Opinion
08 Civ. 7508 (SAS).
October 15, 2009
For Plaintiffs: Patrick J. Coughlin, Esq., Daniel S. Drosman, Esq., Anne L. Box, Esq., Jessica T. Shinnefield, Esq., Nathan R. Lindell, Esq., Darryl J. Alvarado, Esq., David C. Walton, Esq., Coughlin Stoia Geller Rudman Robbins LLP, San Diego, California.
Michael F. Ghozland, Esq., Coughlin Stoia Geller Rudman Robbins LLP, Los Angeles, California.
Samuel H. Rudman, Esq., Jarrett S. Charo, Esq., Coughlin Stoia Geller Rudman Robbins LLP, Melville, New York.
Jason C. Davis, Esq., Coughlin Stoia Geller Rudman Robbins LLP, San Francisco, California. For Defendants Morgan Stanley Co. Incorporated and Morgan Stanley Co. International Limited: James P. Rouhandeh, Esq., Antonio J. Perez-Marques, Esq., Russell Capone, Esq., Davis Polk Wardwell LLP, New York, New York.
For Defendants The Bank of New York Mellon and QSR Management Limited: Jonathan H. Sherman, Esq., Boies, Schiller Flexner LLP, Washington, District of Columbia.
Damien J. Marshall, Esq., Boies, Schiller Flexner LLP, New York, New York. For Defendants Moody's Investors Service, Incorporated and Moody's Investors Service Limited: Joshua M. Rubins, Esq., James J. Coster, Esq., Glenn C. Edwards, Esq., Justin E. Klein, Esq., Aaron M. Zeisler, Esq., Satterlee Stephens Burke Burke LLP, New York, New York.
For Defendants Standard Poor's Rating Services and The McGraw-Hill Companies, Incorporated: Floyd Abrams, Esq., Dean I. Ringel, Esq., Adam N. Zurofsky, Esq., Andrea R. Butler, Esq., Cahill Gordon Reindel LLP, New York, New York.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On September 2, 2009, this Court granted in part and denied in part the motions to dismiss of defendants Morgan Stanley Co. Incorporated and Morgan Stanley Co. International Limited and their affiliates (collectively, "Morgan Stanley") and Moody's Investors Service, Inc. and its affiliates, including wholly-owned and controlled subsidiary Moody's Investors Service Ltd. (collectively, "Moody's"); The McGraw-Hill Companies, Inc. and its affiliates, including its wholly-owned and controlled business division Standard Poor's Rating Services (collectively, "S P," and, together with Moody's, the "Rating Agencies"). This Court also granted The Bank of New York, now known as The Bank of New York Mellon and its wholly-owned subsidiary, QSR Management Limited (together, "BoNY")'s motion to dismiss in its entirety. In addition to plaintiffs' common law fraud claim against Morgan Stanley and the Rating Agencies that remain, plaintiffs' claims for breach of contract against all defendants, tortious interference with contract against all defendants, breach of condition precedent and breaches of the covenant of good faith and fair dealing against BoNY, and aiding and abetting any of these claims and common law fraud — were dismissed without prejudice. Plaintiffs were permitted to replead, but with the direction that
See Abu Dhabi Commercial Bank v. Morgan Stanley Co., Inc., No. 08 Civ. 7508, 2009 WL 2828018, at *20 (S.D.N.Y. Sept. 2, 2009).
See id.
Certain other claims were dismissed with prejudice, but are not relevant to this Memorandum Opinion and Order.
Leave to replead is granted with regard to plaintiffs' [] contract claims, but only if plaintiffs can provide evidence of the contract's formation, consideration, and major terms. Plaintiffs may be able to provide additional facts indicating that the Cheyne SIV intended to enter into a contract with investors based on terms set forth in the Information Memoranda and Selling Documents, but more facts are needed. Allegations that the Information Memoranda and Selling Documents alone give rise to a contract between defendants and plaintiffs are plainly inadequate. Finally, given another opportunity, plaintiffs could more clearly allege their aiding and abetting claims as to each defendant and the remaining common law fraud and contract-based claims.
Id. at *19.
On September 22, 2009, plaintiffs filed a Second Amended Complaint that added no new facts and made no attempt to cure the deficiencies outlined by this Court. Defendants now request that this Court dismiss the claims that remain deficient with prejudice, which would leave only the common law fraud claims against Morgan Stanley and the Rating Agencies and would dismiss BoNY, with prejudice, from the entire case. Plaintiffs oppose the request on the grounds that to do so would effect an entry of a final judgment under Rule 54(b) of the Federal Rule of Civil Procedure and require plaintiffs to immediately appeal. Plaintiffs further contend that this Court should refuse to dismiss all claims against BoNY with prejudice because "it is possible that discovery in this litigation will `bring to light facts that would bear on the propriety' of the Court's motion dismissing certain claims and parties." Plaintiffs assert that to dismiss all claims against BoNY with prejudice would bar plaintiffs from renewing their claims against BoNY if such facts are found.
See Second Amended Complaint at 8 n. 1; Hearing Transcript, Abu Dhabi Commercial Bank v. Morgan Stanley Co., Inc., No. 08 Civ. 7508 (S.D.N.Y. Oct. 1, 2009) ("10/1/09 Hr'g Tr.") at 3.
See 10/1/09 Hr'g Tr. at 3; 10/5/09 Letter to the Court from James P. Rouhandeh, Morgan Stanley's counsel, writing on behalf of all defendants ("10/5/09 Defendants' Letter").
See 10/2/09 Letter to the Court from Daniel S. Drosman, plaintiffs' counsel ("10/2/09 Plaintiffs' Letter") at 1 (citing Marvel Characters, Inc. v. Simon, 310 F.3d 280, 287 (2d Cir. 2002), Cleveland v. Higgins, 148 F.2d 722, 724 (2d Cir. 1945), and LinkCo, Inc. v. Naoyuki Akikusa, 615 F. Supp. 2d 130, 143 (S.D.N.Y. 2009) (Scheindlin, J.)).
Id. at 3.
See id.
II. LEGAL STANDARD
III. DISCUSSION
automatically may Marvel Characters, Inc. v. Simon Cleveland v. Higgins LinkCo, Inc. v. Naoyuki Akikusa
Nwaokocha v. Sadowski, 369 F. Supp. 2d 362, 372 (E.D.N.Y. 2005) (citing Van Buskirk v. The New York Times Co., 325 F.3d 87, 92 (2d Cir. 2003)).
See id.
Fed.R.Civ.P. 54(b) (emphasis added).
National Bank of Wash. v. Dolgov, 853 F.2d 57, 58 (2d Cir. 1988) (quoting Fed.R.Civ.P. 54(b)) ("Respect for the federal policy against piecemeal appeals requires that the district court's power to enter a final judgment before the entire case is concluded be exercised sparingly.").
See Denny v. Barber, 576 F.2d 465, 471 (2d Cir. 1978) (affirming the district court's dismissal and declining to permit a second amendment where the district court had already "put plaintiffs counsel on the plainest notice of what was required" and plaintiff had failed to cure the identified deficiencies); 380544 Canada Inc. v. Aspen Tech. Inc., 633 F. Supp. 2d 15, 35 (S.D.N.Y. 2009) (dismissing plaintiffs' claims with prejudice after plaintiffs failed to correct identified deficiencies in their complaint); Bui v. Industrial Enter. of Am., Inc., 594 F. Supp. 2d 364, 373-74 (S.D.N.Y. 2009) (granting defendants' motion to dismiss with prejudice where plaintiffs had "already had an opportunity to amend the Initial Complaint in response to deficiencies pointed out by the first pre-answer motion to dismiss"); ATSI Commc'n, Inc. v. Shaar Fund, Ltd., 357 F. Supp. 2d 712, 720 (S.D.N.Y. 2005) (same); Wolff v. Rare Medium, Inc., 210 F. Supp. 2d 490, 500 (S.D.N.Y. 2002) (same).
See 10/2/09 Plaintiffs' Letter at 1.
See Marvel Characters, Inc., 310 F.3d at 287 ("It is clear that a dismissal, with prejudice, arising out of a settlement agreement, operates as a final judgment for res judicata purposes."); Cleveland, 148 F.2d at 724 ("[A] dismissal with prejudice is a final judgment on the merits which will bar a second suit between the same parties for the same cause of action."); LinkCo., Inc., 615 F. Supp. 2d at 142 n. 94 (same) (quoting Marvel Characters, Inc., 310 F.3d at 287).
Despite failing to cure the deficient pleading, plaintiffs nonetheless request that the entry of dismissal without prejudice stand so that if new facts are discovered, plaintiffs may amend again. The claims against all defendants that were previously dismissed without prejudice — other than aiding and abetting common law fraud against BoNY — necessarily require plaintiffs to identify a contract to which they were a party. Plaintiffs have not done so. Although plaintiffs were given the opportunity for limited discovery and permission to file a Second Amended Complaint, plaintiffs have failed to identify any such contracts. Thus, leaving open the possibility of future amendments to the contract claims would be futile.
See 10/1/09 Hr'g Tr. at 10-11.
However, plaintiffs' claims that BONY aided and abetted Morgan Stanley and the Rating Agencies' in their alleged commission of common law fraud does not necessarily warrant a dismissal with prejudice. It is possible that further discovery in this case could reveal new facts making the likelihood of BoNY's aiding and abetting more plausible. As a result, I conclude, in the exercise of my discretion, that dismissing plaintiffs' aiding and abetting common law fraud claims against BoNY with prejudice would be premature.
IV. CONCLUSION
For the foregoing reasons, Counts 1B through 1D against Morgan Stanley, 2B through 2D against the Rating Agencies, and 3A through 3C against BoNY, as set forth in the Second Amended Complaint, are dismissed with prejudice. Counts 1A and 2A against Morgan Stanley and the Rating Agencies, respectively, remain in the case. Count 3D, aiding and abetting against BoNY solely to the extent that it pleads aiding and abetting common law fraud, is dismissed without prejudice. Nothing in this Memorandum Opinion and Order shall affect plaintiffs' right to file an appeal upon the final adjudication of the entire case.
SO ORDERED: