11-1071-cv
Alki Partners, L.P. v. Windhorst
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals
2 for the Second Circuit, held at the Daniel Patrick Moynihan
3 United States Courthouse, 500 Pearl Street, in the City of
4 New York, on the 21st day of March, two thousand twelve.
5
6 PRESENT:
7 DENNIS JACOBS,
8 Chief Judge,
9 DENNY CHIN,
10 SUSAN L. CARNEY,
11 Circuit Judges.
12
13 - - - - - - - - - - - - - - - - - - - -X
14 Alki Partners, L.P., Alki Fund, Ltd.,
15 Plaintiffs-Appellants,
16
17 -v.- 11-1071-cv
18
19 Lars Windhorst, Peter A. Ogrisek,
20 Robert B. Hersov, Credit Suisse Group
21 AG, Frederick Ruiz,
22 Defendants-Appellees,
23 - - - - - - - - - - - - - - - - - - - -X
24
25 FOR PLAINTIFFS-APPELLANTS: Brian D. Graifman, Gusrae,
26 Kaplan, Bruno & Nusbaum PLLC,
27 New York, NY.
28
1
1 FOR DEFENDANTS-APPELLEES
2 WINDHORST, OGRISEK, AND
3 HERSOV: James A. Beha, II (Christopher
4 Allegaert and Howard Chen, on
5 the brief), Allegaert Berger &
6 Vogel LLP, New York, NY.
7
8 FOR DEFENDANTS-APPELLEES
9 CREDIT SUISSE GROUP AG
10 AND FREDERICK RUIZ Michael T. Sullivan, Sullivan &
11 Worcester LLP (Stuart Alan
12 Krause, Zeichner Ellman & Krause
13 LLP, on the brief), New York,
14 NY.
15
16 Appeal from a judgment of the United States District
17 Court for the Southern District of New York (Batts, J.).
18
19 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
20 AND DECREED that the judgment of the district court is
21 AFFIRMED.
22
23 Plaintiffs-Appellants Alki Partners, L.P., and Alki
24 Fund, Ltd., appeal the grant of the defendants’ motions to
25 dismiss the complaint. We assume the parties’ familiarity
26 with the underlying factual allegations, the procedural
27 history of the case, and the issues on appeal.
28 Like the district court, we assume the truth of the
29 well-pleaded factual allegations in the First Amended
2
1 Complaint, as well as the allegations that Plaintiffs argue
2 they would include in a putative second amended complaint.
3 [1] Plaintiffs argue on appeal that the district court
4 erred in analyzing their misrepresentation claim as a
5 market-manipulation claim. But it is clear from the face of
6 the complaint that Plaintiffs’ claim for relief was for
7 market manipulation -- not for misrepresentation, as they
8 now urge. Because a plaintiff cannot amend the complaint
9 through an appellate brief, Cody v. Harris, 409 F.3d 853,
10 859 (7th Cir. 2005) (quoting Kennedy v. Venrock Assocs., 348
11 F.3d 584, 594 (7th Cir. 2003)); Daury v. Smith, 842 F.2d 9,
12 15 (1st Cir. 1988), Plaintiffs cannot assert a different
13 claim on appeal by arguing it in their appellate brief.
14 [2] Even if Plaintiffs had asserted a claim for
15 misrepresentation, their allegations would still fail to
16 state an actionable claim for relief. The requisite
17 elements of a securities fraud claim involving statements or
18 omissions are: (1) a material misrepresentation or omission,
19 (2) scienter, (3) a connection with the purchase or sale of
20 a security, (4) reliance, (5) economic loss, and (6) loss
21 causation. Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341-
22 42 (2005).
3
1 Plaintiffs have not alleged any fact to show that
2 Hersov made any statement to them that was materially false
3 or misleading. The First Amended Complaint has no factual
4 allegation at all regarding statements made by Hersov. See
5 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)
6 (holding that a complaint must plead “enough facts” to
7 “raise a right to relief above the speculative level” and
8 state a “plausible” claim); accord Ashcroft v. Iqbal, 129 S.
9 Ct. 1937, 1949 (2009) (holding that “‘naked assertion[s]’
10 devoid of ‘further factual enhancement,’” and “unadorned,
11 the-defendant-unlawfully-harmed-me accusation[s]” are
12 insufficient to state a claim for relief that is plausible).
13 [3] Similarly, the First Amended Complaint is devoid of any
14 factual allegation regarding any allegedly false statement
15 made by Ogrisek. The only potentially relevant allegation
16 about him was that he was one of the managing directors of
17 Vatas; but that is insufficient to make him personally
18 liable absent a link between him and the fraudulent
19 misstatement or omission. See Mills v. Polar Molecular
20 Corp., 12 F.3d 1170, 1175 (2d Cir. 1993). Plaintiffs’ new
21 allegations against Ogrisek -- that he signed two Schedule
22 13G reports and one Schedule 13D report relating to RMDX
4
1 stock held by Vatas -- are also insufficient because
2 Plaintiffs have not alleged facts showing that those reports
3 were materially false and have not established the
4 “requisite proximate relation[ship]” between those
5 statements and Plaintiffs’ purchases of RMDX stock. See
6 Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc.,
7 552 U.S. 148, 158 (2008).
8 [4] Likewise, Plaintiffs have failed to allege facts
9 sufficient to show that Windhorst made any materially false
10 statement. Plaintiffs allege that Windhorst’s assurance
11 that Vatas would buy the shares from Plaintiffs was false
12 because Vatas did not ultimately buy all of Plaintiffs’
13 shares. But the failure to perform a promise “does not
14 constitute fraud if the promise was made with a good faith
15 expectation that it would be carried out.” Luce v.
16 Edelstein, 802 F.2d 49, 56 (2d Cir. 1986); accord Mills, 12
17 F.3d at 1176. Plaintiffs have not alleged facts tending to
18 demonstrate that Windhorst’s statement was made in bad faith
19 -- nor could they, because Vatas initially purchased the
20 shares as per the agreement. See Elliott Assocs., L.P. v.
21 Hayes, 141 F. Supp. 2d 344, 355-56 (S.D.N.Y. 2000)
22 (reasoning that the defendant’s initial performance is
5
1 “compelling evidence . . . [that] negat[es] any inference of
2 fraudulent intent”), aff’d 26 F. App’x 83 (2d Cir. 2002)
3 (summary order).
4 The conclusory allegation that Vatas was
5 “undercapitalized” is not entitled to the assumption of
6 truth, Twombly, 550 U.S. at 555, and Plaintiffs have alleged
7 no facts supporting the conclusion that Vatas was
8 undercapitalized (other than its eventual bankruptcy). More
9 importantly, Plaintiffs have not alleged any facts that
10 Windhorst knew that Vatas was undercapitalized.
11 Plaintiffs allege that Windhorst falsely stated that
12 Vatas could not buy the RMDX shares on the open market. But
13 no facts are alleged to establish falsehood. In any event,
14 the alleged statement was not material. Plaintiffs entered
15 into this arrangement because Vatas promised to pay
16 Plaintiffs $0.05 to $0.10 profit for every share that
17 Plaintiffs purchased. It did not matter whether Vatas’s
18 charter precluded it from making its own open-market
19 purchases of the shares. See Mills, 12 F.3d at 1175
20 (holding that a “statement cannot be fraudulent if it did
21 not affect an investment decision of the plaintiff”).
22
6
1 Plaintiffs allege that they were not informed that
2 other investors were also involved in the alleged scheme to
3 manipulate the market. This allegation does not state a
4 claim. Plaintiffs participated in the scheme because of the
5 per-share profit they were guaranteed under the agreement
6 with Vatas. That other investors were allegedly also making
7 that same profit (or more, or less) was immaterial.
8 [5] Plaintiffs have not stated a fraud claim against Credit
9 Suisse and its employee, Ruiz. Plaintiffs allege that they
10 were not informed that Vatas’s account had been frozen; but
11 they have not established that Credit Suisse was under any
12 obligation to inform them of a client’s account status.
13 Even if Plaintiffs sufficiently alleged materially
14 false statements by Credit Suisse and Ruiz, the claim would
15 still fail for lack of scienter: “intent to deceive,
16 manipulate, or defraud.” Tellabs, Inc. v. Makor Issues &
17 Rights, Ltd., 551 U.S. 308, 319 (2007) (quotation marks
18 omitted). To plead scienter, a plaintiff must “state with
19 particularity facts giving rise to a strong inference that
20 the defendant acted with the required state of mind” --
21 i.e., fraudulent intent. 15 U.S.C. § 78u-4(b)(2)(A). To
22 plead scienter, a plaintiff must allege facts that “show
7
1 either (1) that defendants had the motive and opportunity to
2 commit fraud, or (2) strong circumstantial evidence of
3 conscious misbehavior or recklessness.” ECA, Local 134 IBEW
4 Joint Pension Trust v. JP Morgan Chase Co., 553 F.3d 187,
5 198 (2d Cir. 2009). Plaintiffs argue that Credit Suisse and
6 Ruiz were motivated to earn the fees from the transactions
7 and maintain a good relationship with large clients, but
8 neither a desire to earn transactional fees1 nor a desire to
9 cultivate business relations2 is sufficient to establish
10 scienter. Since Plaintiffs have also not alleged
11 circumstances strongly evidencing conscious misbehavior or
12 recklessness, the claim against Credit Suisse and Ruiz
13 fails.
14 [6] The district court did not err in denying Plaintiffs
15 leave to amend their complaint. The district court
16 considered the “new” factual allegations Plaintiffs might
1
Friedman v. Ariz. World Nurseries Ltd. P’Ship, 730 F.
Supp. 521, 532 (S.D.N.Y. 1990), aff’d 927 F.2d 594 (2d Cir.
1991) (table); accord In re College Bound Consol. Litig.,
No. 93 Civ. 2348, 1995 WL 450486, at *12 (S.D.N.Y. July 31,
1995).
2
In re MRU Holdings Sec. Litig., 769 F. Supp. 2d 500,
515 (S.D.N.Y. 2011); In re JP Morgan Chase Sec. Litig., 363
F. Supp. 2d 595, 621 (S.D.N.Y. 2005) (collecting cases);
accord In re Merrill Lynch Auction Rate Sec. Litig., No. 09
MD 2030, 2011 WL 1330847, at *9 (S.D.N.Y. Mar. 30, 2011).
8
1 include in a second amended complaint and concluded that
2 those allegations were still insufficient. We agree that
3 Plaintiffs’ amendment would have been futile. See Dougherty
4 v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83,
5 88 (2d Cir. 2002) (holding that amendment is futile if the
6 proposed additional facts do not state a claim upon which
7 relief can be granted).
8 We have considered all of Plaintiffs’ other arguments
9 and find them to be without merit. Accordingly, the
10 judgment of the district court is AFFIRMED.
11
12 FOR THE COURT:
13 Catherine O’Hagan Wolfe,
14
15
16
9