants agree that the Court has subject matter jurisdiction, but clarifies that under the CAFA, an unincorporated association, such as a limited liability company and a limited partnership, is deemed a citizen of the state where it has its principal place of business and the state under whose laws it is organized [DE 42 at 9, n. 5]. See28 U.S.C. § 1332(d)(10); Kurth v. Arcelormittal USA, Inc., No. 2:09–cv–108–RM, 2009 WL 3346588 *7 n. 2 (N.D.Ind. Oct. 14, 2009) (Miller, J.); Bond v. Veolia Water Indianapolis, LLC, 571 F.Supp.2d 905, 909–12 (S.D.Ind.2008) (Hamilton, J.); see also Ferrell v. Express Check Advance of SC, LLC, 591 F.3d 698 (4th Cir.2010).

Under this analysis, there is minimal diversity jurisdiction. Plaintiffs are citizens of Indiana [DE 31, ¶ 4]. As Defendants confirm, GS Pep Technology Fund 2000 LP is a limited partnership organized under Delaware law, with its principal place of business in New York; GS Pep Tech 2000 Advisors LLC is a limited liability company organized under Delaware law, with its principal place of business in New York; and Goldman, Sachs & Co. is a New York limited partnership, with its principal place of business in New York [DE 32, ¶ 1; DE 42 at 9 n. 5]. Defendants note that while the citizenship of their limited partners or members is irrelevant for CAFA's minimal diversity analysis, they are Delaware and New York citizens for diversity purposes in any event. The aggregate amount in controversy exceeds five million dollars [DE 32, ¶ 4] as Plaintiffs alone invested $2.5 million and the class is believed to be several hundred [DE 32, ¶¶ 4, 12], factual contentions which Defendants do not contest [DE 32, ¶¶ 4, 12]. Given that the alleged investment with Defendant Goldman Sachs & Co., a leading global investment company, continued for a period of at least ten years and that Defendants concede the Court has jurisdiction, the Court finds that based on the factual allegations as alleged and the proposed class [DE 32], the Plaintiffs have sufficiently shown how this Court has original jurisdiction under the CAFA. 28 U.S.C. § 1332(d)(2). See Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir.2008) (noting that “[o]nce the proponent of federal jurisdiction has explained plausibly how the stakes exceed $5 million, cf. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), then the case belongs in federal court unless it is legally impossible for the plaintiff to recover that much.”).

II. STANDARD OF REVIEW

Fed.R.Civ.P. 12(b)(6) authorizes dismissal of a complaint when it fails to set forth a claim upon which relief can be granted. Generally speaking, when considering a Rule 12(b)(6) motion to dismiss, courts must inquire whether the complaint satisfies the “notice-pleading” standard. Indep. Tr. Corp. v. Stewart Info. Services Corp., 665 F.3d 930, 934 (7th Cir.2012). The notice-pleading standard requires that a complaint provide a “short and plain statement of the claim showing that the pleader is entitled to relief,” which is sufficient to provide “fair notice” of the claim and its basis. Id. (citing Fed.R.Civ.P. 8(a)(2)); Maddox v. Love, 655 F.3d 709, 718 (7th Cir.2011) (citations omitted); see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Fed.R.Civ.P. 8(a)(2)). In determining the sufficiency of a claim, the court construes the complaint in the light most favorable to the nonmoving party, accepts all well-pleaded facts as true, and draws all inferences in the nonmoving party's favor. Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir.2010) (citation omitted).

In recent years, the Supreme Court has adopted a two-pronged approach when considering a Rule 12(b)(6) motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly ). First, pleadings consisting of no more than mere conclusions are not entitled to the assumption of truth. Id. This includes legal conclusions couched as factual allegations, as well as “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” See Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Second, if there are well-pleaded factual allegations, courts should “assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 679, 129 S.Ct. 1937.

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” McCauley v. City of Chi., 671 F.3d 611, 615 (7th Cir.2011) (citing Iqbal and Twombly ). The complaint “must actually suggest that the plaintiff has a right to relief, by providing allegations that raise a right to relief above the speculative level.” Maddox, 655 F.3d at 718 (citations omitted). However, a plaintiff's claim need only be plausible, not probable. Indep. Tr. Corp., 665 F.3d at 935 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). “[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Id. In order to satisfy the plausibility standard, a plaintiff's complaint must “supply enough fact to raise a reasonable expectation that discovery will yield evidence supporting the plaintiff's allegations.” Id. Determining whether a complaint states a plausible claim for relief is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense,” see Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citation omitted), and the Court will assess Plaintiffs' claims accordingly.

Furthermore, Plaintiffs must plead their accusations of fraud with particularity. Fed.R.Civ.P. 9(b); Reger Dev., LLC v. Nat'l City Bank 592 F.3d 759, 764 (7th Cir.2010) (citing Arazie v. Mullane, 2 F.3d 1456, 1465 (7th Cir.1993) (stating that particularity requires the party to specify the “who, what, when, where, and how” of the alleged fraudulent act)). “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). The particularity requirement is designed to discourage a “sue first, ask questions later” philosophy. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 441 (7th Cir.2011) (citations omitted); see Fidelity Nat'l Title Ins. Co. of N.Y. v. Intercounty Nat'l Title Ins. Co., 412 F.3d 745, 748–49 (7th Cir.2005) (the particularity requirement “forces the plaintiff to conduct a careful pretrial investigation” and minimizes the extortionate impact that can come from a baseless fraud claim). Put another way, Rule 9(b)'s “purpose is to ensure that the party accused of fraud, a matter implying some degree of moral turpitude and often involving a ‘wide variety of potential conduct,’ is given adequate notice of the specific activity that the plaintiff claims constituted the fraud so that the accused party may file an effective responsive pleading.” Lachmund v. ADM Investor Servs., Inc., 191 F.3d 777, 783 (7th Cir.1999).

Rule 10(c) describes the type of materials that can be considered to be part of a pleading:

A statement in a pleading may be adopted by reference elsewhere in the same pleading or in any other pleading or motion. A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.

Fed.R.Civ.P. 10(c). This means that a court can consider for purposes of a Rule 12 motion, documents that are attached to a motion to dismiss if they are referred to in the complaint and are central to the plaintiff's claims. McCready v. eBay, Inc., ...