966 F. Supp. 2d 106
E.D.N.Y2013Background
- Landow sues Wachovia/Wells Fargo and Derivium-related entities for fraud, breach of fiduciary duty, aiding and abetting, and NASD/NYSE rule violations.
- Facts center on a seller-financed ESOP and 90% loan program, including transfer and sale of Landow's FRNs to fund Derivium loans and alleged concealment of those sales.
- Wachovia allegedly assisted Derivium, drafted loan documents, and provided accounts and statements that concealed the fraud; Derivium bankruptcy followed.
- Landow's tax issues arise from treating the Derivium transactions as sales, resulting in IRS/New York tax notices and alleged tax consequences.
- New York choice-of-law and borrowing statute CPLR § 202 apply due to diversity jurisdiction; accrual occurred by April 21, 2003, with discovery analysis for fraud claims.
- The court granted defendants' Rule 12(b)(6) motion to dismiss all claims as time-barred and denied leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the first three claims time-barred? | Landow alleges timely discovery within two years of discovery rules. | Claims accrued by 2003 and were not timely brought; discovery didn't toll. | Time-barred; dismissed. |
| Can the fourth claim under NASD/NYSE rules be privately enforceable? | Regulatory rules support private remedies in fiduciary contexts. | No private right of action exists under NYSE/NASD rules. | Dismissed with prejudice; no private right of action. |
| Should the plaintiff be allowed to amend the complaint? | Amendment would cure deficiencies and reflect discovery. | Amendment would be futile given time-barred claims. | Denied; amendments futile. |
| What law governs statute of limitations and accrual in this diversity case? | New York law governs limitations and discovery rules. | Borrowing statute CPLR § 202 applies with accrual by 2003. | New York law applies; accrual by April 21, 2003; discovery yields timely-bar conclusions. |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Supreme Court, 2007) (plausibility pleading standard for § 12(b)(6))
- Erickson v. Pardus, 551 U.S. 89 (Supreme Court, 2007) (courts must construe pleadings liberally)
- Ashcroft v. Iqbal, 556 U.S. 662 (Supreme Court, 2009) (pleading must contain more than conclusory allegations)
- Sargiss v. Magarelli, 12 N.Y.3d 527 (N.Y. 2009) (discovery and inquiry notice for fraud claims; accrual analysis)
- Staehr v. Hartford Fin. Serv. Grp., Inc., 547 F.3d 406 (2d Cir. 2008) (inquiry notice and totality-of-the-circumstances standard)
- Koch v. Christie’s Int’l PLC, 699 F.3d 141 (2d Cir. 2012) (two-year discovery rule and inquiry notice limitations)