472 F. App'x 7
2d Cir.2012Background
- Alki Partners, L.P. and Alki Fund, Ltd. sue Windhorst, Ogrisek, Hersov, Credit Suisse Group AG, and Ruiz in SDNY over alleged market manipulation tied to Vatas and RMDX stock.
- Plaintiffs allege per-share profit guarantees under a Vatas agreement motivated their investment and scheme participation.
- District court dismissed the complaint; plaintiffs appealed arguing misrepresentation rather than market manipulation and asserting various false statements and scienter.
- The court analyzes whether the allegations state a securities fraud claim requiring misrepresentation/omission, scienter, nexus to stock transactions, reliance, financial loss, and loss causation.
- Court finds no actionable statements by Hersov or Ogrisek, insufficient facts tying Schedule 13D/G filings to plaintiffs’ purchases, and no strong inference of scienter against Credit Suisse or Ruiz; amendment would be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the claim pleaded is market manipulation or misrepresentation | Alki argues misrepresentation claim; appellate brief reframes as market manipulation | Defendants contend the complaint pleads market manipulation, not misrepresentation | Market manipulation claim affirmed as the pleaded relief targetted manipulation, not misrepresentation |
| Sufficiency of statements by Hersov and Ogrisek | Alki asserts statements by Hersov and Ogrisek were false or misleading | Hersov and Ogrisek allegedly made no actionable statements; no factual link to fraud | No material false statements alleged; claims against Hersov and Ogrisek fail |
| Proximity of Schedule 13G/13D filings to plaintiffs’ purchases | Alki alleges reports tied to Vatas were false and proximate to purchases | No facts show those reports were materially false or proximate to plaintiffs’ decisions | Allege failed to show material false statements or proximate causation |
| Scienter as to Credit Suisse and Ruiz | Credit Suisse and Ruiz acted with fraudulent intent to earn fees/maintain relationships | No strong motive or conscious-mreckless conduct shown; mere fees/relationships insufficient | No strong inference of scienter; claim against Credit Suisse and Ruiz fails |
| Leave to amend | Plaintiffs would plead new facts in a second amended complaint | Amendment would be futile; new facts still fail to state a claim | District court did not abuse discretion in denying leave to amend |
Key Cases Cited
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (2005) (elements of securities fraud require material misrepresentation and loss causation)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (plaintiff must plead facts showing strong inference of scienter)
- Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) (lack of implied scienter if initial performance undermines intent)
- Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008) (proximate cause and scheme participation required for liability)
- Luce v. Edelstein, 802 F.2d 49 (2d Cir. 1986) (promise alone insufficient to prove fraud absent bad faith)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (2007) (pleading standard requires plausible claims, not mere speculation)
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (rejects bare allegations lacking factual enhancement)