Opinion
20-cv-7436 (LJL)
08-03-2022
JACALYN DIESENHOUSE, on behalf of herself and as Executrix of the Estate of John Stewart, RICKY J. EARLYWINE, WILLIAM GARTNER, HYMAN L. GLUCK REVOCABLE TRUST, MOHAMMED HAYAT, CAROL P. LEVAREK REVOCABLE TRUST, STEVEN LYONS, PHILIPPE MOUTOT, MARJORIE SUDROW, ROBERT J. WARDLE and BARRY WEINBAUM Plaintiffs, v. SOCIAL LEARNING AND PAYMENTS, INC., SOCIAL LEARNING AND PAYMENTS LABS, LLC and EDWARD MORAN. Defendants.
OPINION & ORDER
LEWIS J. LIMAN, United States District Judge
Defendants Social Learning and Payments, Inc. (“SLAP”) and Social Learning and Payments Labs, LLC (“SLAP Labs”) move, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss all claims against them in the amended complaint. Dkt. No. 40. Defendant Edward Moran (“Moran,” and collectively with SLAP and SLAP Labs, “Defendants”) also moves to dismiss all claims against him in the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 42.
BACKGROUND
For purposes of ruling on Defendants' motions, the Court accepts the well-pleaded allegations of the amended complaint as true. of Delaware, with its principal place of business in Windham, New York. Id. ¶ 17. SLAP Labs operates as a holding company for the intellectual property of SLAP and, like SLAP, is a limited liability company existing under the laws of the State of Delaware with its principal place of business in Windham, New York. Id. ¶¶ 18, 26. Moran is the founder of SLAP and at all relevant times was its President and Chief Executive Officer; he is also the managing member of SLAP Labs. Id. ¶¶ 2, 19, 24. Moran resides in Windham, New York. Id. ¶ 19.
To fund SLAP, Moran solicited the plaintiffs in this action (“Plaintiffs”) to invest in the company. Id. ¶ 27. In the period from December 2013 to March 2016, each of the Plaintiffs invested in SLAP as part of a convertible debt offering. Id. ¶¶ 34-44. The promissory notes that Plaintiffs purchased accrued interest at the rate of 5% per annum. Id. ¶ 54. Those promissory notes also provided that Plaintiffs' debt would convert to equity upon a qualified financing of $500,000. Id. ¶ 45.
Plaintiffs allege that they were induced to purchase the notes by false representations by Moran. During the solicitation, Moran represented to each of the Plaintiffs that he had secured other available investors, including his brother-in-law, who owned a network of Toyota dealerships and who planned to become a regular customer of SLAP. Id. ¶ 28. Moran also said that his brother-in-law “would be able to bring in other dealerships as customers.” Id. Moran further represented to each of the Plaintiffs that former Deloitte partners were planning to invest in SLAP, that Jack Ma's Alibaba Group (“Alibaba”) was likely to invest, and that he had the American Automobile Association (“AAA”), AARP, the American Society of Plastic Surgeons, the Joslin Diabetes Center, and the American Diabetes Association lined up as customers. Id. ¶¶ 29-31. Throughout the solicitation, Moran also represented that Carol Levarek (Trustee of Plaintiff Carol P. Levarek Revocable Trust) and Plaintiff Barry Weinbaum would be made board members of SLAP. Id. ¶ 32.
None of these representations came to fruition. Neither Moran's brother-in-law, Alibaba, nor any Deloitte partners invested in SLAP, and neither the Toyota dealership nor any other car dealership became customers of SLAP. Id. ¶ 46. The AAA, AARP, the American Society of Plastic Surgeons, the Joselin Diabetes Center, and the American Diabetes Association also never became customers of SLAP. Id. Carol Levarek and Barry Weinbaum were never appointed board members. Id. ¶ 47.
In early 2016, SLAP amended Plaintiffs' notes so that they would automatically convert into equity on March 31, 2016, rather than converting into equity upon a qualified financing of $500,000 as they had previously provided. Id. ¶ 45. Plaintiffs accepted the amended notes in further reliance upon Moran's misstatements. Id. Around the same time, Moran also sent an electronic mail notice to each of the Plaintiffs, stating that because the intellectual property of SLAP was held by SLAP Labs, any investor in SLAP would also be assigned membership interests in SLAP Labs pari passu. Id. ¶ 33.
None of the Plaintiffs have ever received share certificates, a capitalization table, any dividends, or any other evidence that the notes converted or that Plaintiffs were admitted as shareholders of SLAP. Id. ¶ 45. SLAP has also not made any payments of interest or principal towards any of the convertible promissory notes. Id. ¶ 55. In April 2016, Moran accepted fulltime employment with KPMG and “effectively abandoned his helm without notice.” Id. ¶ 48.
The amended complaint states “none of the Defendants.” Id. ¶ 45. The parties have assumed that the clause contains an error and that the amended complaint should read “none of the Plaintiffs.” The Court makes the same assumption.
As of April 26, 2021, SLAP continued to maintain a website and Moran maintained his role as Chief Executive Officer (“CEO”); however, SLAP had apparently ceased operations and Moran had ceased communications with SLAP's investors, with the exception that Moran, through counsel, responded to Plaintiffs' demand for books and records in 2020, which Moran “effectively refused.” Id. ¶¶ 51-52. On September 10, 2020, SLAP, through counsel, sent notice of a special meeting to its stockholders to vote upon a purported plan of liquidation of SLAP. Id. ¶ 52.
PROCEDURAL HISTORY
Plaintiffs instituted this action by a complaint filed on September 10, 2020 (“Complaint”). Dkt. No. 1. On April 26, 2021, Plaintiffs filed their amended complaint. Dkt. No. 36. The amended complaint (“Amended Complaint”) asserts the following causes of action: (1) nonpayment of convertible promissory notes (against SLAP), id. ¶¶ 53-57; (2) breach of contract (against SLAP Labs), id. ¶¶ 58-62; (3) violation of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder (against Moran) id. ¶¶ 63-70; (4) fraud (against Moran), id. ¶¶ 71-77; (5) breach of fiduciary duty (against Moran) ¶¶ 78-82; (6) unjust enrichment (against Moran) id. ¶¶ 83-85; and (7) accounting (against SLAP) ¶¶ id. ¶¶ 87-92.
On June 14, 2021, the present motions to dismiss the Amended Complaint were filed. Dkt. Nos. 41, 43. On August 4, 2021, Plaintiffs filed oppositions to the motions, Dkt Nos. 5051, and, on October 15, 2021, Defendants replied, Dkt Nos. 62-63. On July 20, 2022, this Court ordered the parties to address two questions: (1) whether, because SLAP is alleged to be a Delaware corporation and Moran is an officer and director of that corporation, Delaware law should be applied to the fiduciary duty and accounting claims pursuant to the internal affairs doctrine; and (2) if so, how that affects the statute of limitations analysis on those claims. Dkt No. 65. The parties each submitted letter responses to this Order on July 28, 2022. Dkt Nos. 6668.
STANDARD OF REVIEW
To survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678. “Determining whether a complaint states a plausible claim for relief will . . . be a contextspecific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. Put another way, the plausibility requirement “calls for enough fact to raise a reasonable expectation that discovery will reveal evidence [supporting the claim].” Twombly, 550 U.S. at 556; accord Matrixx v. Siracusano, 563 U.S. 27, 46 (2011). Although the Court must accept all the factual allegations of a complaint as true, it is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). The ultimate issue “is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013) (quoting Scheuer v. Rhodes, 416 U.S. 232, 235-36 (1974)); see also DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 113 (2d Cir. 2010) (“In ruling on a motion pursuant to Fed.R.Civ.P. 12(b)(6), the duty of a court is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.” (internal quotation marks and citation omitted)).
DISCUSSION
The Defendants move to dismiss all causes of action in the Amended Complaint. The Court addresses each cause of action in turn.
I. Breach of Contract Claim Against SLAP
In their first cause of action, Plaintiffs allege that SLAP breached the terms of Plaintiffs' convertible promissory notes by failing to pay out interest or principal to Plaintiffs and that SLAP is in default under the convertible promissory notes (as a result of ceasing its operations).Dkt. No. 36 ¶¶ 53-57. Accordingly, Plaintiffs claim that all principal and interest is due immediately. Id.
Plaintiffs caption their first cause of action “Non-Payment of Convertible Promissory Notes against SLAP,” Dkt. No. 36, but both parties agree that it is a breach of contract claim. Dkt. No. 41 at 7; Dkt. No. 59 at 2.
“Under New York law, a breach of contract claim requires proof of (1) an agreement, (2) adequate performance by the plaintiff, (3) breach by the defendant, and (4) damages.” Lamda Sols. Corp. v. HSBC Bank USA, N.A., 2021 WL 5772290, at *4 (S.D.N.Y. Dec. 6, 2021) (quoting Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011)). “[A] breach of contract claim will be dismissed where a plaintiff fails to allege ‘the essential terms of the parties' purported contract, including the specific provisions of the contract upon which liability is predicated.'” Fink v. Time Warner Cable, 810 F.Supp.2d 633, 644 (S.D.N.Y. 2011) (quoting Martinez v. Vakko Holding A.S., 2008 WL 2876529, at *2 (S.D.N.Y. July 23, 2008)); see also Nuevos Aires Shows LLC v. Buhler, 2020 WL 1903995, at *4 (S.D.N.Y. Apr. 17, 2020).
The Court assumes, as do the parties, that New York law applies to the breach of contract, common law fraud, and unjust enrichment claims. See Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33, 39 (2d Cir. 2009) (applying New York law where the parties' memoranda of law assume that New York law governed the issues).
Here, Plaintiffs do not sufficiently and plausibly allege that SLAP's failure to pay interest or principal to Plaintiffs constitutes a breach of contract. Although Plaintiffs allege that they held SLAP convertible notes that accrued interest at the rate of 5% per annum and that “[t]o date, SLAP has not made any payments of interest or principal towards any of the convertible promissory notes,” Dkt. No. 36 ¶¶ 54-55, they do not identify any contractual provision SLAP violated by not making these payments. They do not allege when the notes were due and more specifically whether the notes required SLAP to pay out interest to Plaintiffs as opposed to merely accruing interest on top of the principal. Furthermore, although Plaintiffs state in a conclusory fashion that SLAP has effectively ceased operations and is thus in default under the terms of the convertible promissory notes, Plaintiffs never allege that any term in the convertible promissory notes provide that “effectively ceas[ing] operations” constitutes a default event. Id. ¶ 56; see Ebomwonyi v. Sea Shipping Line, 473 F.Supp.3d 338, 347 (S.D.N.Y. 2020), aff'd, 2022 WL 274507 (2d Cir. Jan. 31, 2022) (“[A] complaint fails to sufficiently plead the existence of a contract if it does not provide factual allegations regarding, inter alia, the formation of the contract, the date it took place, and the contract's major terms. Conclusory allegations that a contract existed or that it was breached to not suffice.” (internal quotation marks and citations omitted)).
Because Plaintiffs fail to sufficiently plead factual allegations related to the promissory notes' key terms or identify any of those terms that SLAP breached, Plaintiffs breach of contract claim against SLAP is dismissed.
II. Breach of Contract Claim Against SLAP Labs
In their second cause of action, Plaintiffs allege that SLAP Labs breached an agreement to assign Plaintiffs' membership interests in SLAP Labs. Dkt. No. 36 ¶ 33. Plaintiffs allege that at some point after Plaintiffs invested in SLAP, “Moran sent an electronic mail notice to each of the Plaintiffs that had invested that because the intellectual property of SLAP was held by SLAP Labs, any investor in SLAP would also be assigned membership interests in SLAP Labs pari passu,” and that “[u]pon information and belief, to date, SLAP Labs has not issued any shares of stock in favor of Plaintiffs.” Id. ¶¶ 33, 60.
This claim fails for one central reason: Plaintiffs do not allege what consideration Plaintiffs provided in exchange for receiving membership interests in SLAP Labs. It is hornbook law that to establish that the parties formed a contract, a plaintiff must allege that both parties provided valid consideration. See Kamden-Ouaffo v. Balchem Corp., 2018 WL 4386092, at *12 (S.D.N.Y. Sept. 14, 2018) (applying New York law); Hughes v. Standard Chartered Bank, PLC, 2010 WL 1644949, at *11 (S.D.N.Y. Apr. 14, 2010) (applying New York law and holding that, because the complaint fails to allege that consideration was given in exchange for the alleged promise, “the promise is not enforceable against the defendants”). Because Plaintiffs do not allege any consideration Plaintiffs provided in exchange for this promise, count two of the Amended Complaint must be dismissed.
III. Federal Securities Fraud Claim Against Moran
Plaintiffs' third cause of action asserts that Moran's false statements to Plaintiffs, which allegedly induced them to invest in SLAP, constitute securities fraud in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5 (2001). Dkt. No. 36 ¶¶ 64-70.
To plead a claim under Section 10(b) and Rule 10b-5, a plaintiff must plead each of the following six elements: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation; (5) economic loss; and (6) loss causation.” Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267 (2014). In addition to these elements, “it is well-established that a securities fraud complaint must also plead certain facts with particularity in order to state a claim.” Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000). Under Federal Rule of Civil Procedure 9(b), “whenever a complaint contains allegations of fraud, ‘the circumstances constituting fraud . . . shall be stated with particularity.'” Novak, 216 F.3d at 306 (quoting Fed.R.Civ.P. 9(b)). A complaint making such allegations must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (internal quotation marks and citation omitted).
The Private Securities Litigation Reform Act (“PSLRA”) imposes additional procedural requirements on a plaintiff bringing a private securities fraud action. One of those requirements is that the plaintiff must “state with particularity facts giving rise to a strong inference that the defendant acted with the requisite state of mind.” 15 U.S.C. § 78u-4(b)(2). Under this heightened pleading standard for scienter, a “complaint will survive . . . only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007).
A. The Securities Fraud Claim with Respect to Certain Plaintiffs and Certain Transactions Is Time-Barred
Moran first argues that Plaintiffs' federal securities claim is time-barred under the applicable statute of limitations. Securities fraud claims under Section 10(b) and Rule 10b-5 must be brought “not later than the earlier of (1) 2 years after the discovery of the facts constituting the violation; or (2) 5 years after such violation.” 28 U.S.C. § 1658(b). The two-year statute of limitations begins to run when “a reasonably diligent plaintiff would have discovered the facts constituting the violation.” Sissel v. Rehwaldt, 519 Fed. App'x 13, 15-16 (2d Cir. 2013) (summary order) (quoting Merck & Co. v. Reynolds, 559 U.S. 633 (2010)). “[A] fact is not deemed ‘discovered' until a reasonably diligent plaintiff would have sufficient information about that fact to adequately plead it in a complaint.” City of Pontiac Gen. Employees' Ret. Sys. v. MBIA, Inc., 637 F.3d 169, 175 (2d Cir. 2011). The five-year repose period, on the other hand, “is a fixed statutory cutoff, independent of a plaintiff's awareness” of the alleged fraud and is “not subject to equitable tolling.” Wiedis v. Dreambuilder Invs., LLC, 268 F.Supp.3d 457, 465 (S.D.N.Y. 2017); see also SRM Glob. Master Fund L.P. v. Bear Stearns Cos., 829 F.3d 173, 176 (2d Cir. 2016) (explaining that the statute of repose is not subject to equitable tolling and “creates a substantive right in those protected to be free from liability after a legislatively-determined period of time” (quoting Police and Fire Ret. Sys. of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95, 106 (2d Cir. 2013)); Seagrape Investors LLC v. Tuzman, 2020 WL 5751232, at *14 (S.D.N.Y. Sept. 25, 2020) (“[T]he five-year statute of repose is a fixed statutory cutoff, which is independent of a plaintiff's awareness of the violation under Section 10(b) and is not subject to equitable tolling.” (internal quotation marks and citations omitted)).
“A district court may consider timeliness on a motion to dismiss ‘[w]here the dates in a complaint show that an action is barred by a statute of limitations.'” Integrated Media Res., LLC v. Morley, 2022 WL 913023, at *3 (S.D.N.Y. Mar. 29, 2022) (quoting Cangemi v. United States, 13 F.4th 115, 134 (2d Cir. 2021)); see also Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008).
The two-year statute of limitations does not begin to run until after a plaintiff's claim has accrued, i.e., until after the plaintiff both purchased the securities and the date when a reasonably diligent investor conducting an investigation would have discovered the violation or should have known of the violation; in contrast, the five-year statute of limitation runs from the date of the violation, i.e., the date of the alleged misrepresentation or actionable omission constituting the securities law violation. See City of Pontiac, 637 F.3d at 176 (“Unlike a statute of limitations, which begins to run from defendant's violation, a statute of limitations cannot begin to run until the plaintiff's claim has accrued”); In re Teva Sec. Litig., 512 F.Supp.3d 321, 334 (D. Conn. 2021); Colbert v. Rio Tinto PLC, 392 F.Supp.3d 329, 337 (S.D.N.Y. 2019), aff'd, 824 Fed.Appx. 5 (2d Cir. 2020); Fogel v. Wal-Mart de Mexico SAB de CV, 2017 WL 751155, at *7-8 & n.11 (S.D.N.Y. Feb. 27, 2017) (“[I]n the years since Arnold, the Second Circuit has made plain its belief that it is the date of the misrepresentation, not the transaction, that matters for purposes of the . . . statute of repose.”); Boudinot v. Shrader, 2012 WL 489215, at *4 (S.D.N.Y. Feb. 15, 2012) (“[T]he five-year period begins to run from the time that the allegedly fraudulent representations were made.”); Wiedis, 268 F.Supp.3d at 465 (“[T]he statute of repose begins running from the time that the allegedly fraudulent representations were made.” (cleaned up)).
The Court in Seagrape Investors LLC, 2020 WL 5751232 at *14, stated that “the statute of repose begins to run ‘on the date the parties have committed themselves to complete the purchase or sale transaction.'” (quoting Arnold v. KPMG LLP, 334 Fed.Appx. 349, 351 (2d Cir. 2009) (summary order)). But, as other courts have noted, the statement in Arnold was made in the course of rejecting plaintiff's argument that the statute of repose began on the date of the last alleged misrepresentation when that misrepresentation was made after the final purchase or sale of securities. Arnold, 334 Fed.Appx. at 351; see Fogel, 2017 WL 751155 at *8 & n.11; Intesa Sanpaolo, S.p.A. v. Credit Agricole Corp & Invs. Bank, 924 F.Supp.2d 528, 536 (S.D.N.Y. 2013). The case cannot reasonably be read to require the clock on the repose period to start.
The parties do not seriously dispute that many of Plaintiffs' claims are time-barred by the five-year statute of response. The Complaint was filed on September 10, 2020, Dkt. No. 1, meaning that Plaintiffs' claims would have had to accrue prior to September 10, 2015. The Amended Complaint alleges purchases of the convertible notes by the following Plaintiffs, each of which were made prior to September 10, 2015: (1) Jacalyn Diesenhouse (May 21, 2014); (2) Hyman L. Gluck Revocable Trust (December 21, 2013 and November 21, 2014); (3) Mohammed Hayat (June 13, 2014); (4) Carol P. Levarek Revocable Trust (December 21, 2013, March 28, 2014, June 2, 2014, and November 21, 2014); (5) Philippe Moutot (April 30, 2015); (6) Marjorie Sudrow (April 30, 2015); (7) Robert J. Wardle (June 2, 2014); and (8) Barry Weinbaum (December 20, 2013, March 28, 2014, May 20, 2014, October 30, 2014, and March 1, 2015). Because the alleged fraudulent misrepresentations must have occurred prior to Plaintiffs' purchases made in reliance on them, see DoubleLine Cap. LP v. Odebrecht Fin., Ltd., 323 F.Supp.3d 393, 434 (S.D.N.Y. 2018), claims based on these purchases are barred by the absolute time bar created by the Exchange Act's statute of repose.
Moran also argues that the remaining federal securities fraud claims are time-barred by the two-year statute of limitations as a reasonably diligent investor would have discovered the facts constituting the securities fraud violations in April 2016 after Moran accepted full-time employment with KPMG. Dkt. No. 36 ¶ 48; see Dkt. No. 43 at 8. The facts pleaded in the Amended Complaint, however, do not establish that a reasonable investor would necessarily have discovered Moran's full-time employment with KPMG as soon as it occurred.The running anew each time a plaintiff purchased securities as a result of the false or misleading statement alleged to constitute the violation. Amended Complaint's allegation refers to the date upon which Moran abandoned the company, not the date upon which Plaintiffs discovered he abandoned the company; in fact, the Amended Complaint notes that to this day he continues in his role as CEO. Dkt. No. 36 ¶ 52. In addition, at this stage and on the pleadings, Moran fails to “show how these events did alert or should have alerted Plaintiff to discover facts with sufficient detail and particularity to demonstrate each element of the alleged violations, including the scienter of” the defendant. Washington State Inv. Bd. v. Odebrecht S.A., 461 F.Supp.3d 46, 62 (S.D.N.Y. 2020) (internal quotation marks and citations omitted) (holding that “it is Defendants' burden” to make this showing). For these reasons, this Court rejects Moran's argument that the remaining securities fraud claims are time-barred by the two-year statute of limitations under 28 U.S.C. § 1658(b).
In his reply brief, Moran asserts that Moran's acceptance of another job “resulted in SLAP's immediate and open replacement of [] Moran as CEO” and that Plaintiffs had the means to discover whether their notes have been converted to equity. Dkt. No. 62 at 3-4. The first argument, however, is not supported by citation to any allegation in the Amended Complaint, while the second is raised only the first time on reply. “This Circuit has made it clear it disfavors new issues being raised in reply papers.” Rowley v. City of New York, 2005 WL 2429514, at *5 (S.D.N.Y. Sep. 30, 2005); see also United States v. Letscher, 83 F.Supp.2d 367, 377 (S.D.N.Y. 1999) (stating that “arguments raised in reply papers are not properly a basis for granting relief”); Domino Media, Inc. v. Kranis, 9 F.Supp.2d 374, 384 (S.D.N.Y. 1998) (“New arguments first raised in reply papers in support of a motion will not be considered.” (emphasis omitted)); Playboy Enters., Inc. v. Dumas, 960 F.Supp. 710, 720 n.7 (S.D.N.Y. 1997) (“Arguments made for the first time in a reply brief need not be considered by a court.”). The Court will not consider this argument.
B. Failure to Plead Misrepresentations with Particularity
The federal securities fraud claims with respect to the remaining Plaintiffs and their investments in SLAP nonetheless must be dismissed for failing to meet the particularity requirements of the PSLRA and Rule 9(b). Plaintiffs' securities fraud claim is based on the allegations that “during the offering, Moran materially misrepresented to each of the Plaintiffs that he had investors and customers lined up for SLAP” and that “[d]uring the offering, Moran concealed the fact that he would be seeking employment elsewhere and did not plan to remain full-time at the helm of SLAP for any meaningful period.” Dkt. No. 36 ¶¶ 64-65. Plaintiffs further allege that “[d]uring the solicitation,” Moran represented to each of the Plaintiffs that: (i) he had other available investors, (ii) his brother-in-law planned to become a regulator customer of SLAP and would be able to bring in other car dealerships as customers, (iii) former Deloitte partners were planning to invest in SLAP, (iv) he had AAA, AARP, the American Society of Plastic Surgeons, the Joslin Diabetes Center and the American Diabetes Associated lined up as customer, and (v) Jack Ma's Alibaba was likely to invest. Id. ¶¶ 28-31. Plaintiffs also allege that “[t]hroughout the solicitation,” Moran represented that Carol Levarek and Barry Weinbaum would be made board members of SLAP. Id. ¶ 32.
These allegations fail to meet the particularity requirements of the PSLRA and Rule 9(b). The Amended Complaint alleges that the solicitation occurred from late 2013 into the fall of 2016. Id. ¶ 27. Each of the twelve Plaintiffs are alleged to have purchased a SLAP convertible promissory note on a different date; some purchased SLAP promissory notes on more than one date. Id. ¶¶ 34-44. The most that the Amended Complaint says about each individual Plaintiff is that he, she, or it purchased “in reliance upon Moran's several material representations.” Id. From the Amended Complaint's allegations, the alleged misrepresentations could have been made virtually at any time within the three-year time frame of the solicitation. “[A] complaint making such allegations must ‘(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when statements were made, and (4) explain why the statements were fraudulent.'” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)). The Amended Complaint does not allege where and when each of the alleged statements was made to each of the Plaintiffs, what was stated to the plaintiffs, or why at the time the statement was made it was false. In the absence of such factual allegations, Plaintiffs have not pleaded enough to sufficiently claim that Moran committed securities fraud, and the securities fraud claim therefore must be dismissed. See Novak, 216 F.3d at 306 (“[I]t is well-established that a securities fraud complaint must also plead certain facts with particularity in order to state a claim.”); In re Nokia Oyj (Nokia Corp.) Sec. Litig., 423 F.Supp.2d 364, 392 (S.D.N.Y. 2006) (“[A] complaint must explain, with adequate specificity, why the alleged false or misleading statements were actually false or misleading when made.”); Antigenics Inc. v. U.S. Bancorp Piper Jaffray, Inc., 2004 WL 51224, at *3 (S.D.N.Y. Jan. 9, 2004) (“Particularity ‘means the who, what, where, when and how: the first paragraph of any newspaper story.'” (quoting In re Initial Pub. Offering Secs. Lit., 241 F.Supp.2d 281, 327 (S.D.N.Y. 2003)).
Many of the alleged misstatements are also forward-looking, including that Moran's brother would be able to bring in other dealerships or customers, that Jack Ma's Alibaba was likely to invest, and that he planned to work at SLAP full-time. So too, the statement that Moran planned to make Carol Levarek and Barry Weinbaum board members. Dkt. No. 36 ¶¶ 28-32. Plaintiffs do not plead, however, that any of these statements-purportedly made over a three-year period-were knowingly false or were made with scienter. Plaintiffs allege only that the promises Moran made were not satisfied and that he did not continue to work full-time, bring in the investors or customers he promised, or put on the board the persons he said he would nominate. Id. ¶¶ 46-48. Plaintiffs simply state (without citation) that “the element of scienter need only be pled generally.” Dkt. No. 60 at 4.
That the element of scienter need only be pleaded generally is not a correct statement of federal securities law. It has been established for nearly a half century that a plaintiff cannot establish “fraud by hindsight.” See Denny v. Barber, 576 F.2d 465 (2d Cir. 1978); Wade Park Land Holdings, LLC v. Kalikow, ___ F.Supp.3d ___, 2022 WL 657664, at *26 (S.D.N.Y. Mar. 4, 2022) (finding pleading deficient in part because of allegations of fraud by hindsight where “Plaintiffs fail to plead facts that demonstrate that the statements were false when made”); Landesbank Baden-Wurttemberg v. Goldman, Sachs & Co., 821 F.Supp.2d 616, 623 (S.D.N.Y. 2011) (finding that paradigmatic “fraud by hindsight” allegations “cannot survive a motion to dismiss” (internal quotation marks and citations omitted)). To be sure, “[t]he incantation of fraud-by-hindsight will not defeat an allegation of misrepresentations and omissions that were misleading and false at the time they were made.” In re Fannie Mae 2008 Secs. Lit., 891 F.Supp.2d 458, 476 (S.D.N.Y. 2012) (quoting In re Bear Stearns Cos., Inc. Sec., Derivative, & ERISA Litig., 763 F.Supp.2d 423, 487 (S.D.N.Y. 2011)); see also Robbins v. Moore Med. Corp., 788 F.Supp. 179, 192-93 (S.D.N.Y. 1992) (holding complaint was adequately pleaded despite allegations of fraud by hindsight since “the Denny court recognized that fraud by hindsight decisions may or may not be consistent and necessarily rest on their particular facts” (cleaned up)). Plaintiffs, however, fail to allege any other facts to support that Moran's misrepresentations and omissions were knowingly or recklessly misleading and false at the time he made them. The fact that Moran ended up leaving SLAP does not mean that at the time he solicited the investments he knew he would leave SLAP. And the fact that Alibaba never ended up investing and he did not attract any other car dealerships as customers does not mean that Moran knew that these things would not happen at the time he solicited the investments. Because Plaintiffs have alleged no more, the Amended Complaint, as it is currently pleaded, cannot stand.
IV. Common Law Fraud Claim Against Moran
Plaintiffs' claim for common law fraud fails for many of the same reasons that its claim for federal securities fraud fails. The standard for common law fraud in New York is similar to that for securities fraud. To state a claim for fraud under New York law, a plaintiff must allege “(1) a misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3) which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff reasonably relied; and (5) which caused injury to the plaintiff.” Budhani v. Monster Energy Co., 2021 WL 1104988, at *12 (S.D.N.Y. Mar. 22, 2021) (quoting Wynn v. AC Rochester, 273 F.3d 153, 156 (2d Cir. 2001)). Claims for common law fraud under New York law must also satisfy the heightened pleading requirements of Rule 9(b) and be pleaded “with particularity.” Fed.R.Civ.P. (9)(b); see also B & MLinen, Corp. v. Kannegiesser, USA, Corp., 679 F.Supp.2d 474, 481 (S.D.N.Y. 2010). The plaintiff must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Novak, 216 F.3d at 306 (quoting Shields, 25 F.3d at 1128). Particularity “means the who, what, where, when and how: the first paragraph of any newspaper story.” Antigenics Inc., 2004 WL 51224, at *3 (quoting In re Initial Pub., 241 F.Supp.2d at 327). “Rule 9(b) also requires a plaintiff to ‘allege facts that give rise to a strong inference of fraudulent intent.'” Budhani v. Monster Energy Co., 527 F.Supp.3d 667, 687 (S.D.N.Y. 2021) (quoting Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006)).
For the same reasons the Court does not address Moran's argument that his statements were non-actionable puffery under the Securities Exchange Act, it does not address whether those statements would be non-actionable puffery under New York common law.
As stated above, the Amended Complaint does not identify the alleged misrepresentations with particularity. Although the Amended Complaint identifies the substance of the alleged misrepresentations that Moran made during the solicitation of investments from Plaintiffs that occurred over a three-year period, the Amended Complaint does not identify exactly when those misrepresentations were made during that three-year period; the Amended Complaint merely states that they were made “[d]uring the solicitation.” Dkt. No. 36 ¶¶ 28-32; See Cambridge Cap. LLC v. Ruby Has LLC, 565 F.Supp.3d 420, 462 (S.D.N.Y. 2021) (holding that allegations that a party made misrepresentations “during this time” and “throughout the negotiations” are insufficiently specific about when the statements were made and therefore do not contain the particularity necessary to state a fraud claim in federal court and under New York law). The Amended Complaint also does not allege whether the misrepresentations were made in person, in writing, or some other medium, or where the alleged misrepresentations were made. Optima Media Grp. Ltd. v. Bloomberg L.P., 383 F.Supp.3d 135, 143 (S.D.N.Y. 2019) (finding allegations insufficient where they do not “identify the continent, much less the city, in which the communications were made” and do not “offer an estimate of the number of such communications, or whether they were made ‘in person, over the phone, or by email'” (internal quotation marks and citation omitted)).
Plaintiffs also do not allege facts establishing scienter. As mentioned, the alleged misrepresentations are about future events, such as who would invest, who would become customers of SLAP, and who he would put on the board of the company. Dkt. No. 36 ¶¶ 28-32. That these events did not come to fruition does not mean that Moran had a fraudulent intent at the time that he made these statements; to hold otherwise would allow for “unactionable falsity by hindsight.'” Cambridge Cap. LLC v. Ruby Has LLC, 2022 WL 2292817, at *5 (S.D.N.Y. June 24, 2022) (quoting Coppelson, 2021 WL 148088, at *8). Accordingly, Plaintiffs' common law fraud claim is also dismissed.
Under New York law, an action based on fraud must be commenced within “the greater of six years from the date the cause of action accrued or two years from the time the plaintiff discovered the fraud, or could with reasonable diligence have discovered it.” CPLR § 213(8). Moran argues that most of the common law fraud claims are time-barred because they were not commenced within six years of the date of the consummation of the securities transactions. But the statute is in the disjunctive and gives even a plaintiff who fails to commence an action within six years the benefit of the discovery rule. For the reasons stated above in connection with the federal securities fraud claim, the claims are not clearly time-barred under the discovery rule.
V. Breach of Fiduciary Duty Claim Against Moran
Plaintiffs' fifth cause of action alleges that Moran breached the fiduciary duties he owed to Plaintiffs as President and CEO of SLAP when he accepted full-time employment at KPMG in April of 2016 and stopped committing to SLAP on a full-time basis. Dkt. No. 36 ¶¶ 79-80.
As an initial point, the parties incorrectly state that New York law governs this claim. Dkt. No. 67 at 1; Dkt. No. 68 at 2. A federal court in New York sitting in diversity jurisdiction applies New York choice-of-law rules to determine what state's substantive law it will apply. Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 393 (2d Cir. 2001). “New York applies the internal affairs doctrine to claims for breach of fiduciary duty and, thus, applies the law of the state of incorporation to such claims.” Marino v. Grupo Mundial Tenedora, S.A., 810 F.Supp.2d 601, 607 (S.D.N.Y. 2011). Because SLAP is incorporated in Delaware, Delaware law applies.
That some of the parties' convertible notes contain a choice of law provision in favor of New York and that Defendants have more contacts with New York than Delaware do not change this analysis. A claim for breach of fiduciary duty is a tort claim, and “tort claims are outside the scope of contractual choice-of-law provisions that specify what law governs construction of the terms of the contract.” 2002 Lawrence R. Buchalter Alaska Tr. v. Phila. Fin. Life Assur. Co., 96 F.Supp.3d 182, 211 (S.D.N.Y. 2015) (quoting Fin. One Pub. Co. Ltd. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 335 (2d Cir. 2015)). And, although it is true that an exception to the internal affairs doctrine may be made when the state of incorporation has “no meaningful relationship to the events giving rise to the action,” courts generally only apply this exception when the case does not concern “a director's or officer's liability to the corporation, its creditors and shareholders,” unlike the claims at issue here. In re MF Glob. Holdings Ltd. Inv. Litig., 998 F.Supp.2d 157, 180 (S.D.N.Y. 2014) (quoting Restatement (Second) of Conflict of Laws § 309 (1971)); see In re BP p.l.c. Derivative Litig., 507 F.Supp.2d 302, 309 (S.D.N.Y. 2007) (applying the internal affairs doctrine and distinguishing the case from another that applied an exception to the internal affairs doctrine on the basis that “that case involved a claim by a liquidator of an insurance company, and not a shareholder seeking to sue derivatively”). In this case, the most that the Amended Complaint alleges is that Moran is a resident of New York and that SLAP's principal place of business is in New York. But many Delaware corporations are located outside of Delaware, and their officers and directors tend to reside in the locations of their principal place of business. Those facts alone are not sufficient to displace the law of Delaware or to deprive the corporation, its officers and directors, and its shareholders of the certainty provided by the internal affairs doctrine.
In any event, the application of New York or Delaware law leads to the same substantive analysis and outcome in this case. As a general matter, “New York law imposes the same three-year statute of limitations for a claim of breach of fiduciary duty where the primary relief sought is money damages” as does Delaware. Barbara v. MarineMax, Inc., 2012 WL 6025604, at *8 (E.D.N.Y. Dec. 4, 2012); see IDT Corp. v. Morgan Stanley Dean Witter & Co., 907 N.E.2d 268 (N.Y. 2009); In re Tyson Foods, Inc., 919 A.2d 563, 584 (Del. Ch. 2007). While “New York and Delaware law provide different standards for tolling the statutory period,” Barbara, 2012 WL 6025604, at *8, Plaintiffs allege no basis for tolling the statute of limitations here, see Refco Grp. Ltd., LLC v. Cantor Fitzgerald, L.P., 2015 WL 4097927, at *21 (S.D.N.Y. July 6, 2015) (“When a complaint asserts a claim that is, as here, on its face barred by the statute of limitations, plaintiffs bear the burden of pleading specific facts demonstrating that the statute was tolled.”).
Although it is true that New York law applies a special six-year statute of limitations for breach of fiduciary duty claims sounding in fraud, the six-year statute of limitations does not apply here in light of the factual allegations in the Amended Complaint. Under New York law, “a cause of action for breach of fiduciary duty based on allegations of actual fraud is subject to a six-year limitations period.” Cusimano v. Schnurr, 27 N.Y.S.3d 135, 138 (1st Dep't 2016). “An exception to this rule exists ‘if the fraud allegation is only incidental to the claim asserted.'” Id. (quoting Kaufman v. Cohen, 760 N.Y.S.2d 157, 165 (1st Dep't 2003)). Here, the Amended Complaint states that Moran breached his fiduciary duties to Plaintiffs “by not committing to SLAP on a full-time basis,” Dkt. No. 36 ¶ 80; it does not claim that Moran's alleged misrepresentations (detailed above) constituted a breach of fiduciary duty. In other words, Plaintiffs' fiduciary duty claim is not based on “actual fraud,” and therefore, even assuming that New York law applied, the six-year statute of limitations for fiduciary claims sounding in fraud would not govern Plaintiffs' claim. Kermanshah v. Kermanshah, 580 F.Supp.2d 247, 262 (S.D.N.Y. 2008); see VA Mgmt., LP v. Est. of Valvani, 146 N.Y.S.3d 21, 23 (1st Dep't 2021) (finding that “Plaintiff's breach of fiduciary duty claim does not sound in fraud to warrant application of the six-year statute of limitations” because Plaintiff fails to allege that it justifiably relied on any misrepresentation).
Plaintiffs' claim for breach of fiduciary duty relates to conduct that occurred in April 2016-i.e., the month that Moran accepted full-time employment at KPMG and stopped committing to SLAP on a full-time basis. Because this conduct occurred over three years before the Complaint was filed, this claim is time-barred and must be dismissed.
VI. Unjust Enrichment Claim Against Moran
Plaintiffs' claim for unjust enrichment against Moran must also be dismissed. “The basis of a claim for unjust enrichment is that the defendant has obtained a benefit which in ‘equity and good conscience' should be paid to the plaintiff.” Corsello v. Verizon N.Y., Inc., 967 N.E.2d 1177, 1185 (2012) (emphasis added). The basis for Plaintiff's unjust enrichment claim is that Moran was unjustly enriched through the salary he received from SLAP despite “his faithless and conflicted service.” Dkt. No. 36 at 12-13. Thus, accepting Plaintiffs' allegations, Moran was enriched by SLAP, not by Plaintiffs themselves directly.
There is reason to doubt that any unjust enrichment claim would lie against Moran. Plaintiffs' claim sounds in breach of fiduciary duty and waste rather than in unjust enrichment and would have to satisfy the requirements of those torts. See Corsello v. Verizon New York, Inc., 967 N.E.2d 1177, 1185 (N.Y. 2012) (“An unjust enrichment claim is not available where it simply duplicates, or replaces, a conventional contract or tort claim.”). Even assuming such a claim did lie, however, Plaintiffs assert no basis upon which the salary Moran received was rightly due to themselves, rather than to SLAP.
VII. Accounting Claim Against SLAP
In their seventh cause of action, Plaintiffs seek an accounting from SLAP. In particular, Plaintiffs allege that “Moran should be required to account to Plaintiffs for the funds received from Plaintiffs to finance SLAP's operations.” Dkt. No. 13 ¶ 91. Plaintiffs also allege that they previously made a demand for books and records which was “effectively refused.” Id. ¶ 52. No further detail is provided regarding the books-and-records request.
Delaware law governs this claim for the same reasons that it governed the fiduciary duty claim. As discussed previously, “[u]nder the internal affairs doctrine, claims concerning the relationship between the corporation, its directors, and a shareholder are governed by the substantive law of the state or country of incorporation.” HSM Holdings, LLC v. Mantu I.M. Mobile Ltd., 2021 WL 918556, at *23 (S.D.N.Y. Mar. 10, 2021) (internal quotation marks omitted)); see also Juul Labs, Inc. v. Grove, 238 A.3d 904, 914 (Del. Ch. 2020) (“Under constitutional principles outlined by the Supreme Court of the United States and under Delaware Supreme Court precedent, stockholder inspection rights are a matter of internal affairs . . . governed by Delaware law.”).
The law of Delaware does not provide a free-standing independent cause of action for an accounting. “Under well-accepted Delaware law, [a]n accounting is an equitable remedy that consists of the adjustment of accounts between parties and a rendering of a judgment for the amount ascertained to be due to either as a result.” Garza v. Citigroup Inc., 192 F.Supp.3d 508, 511 (D. Del. 2018) (internal quotation marks omitted). A claim for an accounting is not “an equitable claim in and of itself' and cannot survive as a stand-alone claim. Garza, 192 F.Supp.3d at 511.
Delaware statutory law does provide a mechanism for Plaintiffs to obtain the information they seek. But that law comes with special restrictions and special requirements. Delaware General Corporate Code § 220(b) dictates that “[a]ny stockholder . . . shall have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from . . . a subsidiary's books and records.” Del. Code Ann. tit. 8, § 220(b). Furthermore, “[w]here the stockholder seeks to inspect the corporation's books and records” “such stockholder shall first establish that: (1) Such stockholder is a stockholder; (2) Such stockholder has complied with this section respecting the form and manner of making demand for inspection of such documents; and (3) The inspection such stockholder seeks is for a proper purpose.” Id. § 220(c). “If the corporation, or an officer or agent thereof, refuses to permit an inspection sought by a stockholder . . . or does not reply to the demand within 5 business days after the demand has been made, the stockholder may apply to the Court of Chancery for an order to compel such inspection.” The statute also provides that: “The Court of Chancery is hereby vested with exclusive jurisdiction to determine whether or not the person seeking inspection is entitled to the inspection sought.” Id.
Corporate Defendant SLAP recounts that SLAP objected to Plaintiff's § 220 demand-made by Plaintiffs on December 13, 2019-“based on multiple deficiencies contained therein, including failure to show proof of standing, failure to present evidence of credible basis to infer mismanagement, and failure to explain why each category of documents is ‘necessary and essential.'” Dkt. No. 66 at 2. Defendant suggests Plaintiffs “thereafter abandoned their 220 Demand and opted to seek an accounting in this action.” Id. Although Plaintiffs allege in their Amended Complaint that “Moran was a fiduciary to Plaintiffs,” they do not allege that SLAP-against whom the claim is actually brought-owed them any fiduciary duties. See Dkt. No. 36 ¶¶ 87-91. Under New York law, the general rule is that a corporation does not owe fiduciary duties to its members, shareholders, or convertiblebond holders. See Alexandra Glob. Master Fund, Ltd. v. Ikon Off. Sols., Inc., 2007 WL 2077153, at *5 (S.D.N.Y. July 20, 2007); Hyman v. New York Stock Exch., Inc., 848 N.Y.S.2d 51, 53 (1st Dep't 2007). But see Noryb Ventures, Inc. v. Mankovsky, 17 N.Y.S.3d 384 (Sup. Ct. 2015) (allowing accounting claim against corporate defendant because of evidence that corporation was effectively an alter ego of individual shareholder). Because “Plaintiffs have failed to allege the existence of a fiduciary or otherwise confidential relationship” with SLAP, the accounting claim against SLAP would still merit dismissal under New York law. Ellington Credit Fund, 837 F.Supp.2d at 207.
If Plaintiffs were frustrated by SLAP's failure to respond to their books-and-records request, they could have availed themselves of the remedies provided by Delaware law, including seeking a hearing in the Delaware Chancery Court, which has developed expertise on books-and-records requests. They cannot circumvent those requirements by filing suit in a foreign court (New York) seeking relief on the basis that SLAP owes them a duty under the common law that the common law of Delaware plainly does not provide.
Because the statutory relief can only be obtained in the Court of Chancery and there is no alternative equitable relief for accounting under Delaware law, the Court dismisses this claim against SLAP.
Even if New York law applied to Plaintiffs' accounting claim against SLAP, it would still be dismissed. “To obtain an accounting under New York law, a plaintiff must show: ‘(1) relations of a mutual and confidential nature; (2) money or property entrusted to the defendant imposing upon him a burden of accounting; (3) that there is no adequate legal remedy; and (4) in some cases, a demand for an accounting and a refusal.'” Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F.Supp.2d 162, 207 (S.D.N.Y. 2011) (quoting IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F.Supp.2d 395, 411 (S.D.N.Y.2009)). Regarding the first requirement, New York courts hold that a plaintiff, in order to state an equitable accounting claim, must “allege the existence of fiduciary other otherwise confidential relationship” with the defendant. Id.
CONCLUSION
Defendants' motions to dismiss the Amended Complaint, see Dkt. Nos. 40, 42, are GRANTED. The accounting claim (count seven), the breach of fiduciary duty claim (count five), and those federal securities fraud claims (count three) based on purchases of the convertible notes by the following plaintiffs on the following dates are dismissed with prejudice: (1) Jacalyn Diesenhouse (May 21, 2014); (2) Hyman L. Gluck Revocable Trust (December 21, 2013 and November 21, 2014); (3) Mohammed Hayat (June 13, 2014); (4) Carol P. Levarek Revocable Trust (December 21, 2013, March 28, 2014, June 2, 2014, and November 21, 2014); (5) Philippe Moutot (April 30, 2015); (6) Marjorie Sudrow (April 30, 2015); (7) Robert J. Wardle (June 2, 2014); and (8) Barry Weinbaum (December 20, 2013, March 28, 2014, May 20, 2014, October 30, 2014, and March 1, 2015). See Sanders v. Simonovic, 2021 WL 707060, at *13 (S.D.N.Y. Feb. 23, 2021) (dismissing time-barred claims with prejudice because “the Amended Complaint provides no indication that there are facts that could cure th[at] deficienc[y]”); Cortese v. Skanska Koch, Inc., 2021 WL 429971, at *18 (S.D.N.Y. Feb. 8, 2021) (granting motion to dismiss with prejudice because plaintiff's claims are “clearly time-barred” and amendment would be futile); see also Panther Partners Inc. v. Ikanos Commc'ns, Inc., 347 Fed. App'x 617, 622 (2d Cir. 2009) (summary order) (“Granting leave to amend is futile if it appears that plaintiff cannot address the deficiencies identified by the court and allege facts sufficient to support the claim.”). The remainder of the claims are dismissed without prejudice to the filing of an amended complaint within 30 days of this Order. If an amended complaint is not filed within that time frame, or any extended period ordered by the Court, the case will be closed.
The Clerk of Court is respectfully directed to close Dkt. Nos. 40 and 42.
SO ORDERED.