Morin v. Trupin

• Citation: 778 F. Supp. 711
• Decision Date: 18 November 1991
• Docket Number: 89 Civ. 6639 (RWS),90 Civ. 3475 (RWS).
• Parties: Simeon MORIN, et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants. Norman E. GAAR, Plaintiffs, v. Barry H. TRUPIN, et al., Defendants. Michael P. ALBERTI, M.D., et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

778 F. Supp. 711

Simeon MORIN, et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.

Norman E. GAAR, Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.

Michael P. ALBERTI, M.D., et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.

Nos. 88 Civ. 5743 (RWS), 89 Civ. 6639 (RWS), 90 Civ. 3475 (RWS).

United States District Court, S.D. New York.

November 18, 1991.

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Fink Weinberger, P.C., New York City (Stephen E. Powers, Eric W. Berry, of counsel), for plaintiffs Simeon Morin, et al.

Parker Chapin Flattau & Klimpl, New York City (Lee W. Stremba, Jerome Kowalski, of counsel), for Abrams' defendant.

McDonough Marcus Cohn & Tretter, P.C., New York City (Diane K. Kanca, of counsel), for Becker defendants.

D'Amato & Lynch, New York City (Stephen F. Willig, of counsel), for Mintz, Fraade defendants.

OPINION

SWEET, District Judge.

Defendants Robert Abrams ("Abrams"); Mintz, Fraade & Zeiger, P.C., Frederick M. Mintz and Alan Fraade (the "Mintz Fraade Defendants"); and Stuart Becker and Stuart Becker & Co., P.C. (the "Becker Defendants") (collectively the "Moving Defendants"), have moved to dismiss the second amended consolidated complaint of the plaintiffs in Morin v. Trupin, 88 Civ. 5743 (the "Morin action" and the "Morin plaintiffs"), and the second amended complaint in the related action of Alberti v. Trupin, 90 Civ. 3475 (the "Alberti action" and the "Alberti plaintiffs"), pursuant to Rules 12(b)(1), 12(b)(6) and 9(b), Fed.R.Civ.P.

The underlying disputes and principal parties which are the subject of these actions are recounted in prior opinions of the court, familiarity with which is assumed. See, e.g., Morin v. Trupin, 711 F.Supp. 97 (S.D.N.Y.1989); Morin v. Trupin, 728 F.Supp. 952 (S.D.N.Y.1989); Morin v. Trupin, 738 F.Supp. 98 (S.D.N.Y.1990); Morin v. Trupin, 747 F.Supp. 1051 (S.D.N.Y.1990).

I. THE ALBERTI ACTION

A. Facts

The Alberti action involves an allegedly unlawful securities offering by defendants Barry Trupin ("Trupin"), Rothschild Reserve International, Inc. ("Rothschild Reserve") and others, including the Moving Defendants. The plaintiffs are fifty three investors in a New York limited partnership known as Sacramento Office Park Associates ("Sacramento Associates"). Sacramento Associates was organized for the stated purpose of acquiring, owning, operating and leasing commercial real property consisting of a two-building office park complex known as the Butano Buildings in Sacramento, California (the "Butano Property"). Plaintiffs allege that in making their investments in Sacramento Associates, they relied upon false and misleading representations contained in the Sacramento Office Park Associates Series Private Placement Memorandum (the "Sacramento PPM"), solicitation letters, and sales and promotional literature (collectively the "Sacramento Offering Materials") and on oral representations by various defendants. The Sacramento Offering Materials allegedly contained misrepresentations regarding the manner in which the Butano Property was acquired for syndication, the value and commercial viability of the Butano Property, the application of the proceeds of the offering of limited partnership interests in Sacramento Associates, and the basis for and availability of the tax benefits described in the Sacramento PPM. All of the plaintiffs in the Alberti action are alleged to have purchased their limited partnership interests in Sacramento Associates by February of 1985. Alberti Comp. ¶ 147.

B. Prior Proceedings

The original complaint in the Alberti action was filed on May 22, 1990. An amended complaint naming an additional eighteen plaintiffs was filed on June 28, 1990. The second amended complaint (the "Alberti complaint"), which is the subject of the present motions, was deemed filed on February 1, 1991 in response to this court's dismissal of the complaint in the related action of Morin v. Trupin, 88 Civ. 5743 and pursuant to an order of this court dated February 20, 1991.

C. Discussion

1. 10(b) Claims Against all Moving Defendants are Barred by the Statute of Limitations

Recently, in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, ___ U.S. ___, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), the Supreme Court recently held that private actions under Section 10(b) of the 1934 Act must be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation. Id. 111 S.Ct. at 2781-82. The Supreme Court applied that statute of limitations retroactively to bar a complaint that may otherwise have been timely under prior law. The retroactivity of the Lampf rule was confirmed by the Court's subsequent holding in James B. Beam Distilling Co. v. Georgia, ___ U.S. ___, 111 S.Ct. 2439, 2447-48, 115 L.Ed.2d 481 (1991) (when Court applies rule of law to litigants in one case it must do so with respect to all others not barred by procedural requirements or res judicata), and by the Second Circuit in Welch v. Cadre Capital, 946 F.2d 185 (2d Cir.1991) (Lampf to be applied retroactively to all cases not finally adjudicated on date Lampf decided).

The Alberti plaintiffs' 10(b)/10b-5 claims against the Moving Defendants are untimely under Lampf and are therefore dismissed. According to the complaint, all of the plaintiffs in the Alberti action purchased their interests in Sacramento Associates by February of 1985. The original complaint in that action was filed on May 22, 1990. Because the Alberti plaintiffs' 10(b)/10b-5 claims against the Moving Defendants are premised on the allegedly fraudulent Sacramento Offering Materials, these claims accrued no later than February of 1985. Therefore, the action was commenced outside of the three-year statute of limitations established in Lampf. Moreover, the Alberti plaintiffs' claim that they did not discover, and indeed could not have discovered, the alleged fraud until August of 1989 does not save their claims under the one-year discovery prong of Lampf. Lampf specifically rejected the application of equitable tolling principles to the three-year cutoff as "fundamentally inconsistent with the 1-and-3-year structure." Lampf, 111 S.Ct. at 2782.

Having thus dismissed the federal securities fraud claims, the following discussion addresses the motions of each Moving Defendant as to the remaining claims against them.

2. Abrams

The Alberti Plaintiffs allege that Abrams violated multiple provisions of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). In addition, the Alberti complaint asserts a number of pendent claims, including violation of the Blue Sky Laws of ten states, common law fraud, conspiracy to defraud, negligent misrepresentation and breach of fiduciary duty. Because plaintiffs have failed to state a claim for which relief can be granted, their RICO claims against Abrams are dismissed. Because plaintiffs' federal claims against Abrams are hereby dismissed, their state law claims likewise are dismissed for lack of pendent jurisdiction.

a. RICO Claims Against Abrams Are Dismissed

In Claims I through V of their complaint, the Alberti plaintiffs assert violations by Abrams of RICO based on his participation in the preparation of the Sacramento PPM and his supervision of the Mintz Fraade Defendants' activities in connection with the Sacramento Offering Materials. Specifically, the Alberti complaint alleges violations of 18 U.S.C. § 1962(a) (use of income or proceeds of income derived directly or indirectly from pattern of racketeering activity in acquisition of interest in or establishment of enterprise engaged in interstate commerce); 18 U.S.C. § 1962(b) (direct or indirect acquisition or maintenance of interest in or control of enterprise engaged in interstate commerce through pattern of racketeering activity); 18 U.S.C. § 1962(c) (direct or indirect conduct of or participation in conduct of enterprise by person employed by or associated with enterprise engaged in interstate commerce); and 18 U.S.C. § 1962(d) (conspiracy to violate 18 U.S.C. §§ 1962(a)-(c)). The predicate acts allegedly committed by Abrams are securities fraud, mail and wire fraud and fraudulent concealment. See Alberti Comp. ¶¶ 272, 288, 294, 299, 306-07.

To state a cause of action under RICO, plaintiffs must allege:

(1) that the defendant (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an "enterprise" (7) the activities of which affect interstate commerce.

Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir.1983), cert. denied sub nom., Moss v. Newman, 465 U.S. 1025, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984). Moreover, it is well-settled that where, as here, the predicate crimes of a RICO claim sound in fraud, the pleading of those predicate acts must satisfy the particularity requirement of Rule 9(b), Fed.R.Civ.P. ("Rule 9(b)" or "9(b)"). See Morin v. Trupin, 711 F.Supp. 97, 111 (S.D.N.Y.1989) (citing The Limited, Inc. v. McCrory Corp., 645 F.Supp. 1038, 1041 (S.D.N.Y.1986); Equitable Life Assurance Society v. Alexander Grant & Co., 627 F.Supp. 1023, 1028 (S.D.N.Y.1985)); Fidenas AG v. Honeywell, Inc., 501 F.Supp. 1029, 1042-43 (S.D.N.Y.1980). The pleading of the predicate crime of mail fraud must also specify the use of the mails or wires. Frota v. Prudential-Bache Secs., Inc., 639 F.Supp. 1186, 1192 (S.D.N.Y.1986). In fact, "all of the concerns that dictate that fraud be pleaded with particularity exist with even greater urgency in civil RICO actions." Plount v. American Home Assurance Co., 668 F.Supp. 204, 206 (S.D.N.Y.1987).

Rule 9(b) provides that "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 may be averred generally."...