Wilson v. Dalene

• Decision Date: 29 March 2010
• Docket Number: No. 09-CV-1394 (JFB)(AKT).,09-CV-1394 (JFB)(AKT).
• Citation: 699 F.Supp.2d 534
• Parties: Robert A. WILSON, Plaintiff,v.Frank DALENE; Roy Dalene; Hamptons Luxury Homes, Inc.; Raich Ende Malter & Co., LLP; & Morrit Hock Hamroff & Horwitz, LLP, Defendants.
• Court: U.S. District Court — Eastern District of New York

699 F.Supp.2d 534

Robert A. WILSON, Plaintiff,v.Frank DALENE; Roy Dalene; Hamptons Luxury Homes, Inc.; Raich Ende Malter & Co., LLP; & Morrit Hock Hamroff & Horwitz, LLP, Defendants.

No. 09-CV-1394 (JFB)(AKT).

United States District Court E.D. New York.

March 29, 2010.

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Robert A. Wilson, pro se.

James M. Wicks and Lucia Deschamps Bauknight of Farrell Fritz, P.C., Uniondale, NY, for defendants Frank Dalene, Roy Dalene, and Hamptons Luxury Homes, Inc.

Peter J. Larkin and William J. Kelly of Wilson, Elser, Moskowitz, Edelman & Dicker, White Plains, NY, for defendants Raich Ende Malter & Co., LLP.

Matthew J. Bizzaro and Marian Rice of L'Abbate, Balkan, Colavita & Contini, LLP, Garden City, NY, for defendant Moritt Hock Hamroff & Horwitz, LLP.

memorandum and order

JOSEPH F. BIANCO, District Judge:

On April 3, 2009 pro se plaintiff Robert A. Wilson (hereinafter “plaintiff” or “Wilson”) filed the complaint in this action against defendants Frank Dalene, Roy Dalene, Hamptons Luxury Homes, Inc. (hereinafter “HLXH”), Raich Ende Malter & Co., LLP (hereinafter “REM”), and Morrit, Hock, Hamroff & Horwitz, LLP (hereinafter “MHHH”), (collectively “defendants”), alleging securities fraud under Section 10(b), Rule 10b-5, and Section 20(a) of the Securities Exchange Act of 1934. On June 26, 2009, defendants filed motions to dismiss plaintiff's Amended Complaint in its entirety for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. On July 29, 2009, plaintiff filed a motion for summary judgment. By Order dated November 6, 2009, this Court referred defendants' motions and plaintiff's motion to the Honorable E. Thomas Boyle, United States Magistrate Judge, for a report and recommendation. Presently before the Court are plaintiff's objections to Magistrate Judge Boyle's January 4, 2010 Report and Recommendation, in which he recommended that this Court grant defendants' motions to dismiss in their entirety and deny plaintiff's motion in its entirety. For the reasons set forth below, the Court adopts the thorough and well-reasoned Report and Recommendation of Judge Boyle with the exception of the statute of limitations issue. Accordingly, the Court denies defendants' motion to dismiss on statute of limitations grounds but grants the motion to dismiss the Amended Complaint on the other grounds set forth by Judge Boyle. However, given the nature of the defect and in light of plaintiff's March 1, 2010 letter to the Court and his pro se status, the Court grants plaintiff leave to amend his complaint to attempt to correct, if possible, the pleading deficiencies identified in the R & R and this Memorandum and Order.

I. Procedural History

On April 3, 2009 pro se plaintiff filed a complaint in this action against defendants, and moved by an Order to Show Cause for a preliminary injunction and temporary restraining order against defendants. The temporary restraining order was denied on April 3, 2009, and the motion for a preliminary injunction was denied on April 29, 2009. On May 27, 2009, plaintiff filed an Amended Complaint against defendants.

By letters dated April 22, 2009 and April 24, 2009, defendants requested a pre-motion conference in anticipation of filing motions to dismiss the Amended Complaint. Defendants filed their motions to dismiss on June 26, 2009. Plaintiff responded in opposition on July 29, 2009 and August 6, 2009, and also filed a “motion to dismiss/motion for summary judgment” on those dates. Defendants submitted their opposition and replies on August 17, 2009. By Order dated November 6, 2009, the Court referred the motions to Magistrate Judge E. Thomas Boyle for a report and recommendation.

On November 13, 2009, defendants requested a stay of discovery pending a decision on their motion to dismiss. On November 18, 2009, Magistrate Judge Boyle issued an Order staying discovery pending the outcome of the motions to dismiss. On November 23, 2009, plaintiff moved for a reconsideration of the stay, stating that he had not received notice of defendants' motion for a stay until the date on which it was granted. The motion for reconsideration was granted on November 24, 2009, but the stay of discovery was reinstated after consideration of plaintiff's opposition. On December 7, 2009, plaintiff filed an Order to Show Cause that the Court interpreted as an appeal of Magistrate Judge Boyle's Order staying discovery in the action. Defendants filed their opposition to plaintiff's Order to Show Cause on December 23, 2009.

On January 4, 2010, Magistrate Judge Boyle issued a Report and Recommendation (the “R & R”), recommending that this action be dismissed in its entirety. The R & R further instructed that any objections to the R & R be submitted within ten (10) days of receipt. ( See Report and Recommendation dated January 4, 2010, at 23.) As indicated by the docket sheet, a copy of the R & R was mailed to plaintiff on January 4, 2010. ( See Docket Entry [63].) Plaintiff filed objections to the R & R with the Court on January 11, 2010. Defendants Frank Dalene, Roy Dalene, HLXH, and MHHH filed their opposition on January 25, 2010. Plaintiff filed a reply on January 28, 2010. The Court has fully considered all the submissions. For the reasons set forth below, the Court agrees with Judge Boyle's recommendation, and adopts the R & R with the exception of the statute of limitations issue, but will provide plaintiff with an opportunity to file an amended complaint to attempt to cure the defects identified in the pleadings.

II. Standard Of Review

A district judge may accept, reject, or modify, in whole or in part, the findings and recommendations of the Magistrate Judge. See DeLuca v. Lord, 858 F.Supp. 1330, 1345 (S.D.N.Y.1994); Walker v. Hood, 679 F.Supp. 372, 374 (S.D.N.Y.1988). As to those portions of a report to which no “specific written objections” are made, the Court may accept the findings contained therein, as long as the factual and legal bases supporting the findings are not clearly erroneous. See Fed.R.Civ.P. 72(b); Greene v. WCI Holdings Corp., 956 F.Supp. 509, 513 (S.D.N.Y.1997). As to portions of a report to which specific written objections are made, the Court reviews such findings de novo. See Fed.R.Civ.P. 72(b)(3); Hynes v. Squillace, 143 F.3d 653, 656 (2d Cir.1998); United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir.1997).

The Court has conducted a review of the full record, including inter alia, the Amended Complaint, the parties' respective submissions in connection with the defendants' motions to dismiss and plaintiff's motion for summary judgment, as well as the R & R, the applicable law and plaintiff's objections. Having reviewed de novo all the portions of the R & R to which plaintiff specifically objects, and having reviewed the remainder of the R & R for clear error, the Court adopts the R & R's recommendations that the Amended Complaint should be dismissed for the reasons set forth below, with the exception of the statute of limitations issue, but with leave to re-plead.

III. Discussion

A. Violations of Section 10(b) and Rule 10b-5

Plaintiff first argues that Magistrate Judge Boyle incorrectly concluded that plaintiff failed to state a claim for violations of Section 10(b) and Rule 10b-5 of the Exchange Act. Specifically, Judge Boyle found that plaintiff failed to allege any actionable misrepresentations, made with scienter, that were made in connection with a purchase or sale of securities. Judge Boyle further concluded that plaintiff's Amended Complaint had also failed to adequately plead transaction causation or loss causation such as to be actionable.

Plaintiff's objection to the R & R asserts that defendants made a material misrepresentation when they agreed to pursue plaintiff's proposed roll-up strategy in connection with the purchase of plaintiff's stock. Plaintiff contends that this was an actionable misrepresentation because, he claims, at the time, defendants had no intention of pursuing the roll-up strategy. Judge Boyle concluded that plaintiff's Amended Complaint offers no factual allegations in support of his claim that defendants had no intention of using the roll-up strategy, and, thus, must fail. The Court agrees.

In order to successfully plead a violation of Section 10(b) and Rule 10b-5, “plaintiff must allege that the defendant (1) made misstatements or omissions of material fact, (2) with scienter, (3) in connection with the purchase or sale of securities, (4) upon which the plaintiff relied, and (5) that the plaintiff's reliance was the proximate cause of its injury.” Hall v. The Children's Place Retail Stores, Inc., 580 F.Supp.2d 212, 225 (S.D.N.Y.2008) (quoting ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 105 (2d Cir.2007)).

Federal Rule of Civil Procedure 9(b) requires all averments of fraud and the circumstances constituting fraud to be stated with particularity. “[I]n order to comply with Rule 9(b), ‘the complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.’ ” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir.2006) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993)). In addition, “[a]lthough Rule 9(b) allows a plaintiff to allege fraudulent intent generally, a plaintiff must ‘allege facts that give rise to a strong inference of fraudulent intent.’ ” Sibersky v. Borah, Goldstein, Altschuler & Schwartz, P.C., No. 99-CV-3227 (JGK), 2000 WL 1448635, at *7, 2000 U.S. Dist. LEXIS 14043, at *23 (S.D.N.Y. Sept. 22, 2000) (quoting Shields v. Citytrust Bancorp., Inc., 25 F.3d 1124, 1128 (2d Cir.1994)). “These requirements ensure that ‘a complaint alleging fraud’ is filed ‘only after a wrong is reasonably believed to have occurred,’ and ‘not to find one.’ ” Abercrombie v. Andrew...