Roer v. Oxbridge Inc.
| Decision Date | 26 September 2001 |
| Docket Number | No. 99-CV-5018 (JS).,99-CV-5018 (JS). |
| Citation | 198 F.Supp.2d 212 |
| Parties | Craig ROER and Margaret Roer, Plaintiffs, v. OXBRIDGE INCORPORATED, Win Capital Corp., Frederick L. Gorsetman, Barry L. Hawk and Zachary Yosef Liebman, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Kevin T. Grennan, Esq., Law Office of Kevin T. Grennan, Uniondale, NY, for Plaintiffs Craig Roer, Margaret Roer.
David I. Lewittes, Esq., Wollman, Babitt & King, L.L.P., New York, for Defendants Oxbridge, Inc. and Frederick L. Gorsetman.
Thomas J. Fleming, Esq., Olshan Grundman Frome, New York, NY, for Defendants Win Capital Corp. and Zachary Yosef Liebman.
Stephen B. Wexler, Esq., Wexler & Burkhart, P.C., Mitchell Field, NY, for Defendant Barry L. Hawk.
Craig Roer and Margaret Roer ("plaintiffs") commenced this action on August 23, 1999, alleging multiple violations of federal securities laws under Sections 10(b) and 20 of the Securities Exchange Act of 1934 (the "'34 Act"), 15 U.S.C. §§ 78j(b) and 78t, and Sections 12(2) and 15 of the Securities Act of 1933 (the "'33 Act"), 15 U.S.C. §§ 77l(2) and 77o. Plaintiffs additionally assert state law claims pursuant to Section 349 of the New York General Business Law as well as common law claims sounding in breach of fiduciary duty, negligence, fraud and/or negligent misrepresentation, and breach of contract.
Pending before the Court are the defendants' respective motions to dismiss all claims against them in the Amended Complaint.1 Specifically, defendants Oxbridge Incorporated ("Oxbridge"), Win Capital Corp. ("Win Capital"), Frederick L. Gorsetman ("Gorsetman"), Barry L. Hawk ("Hawk")2 and Zachary Yosef Liebman ("Liebman") seek to dismiss all claims against them pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1) and 12(b)(6), and The Private Securities Litigation and Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4(b).
The following factual allegations are taken from plaintiffs' Amended Complaint and accepted as true for purposes of this motion to dismiss. See Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); Charles W. v. Maul, 214 F.3d 350, 356 (2d Cir.2000). In addition, the Court deems the Amended Complaint to include all documents incorporated by reference, to the extent submitted by the parties, public disclosure documents required by law to be, and have been, filed with the SEC, as well as documents the plaintiffs either possessed or knew about and upon which they relied in commencing suit. See Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir.2000) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir.1991); Kramer v. Time Warner, Inc., 937 F.2d 767, 774 (2d Cir.1991); Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989)).
On or about May 11, 1998, Craig Roer met with defendants Hawk and Liebman in Melville, New York, at which time Hawk and Liebman recommended that Craig Roer invest in United Recycling, Inc. ("URI"), a Minnesota corporation engaged in the business of recovering fibers from used carpet for sale as feedstock to compounders and manufacturers for thermoplastic and nonwoven textile applications. Am. Compl. ¶ 19. During their meeting, Hawk stated to Craig Roer that he "was a registered representative and Director of [Oxbridge]" and further provided Craig Roer with an Oxbridge business card which had Hawk's name on it. Id. At all times relevant, defendant Gorsetman was the President, majority shareholder, and Chairman of the Board of Oxbridge. Am. Compl. ¶¶ 38-40. Gorsetman was also the President and Director of Oxbridge Funding, Inc. which, in turn, was the Manager of Oxbridge Investors, L.L.C. Am. Compl. ¶¶ 41-42. Gorsetman likewise was President and Chairman of the Board of Oxbridge Investors, L.L.C. Am. Compl. ¶¶ 44-45. Oxbridge Investors, LLC was the General Partner of Oxbridge URI, L.P. which, in turn controlled URI through its General Partner Oxbridge Investors, LLC. Am. Compl. ¶ 46. Gorsetman was the General Partner of Oxbridge URI, L.P. Id. Defendant Hawk maintained an office at Oxbridge's place of business. Am. Compl. ¶ 82.
During their May 11, 1998 meeting, Craig Roer informed Hawk and Liebman that "he was presently unemployed and that he could not afford to lose any money." Am. Compl. ¶ 20. In response, Hawk and Liebman told Craig Roer that an investment in URI would return between one hundred percent and four hundred percent of his original investment. Am. Compl. ¶ 22. At the May 11, 1998 meeting, both Hawk and Liebman individually stated to Craig Roer that "they had a company waiting in the wings to buy [URI]" and that "he would receive a return on his investment between one hundred percent to four hundred percent...." Id. According to Hawk and Liebman, the buyout of URI would occur by October or November of 1998. Id. Hawk and Liebman also told Craig Roer that URI would be profitable within sixty days. Id. In reliance on Hawk and Liebman's statements, on May 11, 1998, plaintiffs purchased 396,963 common stock purchase warrants of URI ("warrants") and a $100,000 Senior Secured Note of URI with a maturity date of June 30, 1998 ("URI Note"). Am. Compl. ¶ 23. The URI Note provided for payment on June 30, 1998 of $100,000 plus interest on the outstanding principal amount at a rate of 12% per annum. Affidavit of Frederick L. Gorsetman dated October 21, 1999 ("Gorsetman Aff."), Ex. C (URI Note). The warrants included in the deal entitled plaintiffs to purchase URI common stock at $.25 per share between May 11, 1998 and May 11, 2008. Gorsetman Aff., Ex. B (warrants). Plaintiffs paid a total of $100,000 for both the warrants and the URI Note. Am. Compl. ¶ 23.
Following the May 11, 1998 meeting, Craig Roer spoke individually to both Hawk and Liebman who each again represented to him that they "had a company waiting in the wings ready to buy out [URI]" and that he would receive a return of one hundred percent to four hundred percent on his "$100,000 investment" and that the buyout of URI would occur by October or November of 1998. Am. Compl. ¶ 24.
Thereafter, in or about June 1998, Hawk telephoned Craig Roer and recommended that the plaintiffs of Firestorm Pictures, LLC ("Firestorm"), a California company involved in the production of motion pictures. Am. Compl. ¶ 25. In the course of their conversation, Hawk informed Craig Roer that "he would receive a 50% return on his money within a two month period." Id. Additionally, Hawk further stated to Craig Roer that Firestorm was going to produce movies with Miramax and that Firestorm had an insurance policy with "Oppenheimer" on any movies made such that plaintiffs' investment with Firestorm would be protected from any losses. Id. Hawk also told Craig Roer that he would be investing his own money into Firestorm, that he was an attorney and, as such, plaintiffs should trust his advice and invest in Firestorm. Id. Lastly, Hawk told Craig Roer that there was a motion picture deal pending with respect to Firestorm. Id.
On July 10, 1998, plaintiffs "agreed to invest in, and did invest in," a Secured Promissory Note dated July 9, 1998 in the amount of $50,000 ("July 9, 1998 Firestorm Note") and a letter of "Certain Additional Understandings" dated July 9, 1998 ("July 9, 1998 Letter Agreement"), by mailing a check for $50,000 to the main office of Oxbridge and made payable to Firestorm. Am. Compl. ¶ 26. The July 9, 1998 Firestorm Note provided for payment of the principal amount plus interest at an annual rate of 12% no later than October 30, 1998. Gorsetman Aff., Ex. F (July 9, 1998 Firestorm Note). Pursuant to the terms of the July 9, 1998 Firestorm Note, plaintiffs were to receive a "production fee" and an interest in the "producer's net profit", as those terms were defined by the July 9, 1998 Letter Agreement, as "Additional Consideration" for their investment. Id. Plaintiffs agreed to the investment in reliance upon the statements and representations made by Hawk. Id.
During their conversation, Hawk advised Craig Roer that he should invest an additional $25,000.00 in Firestorm and "assured Craig Roer that Firestorm ... would pay him a seventy [-]five percent return on his total investment in Firestorm ... in two months." Id. Thereafter, on or about October 15, 1998, plaintiffs "agreed to invest and believed at the time that they did invest an additional $12,500.00 ... in Firestorm." Am. Compl. ¶ 28. Specifically, in exchange for the July 9, 1998 Firestorm Note, Firestorm Pictures, LLC issued plaintiff a new Secured Promissory Note dated October 29, 1998 ("October 29, 1998 Firestorm Note"), which promised to pay plaintiffs principal and interest in the total sum of $87,500 and a new letter of Certain Additional Understandings dated October 29, 1998 ("October 29, 1998 Letter Agreement") which superseded the previously issued July 9, 1998 Letter Agreement.3 Gorsetman Aff., Ex. H (October 29, 1998 Letter Agreement). Plaintiffs allege that the additional $12,500.00 they intended to invest in Firestorm was diverted to an entity called Stourbridge Investments, Ltd. ("Stourbridge"). Id. Plaintiffs base their belief on a "Paying Agent and Security Agreement" between Firestorm and other parties listing the address of Stourbridge and a personal check, dated October 15, 1998, made payable to Stourbridge in the amount of $12,500.00 and signed by Craig Roer. Id.; see also Affidavit of Craig Roer dated February 21, 2000 ("Roer Aff.") at Ex. E.
In or about November 1998, Hawk informed Craig Roer that Firestorm's deal with Miramax fell through, but that another company would eventually be found to produce the motion picture. Am. Compl. ¶ 29. At that time, Hawk reiterated to Craig Roer that his investments in Firestorm were protected because the motion picture...
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