Cohen v. Cohen
2011 U.S. Dist. LEXIS 33771
S.D.N.Y.2011Background
- Patricia Cohen sues her former husband Steven Cohen, his brother Donald Cohen, and partner Brett Lurie for defrauding her of a share of the 1987 Settlement; claims include civil RICO, common law fraud, breach of fiduciary duty, and unjust enrichment.
- SAC Trading/Queen’s investments and the Lurie Investment allegedly involved fraudulent offering plans and misrepresentations by Lurie, Steven, and SAC.
- The 1987 Settlement paid Patricia $5.5 million in connection with a dispute over the Lurie Investment; the value of the Lurie Investment was later claimed to be “lost” during divorce negotiations.
- During divorce negotiations, Steven allegedly asserted the Lurie Investment was worthless or unrecoverable until foreclosure/bankruptcy, while Patricia contends the investment had value.
- Patricia discovered documents related to the 1987 Settlement and alleged secret SAC funds in 2008, prompting filing of the Second Amended Complaint in 2010.
- Defendants moved to dismiss the 2AC as time-barred and for failure to state a claim; court considered extrinsic documents integral to the fraud allegations and granted the motion with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 2AC pleads fraud with particularity under Rule 9(b). | Patricia contends 2AC alleges specific misrepresentations and their falsity. | Steven/Donald/Lurie argue 9(b) requirements not satisfied. | No; 2AC fails to allege plausible, particularized fraud. |
| Whether RICO and common law fraud claims are time-barred by inquiry notice. | Patricia alleges she lacked notice until 2008 discovery. | Defendants assert 1991 action placed Patricia on inquiry notice before 2008. | Time-barred under discovery/inquiry notice doctrine. |
| Whether prior 1991 proceedings placed Patricia on inquiry notice to preclude later fraud claims. | Patricia did not discover the full extent of the fraud; 1991 filings related to other issues. | Earlier suit and affidavits gave Patricia notice of potential fraud. | Prior 1991 action put Patricia on inquiry notice; claims barred. |
Key Cases Cited
- Staehr v. Hartford Fin. Serv. Group, Inc., 547 F.3d 406 (2d Cir. 2008) (inquiry notice requires direct triggering information to alert reasonable investor of fraud)
- In re Merrill Lynch Ltd. P’ships Litig., 154 F.3d 56 (2d Cir. 1998) (fraud-based accrual when discovery of injury occurs; storm warnings may trigger notice)
- Dodds v. Cigna Secs., Inc., 12 F.3d 346 (2d Cir. 1993) (inquiry notice objective standard for fraud accrual)
- Lenz v. Associated Inns and Restaurants Co. of Am., 833 F. Supp. 362 (S.D.N.Y. 1993) (awareness of third-party fraud can place plaintiff on inquiry notice)
- Banks v. Yokemick, 214 F. Supp. 2d 401 (S.D.N.Y. 2002) (judicial admissions not controlling; prior actions can trigger notice)
- Kaufman v. Cohen, 307 A.D.2d 113 (1st Dep’t 2003) (fiduciary-duty fraud claims subject to six-year limitations)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (employs plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must plead plausible claim, not mere legal conclusions)