Cohen v. S.A.C. Trading Corp.
2013 U.S. App. LEXIS 6798
2d Cir.2013Background
- Patricia Cohen sues her ex-husband Steven Cohen and his brother Donald for fraud-based RICO, common law fraud, and breach of fiduciary duty; Steven is also sued for unjust enrichment.
- The Lurie Investment involved a $9 million real estate deal through SAC, later concealed as worthless despite partial recovery to $5.5 million.
- 1989 Separation Agreement and 1992 amended Settlement Agreement defined disclosures; Patricia alleged concealment of assets and misrepresentation of financial condition.
- Patricia learned of potential fraud through post-litigation investigation and discovered the $5.5 million payment in 2009, triggering suit in December 2009.
- District Court dismissed in March 2011 for failure to state a claim and timeliness; ruling on some claims based on alleged untimeliness.
- Court of Appeals vacated in part, reinstating fraud-based claims on sufficiency and timeliness, while affirming unjust enrichment dismissal as time-barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of fraud-based pleadings | Cohen alleges specific misrepresentations and concealments with intent to defraud. | District court properly dismissed for insufficiency under Iqbal/Rule 9(b). | Fraud-based pleadings sufficiently stated; charted on remand for further handling. |
| Timeliness of RICO, fraud, and fiduciary-duty claims | Discovery rule and inquiry notice do not bar timely filing on record. | District court correctly found time-bar issues based on the record. | Claims not time-barred on the record; remanded for further considerations. |
| Unjust enrichment timeliness | Not time-barred due to accrual of wrongful act within six years. | Six-year period expired; time-barred. | Unjust enrichment claim time-barred. |
Key Cases Cited
- Rotella v. Wood, 528 U.S. 549 (U.S. 2000) (RICO statute of limitations and discovery rule)
- Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143 (U.S. 1987) (statute of limitations and accrual for fraud cases)
- In re Merrill Lynch Ltd. P’ships Litig., 154 F.3d 56 (2d Cir. 1998) (discovery rule for RICO actions)
- In re Merrill Lynch, 154 F.3d 60 (2d Cir. 1998) (continued application of discovery accrual principle)
- Sargiss v. Magarelli, 12 N.Y.3d 527 (N.Y. 2009) (fraud accrual under New York law)
- Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005) (duty to inquire and discovery timing for statutes)
- LC Capital Partners, LP v. Frontier Ins. Grp., 318 F.3d 148 (2d Cir. 2003) (when discovery triggers accrual for fraud actions)
- Berry Petroleum Co. v. Adams & Peck, 518 F.2d 402 (9th Cir. 1975) (reasonable diligence and discovery-based accrual)
- Staehr v. Hartford Fin. Servs. Grp., 547 F.3d 406 (2d Cir. 2008) (publicity and discovery concepts in inquiry notice)