Milea v. Hoveman

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

_______________________________________________

FRANK LOUIS MILEA, and

CARPET ALLEY INCORPORATED,

Plaintiffs,

v. 5:24-cv-0407

(DNH/TWD)

VIRGINIA HOVEMAN, et al,

Defendants.

_______________________________________________

APPEARANCES:

FRANK LOUIS MILEA

Plaintiff, pro se

6961 Exline Road

Jacksonville, FL 32222

CARPET ALLEY INCORPORATED

Plaintiff, pro se

THÉRÈSE WILEY DANCKS, United States Magistrate Judge

REPORT-RECOMMENDATION AND ORDER

I. INTRODUCTION

The Clerk has sent the pro se amended complaint in the above-captioned action together

with an application to proceed in forma pauperis (“IFP”), and two motions for counsel filed by

Frank Louis Milea (“Plaintiff”) to the Court for review. (Dkt. Nos. 2, 3, 6, 7.)

II. IFP APPLICATION

Plaintiff has not paid the filing fee for this action and seeks to proceed IFP. Upon review,

Plaintiff’s IFP application demonstrates economic need. (Dkt. No. 2.) Therefore, he is permitted

to proceed IFP.

III. BACKGROUND

Plaintiff’s original complaint was received on March 25, 2024, which named Virginia

Hoveman, Grace Ghezzi, and Madison County, New York as the Defendants. (Dkt. No. 1.1) In

the accompanying IFP application Plaintiff stated:

This Law Suit is all about a estate attorney who has scammed me

and worked for me for 15 years and has paid officials in Madison

County, New Yor with my money to help scam me out of my

rightful inheritance and has ruined my life for the last 8 years in

her attempt to kill me like she did my mother. These three entities

are the prime source of me going to jail for 6 months because of

there lies in a last will and testament of my mother leaving me

broke and heart broken and completely friendless from even my

own children.

(Dkt. No. 2 at 1.)

On March 25, 2024, a Text Notice of Filing Deficiency was issued: “Pro Se Plaintiff

needs to file a Civil Cover Sheet, Summons for each defendant, a signed, dated Complaint to

contain name, address and phone number.” (Text Notice 03/25/2024.) Plaintiff was directed to

make the appropriate corrections and forward the documents to the Clerk’s office. Id.

On April 8, 2024, Plaintiff submitted an amended complaint entitled: “This is RICO Act

Complaint.” (Dkt. No. 7 at 1.) In the civil cover sheet, Plaintiff indicated the basis of

jurisdiction was “U.S. Government Plaintiff.” (Dkt. No. 7-1.) In the nature of suit portion of the

sheet, Plaintiff checked the following boxes: Other Contract, Other Personal Injury, Other Fraud,

All Other Real Property, and Freedom of Information Act. Id. Plaintiff identified “RICO Act”

as the statute under which he filed and listed “Inherantance” as a brief description. Id.

1 Citations to Plaintiff’s submissions will be to the pagination generated by CM/ECF, the

Court’s electronic filing system. Unless otherwise indicated, excerpts from the record are

reproduced exactly as they appear in the original and errors in spelling, punctuation, and

grammar have not been corrected.

In the amended complaint, Plaintiff listed himself and Carpet Alley Incorporated as the

plaintiffs and named the following as Defendants: (1) Lorie Milea; (2) Virginia Hoveman,

Attorney; (3) Bousquet Holstein Law Firm; (4) Grace Ghezzi; (5) Frank Milea, Jr.; (6) Elizabeth

M. Milea; (7) David J. Milea; (8) John A. Milea; (9) Theresa Martin; (10) Scott Martin; (11)

Michael Besner; (12) Michelle Besner; (13) Traci D’Ambrosio; (14) Joseph D’Ambrosio; (15)

Ford-Marrin Law Firm; (16) Anthony Grizzanti, Attorney; (17) Douglas Mahr, Attorney; (18)

Scolaro, Fetter, Grizanti & McGough, P.C.; (19) Madison County, Madison, New York; (20)

Andrew Fredrickson, Attorney; and (21) Rick Britton, Attorney. Id. at 1-2.

On April 9, 2024, without direction from the Court, Plaintiff submitted a second

“amended complaint” adding two more Defendants: David Sieling and Brenna Boyce, P.L.C.

(Dkt. No. 10.) Then, on April 22, 2024, again without direction from the Court, Plaintiff filed a

third “amended complaint” adding Duval County, Jacksonville, Florida as a Defendant. (Dkt.

No. 13.) Like the original complaint, Plaintiff’s so-called second and third amended complaints

are not signed in violation of Federal Rule of Civil Procedure 11(a), which prescribes that

“[e]very pleading, written motion, and other paper must be signed . . . by a party personally if the

party is unrepresented.” Fed. R. Civ. P. 11(a).

Therefore, the Court deems the amended complaint, the only signed pleading, the

operative pleading. (Dkt. No. 7.) However, out of an abundance of caution and in light of the

solicitude generally afforded to pro se litigations, the Court will consider the unsigned pleadings

as supplements to the amended complaint for purposes of initial review.2

2 However, Plaintiff is advised he may not attempt to amend his pleadings in a piecemeal

manner. See L.R. 15.1; see also Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir.

1994) (“It is well established that an amended complaint ordinarily supersedes the original, and

renders it of no legal effect.” (internal quotation marks omitted)).

IV. STANDARD OF REVIEW

A. Legal Standard

Section 1915(e) directs that, when a plaintiff seeks to proceed IFP, “the court shall

dismiss the case at any time if the court determines that . . . the action . . . (i) is frivolous or

malicious; (ii) fails to state a claim on which relief may be granted; or (iii) seeks monetary relief

against a defendant who is immune from such relief.” 28 U.S.C. § 1915(e)(2)(B); see Livingston

v. Adirondack Beverage Co., 141 F.3d 434, 437 (2d Cir. 1998). The court must also dismiss a

complaint, or portion thereof, when the court lacks subject matter jurisdiction. See Fed. R. Civ.

P. 12(h)(3).

While the law mandates dismissal on any of these grounds, the court is obliged to

construe pro se pleadings liberally, Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009), and interpret

them to raise the “strongest arguments that they suggest.” Triestman v. Fed. Bureau of Prisons,

470 F.3d 471, 474-75 (2d Cir. 2006) (internal quotation marks and citation omitted) (emphasis in

original). A claim is frivolous when it “lacks an arguable basis either in law or in fact.” Neitzke

v. Williams, 490 U.S. 319, 325 (1989), abrogated on other grounds Bell Atl. Corp. v. Twombly,

550 U.S. 544 (2007); see Denton v. Hernandez, 504 U.S. 25, 33 (1992) (holding “a finding of

factual frivolousness is appropriate when the facts alleged rise to the level of the irrational or the

wholly incredible”); see also Livingston, 141 F.3d at 437 (“[A]n action is ‘frivolous’ when

either: (1) the factual contentions are clearly baseless . . . or (2) the claim is based on an

indisputably meritless legal theory.”).

To survive dismissal for failure to state a claim, a complaint must contain a short and

plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2).

This short and plain statement of the claim must be “plausible on its face.” Twombly, 550 U.S. at

570. “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.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). It must “give the defendant fair notice of what the

claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555 (internal quotation

marks and citations omitted); see also Fed. R. Civ. P. 8(a)(2). “[W]here the well-pleaded facts

do not permit the court to infer more than the mere possibility of misconduct, the complaint has

alleged-but it has not ‘show[n]’-’that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 679

(quoting Fed. R. Civ. P. 8(a)(2)).

In determining whether a complaint states a claim upon which relief may be granted, “the

court must accept the material facts alleged in the complaint as true and construe all reasonable

inferences in the plaintiff’s favor.” Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir. 1994)

(citations omitted). “[T]he tenet that a court must accept as true all of the allegations contained

in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. “Threadbare recitals

of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”

Id at 663.

B. Overview of the Amended Complaint as Supplemented

The amended complaint is drafted in narrative form and is difficult to understand. (See

generally, Dkt. No. 7.) For example, the amended complaint states: “Probate Court is a Sacred

Court in this county but I was meet with sarcasm and foolery in Madison County. No matter

which way I went. I was given a hard time and lies.” Id. at 3. From what the Court can discern,

Plaintiff alleges that pursuant to his mother’s 2001 will, he “had 1/3 of the Theresa Milea estate

coming to me plus a home.” Id. Grace Ghezzi was the financial advisor. Id. But in 2015,

Plaintiff’s 93-year-old-mother was coerced by Virginia Hoveman into signing a new will naming

Plaintiff’s daughters, Lorie Milea and Theresa Martin, “as executors and Fiduciaries.” Id. at 3-4.

Plaintiff alleges the beneficiaries of the 2001 will did not know about the existence of the 2015

will so Defendants “could embezzle this estate completely of over 4 million dollars in assets as

proven by Grace Ghezzi and Virginia Hoveman who are not talking.” Id. at 4.

It appears Plaintiff took “them” to court in Jacksonville, Florida and Madison County,

New York because of “their non transparency.” Id. But “Lorie Milea’s criminal attorney

protected her from her embezzlement and was awarded $6,000.00 judgment against me by Judge

Cerio of the Supreme Court Madison County New York by falsifying motions that he falsely

said he made against me.” Id.

Plaintiff requests a “minimum of 5 million each” from the defendants, and 10 million

from Virginia Hoveman and Grace Ghezzi. Id. at 5. Plaintiff claims defendants “could not have

engineered this violent act if they all did not take part in this heinous act of corruption.” Id. In

conclusion, Plaintiff states:

Father in Heaven I stand before you today in are heavenly world.

These 21 people have made a disgrace of my mother and fathers

life work for their own advancement and made a living hell out of

my life. With the special power you have granted them all.

I ask you to treat them all equally and to give me strength and

guidance enough to tear them apart and achieve my goals that only

you know of.

Id.

For a complete statement, reference is made to the amended complaint as supplemented.

(Dkt. Nos. 7, 10, 13.) The Court notes Plaintiff has also filed numerous letters on the docket

addressed to the Court as well as a RICO Act Statement, among other submissions. (See, e.g.,

Dkt. Nos. 5, 6, 12, 14, 15, 17.)

V. ANALYSIS

A. Allied Carpet Incorporated

As a preliminary matter, Plaintiff, who is proceeding pro se and requests pro bono

counsel, lists Carpet Alley Incorporated as plaintiff in this action. (Dkt. No. 7 at 1; see Dkt. Nos.

3, 6.) The statute governing appearances in federal court, 28 U.S.C. § 1654, “allow[s] two types

of representation: ‘that by an attorney admitted to the practice of law by a governmental

regulatory body, and that by a person representing himself.’” Lattanzio v. COMTA, 481 F.3d

137, 139 (2d Cir. 2007) (quoting Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305, 1308 (2d

Cir. 1991)). A nonlawyer cannot bring suit on behalf of another person and “may not represent a

separate legal entity such as a corporation.” Id.; see United States ex rel. Mergent Servs. v.

Flaherty, 540 F.3d 89, 92 (2d Cir. 2008); Iannaccone v. Law, 142 F.3d 553, 558 (2d Cir. 1998).

A “corporation may appear in the federal courts only through licensed counsel.” Amerio v. Gray,

No. 5:15-CV-538, 2020 WL 4192618, at *17 (N.D.N.Y. July 21, 2020) (quoting Rowland v. Cal.

Men’s Colony, 506 U.S. 194, 201-02 (1993)).

Accordingly, the Court recommends that any claims Plaintiff purportedly asserts on

behalf of Allied Carpet Incorporated be dismissed. 28 U.S.C. § 1915(e)(2)(B)(ii).

B. Rules 8 and 10 of the Federal Rules of Civil Procedure

Next, the amended complaint fails to meet the standards of Federal Rules of Civil

Procedure 8 and 10. (See generally, Dkt. No. 7.) Rule 8 requires a “short and plain statement”

of a claim, showing that “the pleader is entitled to relief.” Whitfield v. Johnson, 763 F. App’x

106, 107 (2d Cir. 2019) (quoting Fed. R. Civ. P. 8(a)). Each statement must be “simple, concise,

and direct,” and give “fair notice of the claims asserted.” Whitfield, 763 F. App’x at 107

(quoting Simmons v. Abruzzo, 49 F.3d 83, 86 (2d Cir. 1995)). Rule 8 “demands more than an

unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678 (citing

Twombly, 550 U.S. at 555). “A complaint may be dismissed under Rule 8 if it is ‘so confused,

ambiguous, or otherwise unintelligible that its true substance, if any, is well disguised.’” Id.

Moreover, Rule 10 provides that “[a] party must state its claims or defenses in numbered

paragraphs, each limited as far as practicable to a single set of circumstances[.]” Fed. R. Civ. P.

10(b). Rule 10’s purpose is to “provide an easy mode of identification for referring to a

particular paragraph in a prior pleading[.]” Clervrain v. Robbins, No. 22-CV-1248 (MAD/DJS),

2022 WL 17517312, at *2 (N.D.N.Y. Dec. 8, 2022) (citation omitted), report-recommendation

adopted, 2023 WL 3170384 (N.D.N.Y. May 1, 2023).

A complaint that does not comply with these Rules “presents far too heavy a burden in

terms of defendants’ duty to shape a comprehensive defense and provides no meaningful basis

for the Court to assess the sufficiency of [the plaintiff’s] claims,” and may properly be dismissed

by the Court. Gonzales v. Wing, 167 F.R.D. 352, 355 (N.D.N.Y. 1996).

Given its lack of clarity, the Court recommends dismissal of the amended complaint, as

supplemented, because it is not acceptable under Rules 8 and 10 of the Federal Rules of Civil

Procedure.

C. Failure to State a Claim

Lastly, insofar as the amended complaint, as supplemented, is liberally construed as

asserting claims under the civil provision of RICO, which “creates a private right of action for

individuals to enforce the RICO statute,” Mathon v. Feldstein, 303 F. Supp. 2d 317, 322

(E.D.N.Y. 2004), the Court recommends it be dismissed. 28 U.S.C. § 1915(e)(2)(B)(ii).

The civil RICO enforcement provision states that “[a]ny person injured in his business or

property by reason of a violation of [18 U.S.C. § 1962] . . . may sue . . . in any appropriate

United States district court and shall recover threefold the damages[.]” 18 U.S.C. § 1964(c). In

order to state a violation of Section 1962, and thus, a claim under the civil RICO enforcement

provision, a plaintiff must allege facts showing: “(1) that the defendant (2) through the

commission of two or more acts (3) constituting a ‘pattern’ (4) of ‘racketeering activity’ (5)

directly or indirectly invests in, or maintains an interest in, or participates in (6) an ‘enterprise’

(7) the activities of which affect interstate or foreign commerce.” Moss v. Morgan Stanley, Inc.,

719 F.2d 5, 17 (2d Cir. 1983) (quoting Section 1962(a)-(c)). Such a plaintiff must also “allege

that he was ‘injured in his business or property by reason of a violation of section 1962.’” Id.

(quoting Section 1964(c)) (emphasis in original).

To state a claim of a civil RICO conspiracy under Section 1962(d), a plaintiff must allege

facts showing that the defendants “agreed to form and associate themselves with a RICO

enterprise and that they agreed to commit two predicate acts in furtherance of a pattern of

racketeering activity in connection with the enterprise.” Cofacredit, S.A. v. Windsor Plumbing

Supply Co., 187 F.3d 229, 244 (2d Cir. 1999). A plaintiff must also show that “if the agreed

upon predicate acts had been carried out, they would have constituted a pattern of racketeering

activity.” Id. at 244-45.

Plaintiff’s allegations as to these claims are conclusory, without factual support, and

suggest that Plaintiff is merely dissatisfied with the rulings and/or actions of the probate court

and other courts with regard to his mother’s estate. Even when liberally construed, Plaintiff does

not allege any plausible facts that would support any claim under the civil RICO statute.

Plaintiff fails to plausibly allege any predicate acts, much less a pattern of RICO activity, nor

does he sufficiently allege the existence of a RICO enterprise that affects interstate or foreign

commerce. (See generally, Dkt. Nos. 7, 10, 13.) Further, wholly absent are any factual

allegations from which the Court could reasonably construe an agreement among the Defendants

to commit RICO violations. Id. Rather, Plaintiff alleges, in conclusory fashion, that “These 21

people could not have engineered this violent act if they all did not take part in this heinous act

of corruption. Id. at 5.

Therefore, the Court recommends Plaintiff’s civil RICO claims stemming from his

“Inherantance” be dismissed for failure to state a claim. 28 U.S.C. § 1915(e)(2)(B)(ii).

D. Leave to Amend

For the reasons stated above, the Court recommends dismissal of the amended complaint,

as supplemented, for failure to comply with the Rule 8 and 10 of the Federal Rules of Civil

Procedure and for failure to state a claim upon which which relief may be granted.

Generally, a court should not dismiss a pro se complaint “without granting leave to

amend at least once when a liberal reading of the complaint gives any indication that a valid

claim might be stated.” Gomez v. USAA Fed. Sav. Bank, 171 F.3d 794, 795 (2d Cir. 1999)

(citation and internal quotation marks omitted). However, an opportunity to amend is not

required where “the problem with [the plaintiff’s] causes of action is substantive” such that

“better pleading will not cure it.” Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000).

Although this Court has serious doubts whether Plaintiff can assert a cognizable RICO

claim against the Defendants, in light of his pro se status, prior to outright dismissal of this

action, the Court recommends that Plaintiff be afforded the opportunity to file a second amended

complaint to cure the deficiencies identified above.

The second amended complaint must comply with Rules 8, 10, and 11 of the Federal

Rules of Civil Procedure. It must also demonstrate that a case or controversy exists between the

Plaintiff and the Defendants which Plaintiff has a legal right to pursue, and over which this Court

has jurisdiction. It must be a complete pleading that does not rely upon or incorporate by

reference any pleading or document previously filed with the Court.

VI. MOTIONS FOR COUNSEL

It is well-settled there is no right to appointment of counsel in civil matters. See, e.g.,

Burgos v. Hopkins, 14 F.3d 787, 789 (2d Cir. 1994). Pursuant to 28 U.S.C. § 1915(e), the court

may request an attorney to represent an indigent party. 28 U.S.C. § 1915(e)(1) (authorizing the

court to “request an attorney to represent any person unable to afford counsel.”). The Court must

consider the issue of appointment carefully because “every assignment of a volunteer lawyer to

an undeserving client deprives society of a volunteer lawyer available for a deserving cause.”

Cooper v. A. Sargenti Co., Inc., 877 F.2d 170, 172 (2d Cir. 1989). Thus, the appointment must

be done carefully in order to preserve the “precious commodity” of volunteer lawyers for those

litigants who truly need a lawyer’s assistance. Id. at 172-73.

Courts cannot utilize a bright-line test in determining whether counsel should be

appointed on behalf of an indigent party. Hendricks v. Coughlin, 114 F.3d 390, 392-93 (2d Cir.

1997). Instead, a number of factors must be carefully considered by the court in ruling upon

such a motion:

[The Court] should first determine whether the indigent’s position

seems likely to be of substance. If the claim meets this threshold

requirement, the court should then consider the indigent’s ability to

investigate the crucial facts, whether conflicting evidence

implicating the need for cross examination will be the major proof

presented to the fact finder, the indigent’s ability to present the

case, the complexity of the legal issues and any special reason in

that case why appointment of counsel would be more likely to lead

to a just determination.

Terminate Control Corp. v. Horowitz, 28 F.3d 1335, 1341 (2d Cir. 1994) (quoting Hodge v.

Police Officers, 802 F.2d 58, 61 (2d Cir. 1986)) (internal quotation marks omitted). This is not

to say that all, or indeed any, of these factors are controlling in a particular case. Rather, each

case must be decided on its own facts. Velasquez v. O’Keefe, 899 F. Supp. 972, 974 (N.D.N.Y.

Oct. 16, 1995) (citing Hodge, 802 F.2d at 621).

The Court finds appointment of counsel is not warranted at this time. Because the Court

is recommending dismissal of the amended complaint, the Court is unable to determine, as a

threshold matter, whether Plaintiff’s claims are likely to be of substance. Id.

Accordingly, Plaintiff’s motions for counsel are denied without prejudice. (Dkt. Nos. 3,

6.) Any future motion for counsel must be accompanied by documentation that substantiates

Plaintiff’s efforts to obtain counsel from both the public and private sectors.

VII. CONCLUSION

ACCORDINGLY, it is hereby

ORDERED that Plaintiff’s IFP application (Dkt. No. 2) is GRANTED,3 and it is further

RECOMMENDED that Plaintiff’s amended complaint as supplemented (Dkt. Nos. 7,

10, 13), be DISMISSED WITH LEAVE TO AMEND; and it is further

ORDERED that Plaintiff’s motions for counsel (Dkt. Nos. 3, 6) are DENIED

WITHOUT PREJUDICE; and it is further

ORDERED that the Clerk provide to Plaintiff a copy of this Report-Recommendation

and Order, along with copies of the unpublished decisions cited herein in accordance with the

Second Circuit decision in Lebron v. Sanders, 557 F.3d 76 (2d Cir. 2009) (per curiam).

3 Although Plaintiff’s application to proceed IFP has been granted, he will still be required to

pay fees incurred in the future regarding this action, including, but not limited to, copying and/or

witness fees.

Pursuant to 28 U.S.C. § 636(b)(1), the parties have fourteen (14) days within which to

file written objections to the foregoing report.4 Such objections shall be filed with the Clerk of

the Court. FAILURE TO OBJECT TO THIS REPORT WITHIN FOURTEEN (14) DAYS

WILL PRECLUDE APPELLATE REVIEW. Roldan v. Racette, 984 F.2d 85 (2d Cir. 1993)

(citing Small v. Sec’y of Health and Human Servs., 892 F.2d 15 (2d Cir. 1989)); 28 U.S.C.

§ 636(b)(1); Fed. R. Civ. P. 72.

IT IS SO ORDERED.

Dated: May 20, 2024

Syracuse, New York /

Thérése Wiley Dancks

United States Magistrate Judge

* If you are proceeding pro se and are served with this Report-Recommendation and Order by

mail, three additional days will be added to the fourteen-day period, meaning that you have

seventeen days from the date the Report-Recommendation and Order was mailed to you to serve

and file objections. Fed. R. Civ. P. 6(d). Ifthe last day of that prescribed period falls on a

Saturday, Sunday, or legal holiday, then the deadline is extended until the end of the next day

that is not a Saturday, Sunday, or legal holiday. Fed. R. Civ. P. 6(a)(1)(C).

13

2020 WL 4192618

*1 IL INTRODUCTION...——

KeyCite Yellow Flag - Negative Treatment

Distinguished by EIG Energy Fund XIV, L.P. v. Petroleo Brasileiro S.A., Tl. BACKGROUND...—\

DD.C., August 8, 2022

Ill. LEGAL STANDARD...—

2020 WL 4192618 A. Default Judgment..—#

Only the Westlaw citation is currently available.

United States District Court, N.D. New York. B. Summary Judgment...—\!

Steven AMERIO and Andrew Goldberg, Plaintiffs

Vv. IV. DISCUSSION...—

Gregory W. GRAY, Jr.; Gregory P. Edwards; A. The Motion to Intervene...

Archipel Capital LLC; BIM Management LP; and

B. Edwards’ Motion for Summary Judgment..—#§\

Bennington Investment Management, Inc., Defendants.

1. Securities Fraud.. ——

5:15-CV-538

| 2. Common Law Fraud..—

Signed 07/21/2020

3. Negligent Misrepresentation.. ——

Attorneys and Law Firms

4. Breach of Fiduciary Duty.. ——

OF COUNSEL: JOHN C. CHERUNDOLO, ESQ., J.

PATRICK LANNON, ESQ., CHERUNDOLO LAW FIRM, _ C. Plaintiffs’ Claims Against Bennington.. ——

PLLC, Attorneys for plaintiffs and intervenors, AXA Tower

One 17th Floor, 100 Madison Street, Syracuse, New York D. Plaintiffs’ Motion for Default Judgment..—

13202.

1. Facts Attributable to Each Defendant..—

OF COUNSEL: KEVIN P. RODDY, ESQ., WILENTZ

GOLDMAN & SPITZER PA, Attorneys for plaintiffs, 90 2. Securities Fraud..—\

Woodbridge Center Drive, Suite 900, Woodbridge, New

3. Common Law Fraud..—§

Jersey 07095.

JAMES TONREY ESQ., OF COUNSEL: JAMES E. 4. Negligent Misrepresentation..—

TONREY, JR., ESQ., Attorneys for plaintiffs, 144 Pinewood 5. Breach of Fiduciary Duty...

Avenue, Staten Island, New York 10306.

6. Plaintiffs’ Remaining Claims Against the Archipel

GREGORY W. GRAY, JR., Defendant pro se, 60 School Defendants. ——

Street #1192, Orchard Park, NY 14127.

OF COUNSEL: MICHAEL J. GRUDBERG, ESQ., TARTER □□ &: Plaintififs’ Claims Against Gray..——

KRINSKY & DROGIN LLP, Attorneys for defendants

Edwards, and Bennington Investment, Management, Inc., V. CONCLUSION...

1350 Broadway, New York, New York 10018.

I. INTRODUCTION

Plaintiffs Andrew Goldberg (“Goldberg”) and Steven Amerio

MEMORANDUM-DECISION and ORDER (“Amerio”, together “plaintiffs”) were two of more than

one hundred investors who found themselves disappointed

DAVID N. HURD, United States District Judge —to say the least—with the venture capital opportunities

presented by the several defendants assembled in this case.

CONTENTS Although the financial loss that they suffered varies, the

same. negligent misrepresentation; and (VI) breach of fiduciary

duty. Third and finally, plaintiffs have moved for default

Among those culprits is Gregory Gray (“Gray”), the founder judgment against Archipel and BIM, neither of whom have

and architect of a series of investment vehicles under the appeared or defended this action. Those motions having been

brand name Archipel (“the Archipel entities”). As a structure fully briefed, they will now be decided based on the parties’

to orchestrate the Archipel entities, Gray founded Archipel submissions without oral argument.

Capital, LLC (“Archipel”), a New York limited liability

company that served as a brand Gray used in advancing

investment opportunities to clients. Gray also founded BIM II. BACKGROUND

Management LP (“BIM”), a Delaware limited partnership From 1996 until the early 2010s, Gray held several jobs at

that provided the operational apparatus to manage the several companies in the securities industry. See Dkt. 279-4

Archipel entities. (“Gray Dep.”), pp. 4-5.1 Gray's somewhat nomadic career

was forced to take a detour on December 17, 2008, when

In addition to Gray, defendant Gregory Edwards (“Edwards”) the New York Stock Exchange (the “NYSE”) barred him

was also a partner of BIM, and plaintiffs allege that from “acting in any capacity with a member firm for three

Edwards is also culpable for the economic harm they have years.” Dkt. 279-7, p. 10. In sum and substance, Gray was

sustained. Edwards’ own company, Bennington Investment accused of mismanaging and comingling his clients’ funds

Management, Inc. (“Bennington”), a Canadian corporation, and, upon his errant trades being discovered, harassing his

also counts among the list of those that plaintiffs would hold clients to coerce their silence. Id. at 10-17. On July 22, 2009,

accountable. the Securities Exchange Commission (the “SEC”) upheld the

NYSE's censure. Id. at 9.

In brief, plaintiffs allege that defendants swindled, comingled,

and generally mismanaged the funds with which they were 1 Pagination corresponds with CM/ECF.

entrusted. As a result, on April 30, 2015, plaintiffs filed a

complaint in this District. The Second Amended Complaint Ostracized from the traditional brokerage industry for at least

(“the SAC”), the current operative pleading, asserts the three years, Gray decided to take a different approach. In 2008

following three counts under federal law: (I) securities or 2009, he reached out to Edwards, a veteran investment

fraud under § 10(b) of the Securities and Exchange Act advisor out of Canada who had engaged a group of investors

of 1934 (“the Exchange Act”), 15 U.S.C. § 78j(b) and in a few startup opportunities Gray had proposed to him. See

the corresponding Rule 10b-5 of the Code of Federal Dkt. 279-3 (“Edwards Dep.”), pp. 5-6. Gray now had a new

Regulations, 17 C.F.R. § 240.10b-5, (“Rule 10b-5”); (II) enterprise of his own in the works and wanted Edwards to join

Control Person Liability under § 20(a) of the Exchange Act, him. Id.

15 U.S.C. § 78t; and (III) a violation of the Racketeering

Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962. In March of 2008,2 Gray's successor at the investment firm

Additionally, plaintiffs assert the following nine state law through which he had met Edwards “casually mentioned”

claims: (IV) common law fraud; (V) common law negligent Gray's discipline to Edwards over the phone. Edwards Dep. 7.

misrepresentation; (VI) common law breach of fiduciary On November 5, 2008, Edwards sent Gray an email chastising

duty; (VII) common law conversion; (VIII) common law him for keeping his punishment secret, going so far as to

unjust enrichment; and (IX-XII) claims under New York's call him “pathetic.” Id. at 26-27. According to Edwards,

Debtor and Creditor Law §§ 273-76. he asked later that same year that Gray explain how the

discipline came to pass. Dkt. 273-1 (“Edwards Dec.”), ¶

*2 Three motions are presently under consideration. First, 12. Apparently satisfied with Gray's explanation, Edwards

five other frustrated investors in the Archipel entities, Andrew accepted Gray's offer to go into business together and joined

C. Russo, Caroline Hardman, Lee Knight, Todd Morakis Archipel's advisory board. Id. at ¶ 12; Edwards Dep. 7.

(“Morakis”), and David Work (together “the intervenors”),

have moved to intervene and be joined into this action as 2 The parties dispute whether Edwards discovered

plaintiffs. Second, Edwards and Bennington have moved Gray's disciplinary history in March or November

for summary judgment on the four counts of the SAC that

time he joined Archipel, that dispute is immaterial. should an investment pay off. See id. The PPMs also provided

As a member of Archipel's board, Edwards’ role was that a brief biography of Edwards, Gray, and Archipel's Managing

of a “technical advisor.” Edwards Dep. 40. He describes his Director, Devin Stelljes (“Stelljes”), and identified that the

responsibilities at Archipel as involving valuation, financial three of them would “manage [BIM, as general partner of

analysis, deal terms, and structure. Id. at 23. As to whether the Archipel entity,] and oversee its operations[.]” Id. at 11.

a particular investment was suitable, he left that to Gray. Edwards’ biography, listed first, is the most extensive. See id.

Id. In any case, he visited Archipel's offices in Buffalo However, that description is silent as to what role he actually

approximately four times over four years to meet with Gray occupied at Archipel. Id.

but did not supervise him or any other Archipel employee.

Edwards Dec. ¶ 14. As for Gray, most of the PPMs make no mention of his

disciplinary history, and in fact list him as a “registered

To that end, some explanation is necessary as to how Archipel investment advisor” with active licenses. See Dkt. 279-8, p.

and its varied entities worked. First, Archipel would identify 11. Only the Late Stage Fund LP PPM, created in 2014,

a company looking for investors. Dkt. 279-6, p. 20. Often, notes his prior securities violation as a risk factor and

these companies were either nascent, or otherwise looking acknowledges only that he passed the requisite tests to receive

to grow and expand without offering public stock. Id. at 17. his licenses. Dkt. 279-12, pp. 10-12. Edwards does not recall

Archipel would then seek out investors, who would purchase whether he suggested to Archipel's counsel that the PPMs

shares not in the company itself, but in an Archipel entity. See should acknowledge Gray's disciplinary history. Edwards

Dkt. 279-8, pp. 7-8 (describing the function of one particular Dep. 19. Edwards did, however, discuss with Gray whether

Archipel entity that invested in Twitter). his discipline should be included in the PPMs because he

believed that an investor should know of a sufficiently serious

*3 The Archipel entities were each limited partnerships disciplinary action. Id. Outside of his discussion with Gray

and each investor became a limited partner of the entity and providing his biography, Edwards’ only interaction with

by purchasing its shares. See Dkt. 279-8, pp. 7-8. Despite the PPMs was to give cosmetic comments on an early draft.

being a general partnership itself—with Gray and Edwards Id. at 14.

as its general partners—BIM was the general partner of each

Archipel entity. Dkt. 279-6, p. 18; see, e.g., Dkt. 279-8, p. Having ironed out a fundamental structure, Archipel set

7. As such, BIM was tasked with managing the entities, in to finding companies in which to invest. One Archipel

exchange for taking five percent of the investment pool as a investment opportunity began to come together in December

management fee. See id. at 8. of 2010, when Edwards met Hilary DeCesare (“DeCesare”)

at a conference. Dkt. 279-5, p. 15. DeCesare was a co-founder

Once the entity reached a critical mass of investors, it would and CEO of Everloop, a “security company to keep kids safe

invest in the targeted company. See Dkt. 279-8, pp. 7-8. If all online.” Id. Hoping to secure funding for Everloop, DeCesare

went well, the target would flourish with the investment, grow gave an investment pitch to an audience of roughly 200

in value through the extra funds and the network afforded by people, among them Edwards. Id. Edwards was convinced

Archipel, and then the Archipel entity would cash out and and wanted to meet with DeCesare to discuss her working

collect a profit. See id.; Gray Dep. 5. In any case, when an with Archipel to raise capital. Id.

Archipel entity sold its invested stock, it would first repay

the limited partners until they received their investment back, *4 Early in 2011, DeCesare met with Gray to discuss

with ten percent of any further profit going to BIM and the working together, but found herself put out by his attitude,

remaining ninety percent getting distributed to the limited which she described as “very arrogant.” Dkt. 279-5, p. 16.

partners proportionally to their initial investment. Dkt. 279-8, Shortly after that poor first impression, she told Edwards that

p. 7. she did not want to work with Gray. Id. DeCesare's opinion of

Gray only soured further later that year when she discovered

Instrumental in each Archipel entity transaction was his disciplinary history. Id. at 24.

each entity's Private Placement Memorandum (“PPM”), a

document that detailed how the entity worked. See generally, To allay her burgeoning concerns, Gray sent DeCesare an

email, which Edwards had reviewed, detailing his narrative

As a final concession to DeCesare's concerns, Gray and to invest in Bloom. Id. at 9. At the time he invested, Amerio

Edwards agreed that the name of the investment vehicle was aware that venture capital investments carry a high degree

would be Bennington-Everloop LP (“BELP”), instead of the of risk. Id. at 15.

originally proposed Archipel-Everloop LP, so that Edwards’

company, and by implication Edwards, would have a stronger Although Amerio does not recall Edwards being discussed

association with the investment entity. Id. at 52. by an Archipel employee prior to his investment in Bloom

—and he distinctly recalls that Morakis never mentioned

Having collected a growing crop of investment opportunities, Edwards—he remembers that Gray would often refer to his

Archipel began looking for investors. Among those new “partner.” Amerio Dep. 10. In fact, Amerio does not recall

investors was plaintiff Andrew Goldberg, a retired college hearing Edwards’ name at all before he invested, but he does

graduate. Dkt. 273-3 (“Goldberg Dep.”), p. 3. Through believe that he read his name in the Bloom PPM. Id. As a

pure happenstance, Goldberg was put in contact with Devin result, although Amerio did not communicate with Edwards

Stelljes (“Stelljes”), an Archipel employee. Goldberg Dep. directly before investing in Bloom, he was nevertheless aware

8. The two eventually met in person, and Stelljes pitched of Edwards’ extensive credentials as an investment advisor

this plaintiff an opportunity to invest in BELP. Dkt. 279-1, and assumed that he was Gray's partner. Id. at 12. Amerio

p. 13; Dkt. 279-13, p. 6. During that meeting, Stelljes describes those credentials as a factor in his decision to invest

never mentioned Edwards. Goldberg Dep. 9. Stelljes’ silence in Bloom. Id.

regarding Edwards perhaps stemmed from his lack of

understanding as to what Edwards did at Archipel and the fact *5 Nevertheless, Amerio had “no idea” whether Edwards

that he “didn't meet with [Edwards] much.” Dkt. 279-5, p. 6. would be involved in administering the investments in Bloom.

Amerio Dep. 13. Throughout Amerio's time as a Bloom

Three months later, Goldberg invested $100,000 in Everloop investor, he never spoke to Edwards, not even by email. See

through BELP. Goldberg Dep. 9. Goldberg would ultimately id. at 27.

invest an additional $200,000 of his money through Archipel

entities, with $50,000 each going to companies called Bloom At some point, Goldberg's sister also became an investor

Energy (“Bloom”) and Agrivida, and $100,000 going to the in Archipel at Goldberg's suggestion. Goldberg Dep. 26.

social media company Twitter. Id. However, as she communicated with Gray, something in his

attitude struck a wrong chord with her, and so she searched

Goldberg did not communicate with Edwards prior to him on Google. Id. at 15. Through that internet search,

any investment in an Archipel entity. Goldberg Dep. 10. Goldberg's sister came across Gray's NYSE disciplinary

Instead, he spoke with Gray and Stelljes before making each history, which she of course promptly shared with her brother.

investment. Id. at 9-10. In fact, Goldberg is unsure when he Id.

first heard Edwards’ name. Id. at 12. However, at some point

before 2014, Goldberg learned that Edwards was a Certified Goldberg called Gray and Stelljes frequently after the

Financial Advisor, which impressed him. Dkt. 279-1, pp. revelation of Gray's past, because his trust in Gray was,

40-41. perhaps understandably, diminished. Goldberg Dep. 16. After

all, he felt that Gray “had essentially lied to [him] by not”

Goldberg's counterpart plaintiff, Steven Amerio, is also disclosing his discipline. Id. Although Goldberg expressed a

a college graduate, and has spent his entire career in desire to “get past” the issue of Gray's failure to disclose his

the investment industry. Dkt. 273-4 (“Amerio Dep.”), pp. disciplinary history and did not leave Archipel, he began to

3-6. Amerio first heard about Archipel through his friend, closely scrutinize his investments in Everloop and Twitter.

proposed intervenor Todd Morakis. Id. at 9. Both Amerio and Id. As a result, Goldberg and Gray had frequent arguments,

Morakis work in finance, and Morakis mentioned that he had during some of which Gray “threatened” to sell off Goldberg's

been investing through Archipel and suggested to Amerio that Twitter shares. Id. at 17. Although Goldberg considered this a

he could also get involved. Id. at 3-5, 9. Amerio held Morakis’ threat because he believed that his Twitter investments could

opinion and intelligence in high regard, and as a result when become valuable, he nevertheless encouraged Gray to find

Morakis described Gray as a “standup individual” and a him a buyer for his shares so that the two of them would no

“good guy,” Amerio was intrigued. Id. at 10-11. Accordingly, longer work together. Id.

On June 10th, 2014, Gray and Goldberg launched into another Needless to say, Gray's guilty plea cued Archipel's requiem,

argument over email as to the amount of Twitter shares to but Goldberg and Amerio had already filed this suit on April

which Goldberg was entitled. See Dkt. 279-1, p. 32; 279-22, 30, 2015 in an effort to recover the money they had lost. Dkt.

pp. 7-8. As the argument escalated, Goldberg forwarded the 1. The case proceeded through discovery, but when discovery

email chain concerning the dispute to Edwards, as well as ended, no motion practice followed. Defendants BIM and

Archipel's attorney. Dkt. 279-1, p. 32; 279-22, pp. 7-8. Upon Archipel never appeared to defend plaintiffs’ suit, and thus on

being included in the argument, Edwards did not respond, April 19, 2018 plaintiffs received an entry of default against

and did not check Gray's math. Edwards Dep. 39. Instead, them. Dkt. 160.

Edwards urged Gray not to respond because he did not believe

that Goldberg was capable of having a rational conversation To streamline plaintiffs’ claims against the other defendants

on the issue. Id. At the same time, Edwards reached out to into a format ready for trial, the Court issued a Memorandum-

Archipel's counsel to ask him to reassure Goldberg that “all Decision and Order reopening the deadline to make

numbers and documents will be rechecked or something to dispositive motions on March 31, 2020. Dkt. 266. Plaintiffs

that effect.” Id. at 40. moved for default judgment against Archipel and BIM on

April 15, 2020, and to intervene five additional plaintiffs on

Unfortunately for Goldberg, he would soon be proved right to April 22, 2020. Dkt. 267; 268. The moving defendants moved

be concerned about Gray's candor, and unfortunately for Gray for summary judgment against all claims against them on May

he had bigger concerns ahead than Goldberg's ire. The facts 12, 2020. Dkt. 273. Plaintiffs’ claims against Gray, however,

surrounding Gray's indictment by the United States Attorney's remain undisturbed.

Office for securities fraud have already been recounted in

the twin to this case, McEssy v. Gray, 2019 WL 6829053

(N.D.N.Y. Dec. 13, 2019), and need not be recounted at great III. LEGAL STANDARD

length.

A. Default Judgment.

Under Rule 55, a district court may grant default judgment

Suffice it to say, the Archipel entities yielded few returns. See

against a party for the failure to plead or otherwise defend an

McEssy, 2019 WL 6829053, at *5. In fact, only the Twitter

action. FED. R. CIV. P. 55; see Enron Oil Corp. v. Diakuhara,

investment produced any positive returns to its Archipel

10 F.3d 90, 95 (2d Cir. 1993). A party moving for default

investors. Id. To cover for those losses and keep Archipel

judgment must first attain an Entry of Default from the

afloat, Gray had used a majority of the funds raised to

Clerk of the Court. FED. R. CIV. P. 55(a). Once the party

purchase Twitter shares to instead provide an appearance of

attains an entry of default, they must serve the defendant with

profit to investors in the other Archipel entities. Id. Desperate

written notice of the application for default judgment under

to keep his house of cards standing for every second he

Rule 55(b)(2). Once default has been established as proper,

could, Gray sought out William McEssy (“McEssy”), the

the party moving for default is “entitled to all reasonable

most substantial Archipel investor, and presented him with an

inferences from the evidence offered,” but a district court still

opportunity to purchase $5,000,000 worth of Uber stock. Id.

must determine whether the allegations establish liability as

at *6.

a matter of law. Finkel v. Romanowicz, 577 F.3d 79, 84 (2d

Cir. 2009).

*6 But of course, the Uber stock did not exist. McEssy,

2019 WL 6829053, at *6. Instead, Gray used McEssy's funds

to finally purchase the Twitter shares that he had failed to B. Summary Judgment.

purchase when he had originally promised to because he Under Rule 56, summary judgment is warranted “if the

instead used the money to paper over his earlier bad bets. movant shows that there is no genuine dispute as to any

Id. The SEC began to investigate Gray, and he pled guilty material fact and the movant is entitled to judgment as a

to securities fraud and perjury on December 23, 2015. Id. at matter of law.” FED. R. CIV. P. 56(a). The party moving

*7. For his part, Edwards has declared that he was unaware for summary judgment bears the initial burden of showing,

of Gray's comingling of funds and unauthorized withdrawals through the production of admissible evidence, that no

until at least February of 2015, and never condoned it. genuine issue of material fact exists. Salahuddin v. Goord,

Edwards Dec. ¶ 16. 467 F.3d 263, 272-73 (2d Cir. 2006). Only after the moving

to produce evidence demonstrating that genuine issues of unusual circumstances. Pitney, 25 F.3d 66 at 70.3 However,

material fact exist. Id. at 273. the first factor—the duration of notice—is typically given

greater weight than its fellows. Catanzano ex rel. Catanzano

The nonmoving party must do more than “rest upon the v. Wing, 103 F.3d 223, 232 (2d Cir. 1996).

mere allegations ... of [the plaintiff's] pleading” or “simply

show that there is some metaphysical doubt as to the material 3

Although Pitney considered whether intervention

facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475

was timely for plaintiffs intervening under Rule

U.S. 574, 586 & n.11 (1986). Instead, a dispute regarding

24(a), the analysis of the timeliness of intervention

a material fact is genuine “if the evidence is such that a

under Rule 24(b) is treated the same. See Hnot v.

reasonable jury could return a verdict for the nonmoving

Willis Group Holdings, Ltd., 234 Fed.Appx. 13, 14

party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(2d Cir. 2007) (summary order) (applying Pitney's

(1986). In determining whether a genuine issue of material

four timeliness factors to a Rule 24(b) motion);

fact exists, the Court must resolve all ambiguities and draw

Kamdem-Ouaffo v. Pepsico, Inc., 314 F.R.D. 130,

all reasonable inferences against the moving party. Major

134 (S.D.N.Y. 2016) (same).

League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290,

309 (2d Cir. 2008). In short, summary judgment is the point In considering the timeliness of a motion to intervene, the

in litigation where the record evidence is assembled to assess court has discretion to determine how long the intervenors

whether there exist any material disputed facts that necessitate had notice or should have had notice of their interest in the

trial, and thus the point at which the parties must “put up or original claim before moving. See Catanzano, 103 F.3d at

shut up.” Weinstock v. Colum. Univ., 224 F.3d 33, 41 (2d Cir. 232. In making that determination, the court first considers

2000). which event triggered the intervenors’ notice of their interest

in the claim being put at stake. See Chen-Oster v. Goldman

Sachs & Co., 2015 WL 4619663 at *6 (S.D.N.Y. Aug. 3,

IV. DISCUSSION 2015), aff'd 2016 WL 11645644 (S.D.N.Y. June 6, 2016).

*7 There are three motions currently under consideration:

(1) the intervenors’ Rule 24(b) motion to intervene; (2) For interventions involving class actions, a party is deemed

Edwards’ and Bennington's motions for summary judgment on notice once she learned or should have learned that class

in their favor; and (3) plaintiffs’ motion for default judgment certification was denied. See Crown, Cork & Seal Co., Inc.

against BIM and Archipel. v. Parker, 462 U.S. 345, 353-54 (1983) (emphasizing parties’

ability to intervene after denial of class certification); Hnot v.

Willis Group Holdings, Ltd., 234 F. App'x. 13, 14-15 (2d. Cir.

A. The Motion to Intervene.

2007) (summary order) (same).

A district court has broad discretion to grant a Rule 24(b)

motion to intervene, but the intervenors must first prove that

Furthermore, Rule 24 requires that intervenors promptly

their motion is timely. United States v. Pitney Bowes, Inc.,

move to intervene when they receive notice that their interests

25 F.3d 66, 69-70 (2d Cir. 1994) (ruling that “intervention

might not be protected rather than waiting until the danger to

decisions are reviewed under an abuse of discretion standard”

that interest becomes certain. Floyd v. City of New York, 302

and making timely motion is “first hurdle”). If the motion

F.R.D. 69, 86-87 (S.D.N.Y. 2014) (noting that “intervention

is timely, then the intervenors must show that they pleaded

law required [the intervenors] to move at the first instance that

a claim that shares a similar question of law or fact with

there was some doubt [that their interests were not protected

the plaintiffs’ original claim. FED. R. CIV. P. 24(b)(1)(B),

in the action]”), aff'd in part, appeal dismissed in part, 770

(c); see also Greer v. Blum, 462 F. Supp. 619, 625 (S.D.N.Y.

F.3d 1051 (2d Cir. 2014).

1978) (requiring that the claim with the motion to intervene

be substantially similar to the original claim).

*8 The moving defendants principally argue that the

potential intervenors’ motion is untimely because they were

To satisfy the threshold timeliness inquiry, a court weighs, in

put on notice when the Court denied class certification seven

its discretion: (1) how long the intervenors had notice before

months ago. They also argue that they would be prejudiced

they moved to intervene; (2) resulting prejudice to existing

by the intervention because they would have to conduct

theories of the case. Lastly, they point out that intervention The intervenors’ justifications thus do not justify such a

would disserve the Court because it would likely delay trial substantial step backwards in the resolution of this case,

and a final resolution of the case. and their motion must be denied. See, e.g., in re Holocaust

Victim Assets Litig., 225 F.3d 191, 198-199 (2d Cir. 2000)

For their part, the intervenors argue that it is common (denying intervention when intervenors “waited another eight

practice for parties who had their class certification denied months [after submitting a letter objecting to the settlement in

to subsequently intervene. They further explain that it took question] before moving to intervene”).

around seven months to file the motion because of the

holidays and the general disruption caused by the COVID-19

pandemic. The intervenors also argue that they are not adding B. Edwards’ Motion for Summary Judgment.

any new allegations to the action, and so would not unduly Plaintiffs have four remaining claims against Edwards: (1)

prejudice the defendants. Critically, however, the intervenors securities fraud under Rule 10b-5; (2) common law fraud; (3)

point to no potential prejudice from a denial of intervention. breach of fiduciary duty; and (4) negligent misrepresentation.

The lack of any articulated prejudice, combined with the

1. Securities Fraud.

extended, seven-month delay after class certification was

The elements of a private securities fraud claim based

denied on September 3, 2019, demands that the intervenors’

on a material misrepresentation or omission under Rule

motion be denied. Compare Dkt. 268 (intervenor's motion

10b-5(b) are: (1) a material misrepresentation or omission

dated April 22, 2020), with Dkt. 252 (denying class

by the defendant; (2) scienter; (3) a connection between the

certification dated September 3, 2019). The intervenors’

misrepresentation or omission and the purchase or sale of a

explanation that the holidays delayed their motion cannot

security; (4) reliance upon the misrepresentation or omission;

justify their delay. The holidays come every year, at the same

(5) economic loss; and (6) loss causation. Matrixx Initiatives,

time of year—roughly three months after the intervenors

Inc. v. Siracusano, 563 U.S. 27, 37-38 (2011).

were denied class certification—and yet countless motions

are filed, rebutted, and decided during that span.

*9 Reliance is an “essential element” of a Rule 10b-5 action,

which “ensures that, for liability to arise, the requisite causal

The intervenors’ argument that the COVID-19 pandemic also

connection between a defendant's misrepresentation and a

delayed their motion may have carried some weight but for

plaintiff's injury exists as a predicate for liability.” Stoneridge

one point: this Court never stopped accepting and deciding

Inv. Partners, LLC v. Sci.-Atlanta, Inc., 552 U.S. 148, 159

motions. As a result, although the pandemic may have made

(2008). “In assessing the reasonableness of a plaintiff's

it more difficult to compile the necessary information to

alleged reliance, [the Court] considers the entire context of

move to intervene, it fell far short of making it impossible.

the transaction, including factors such as its complexity and

Additionally, the intervenors were already represented by

magnitude, the sophistication of the parties, and the content

plaintiffs’ counsel, who are intimately familiar with the

of any agreements between them.” Emergent Capital Inv.

case, and by extension any need to compile the intervenors’

Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189, 195 (2d

information and allegations before moving would have been

Cir. 2003).

greatly reduced. Accordingly, the intervenor's motion is not

timely.

“ ‘The traditional (and most direct) way’ for a plaintiff to

demonstrate reliance ‘is by showing that he was aware of a

This is especially true because the fraud claims the intervenors

company's statement and engaged in a relevant transaction ...

assert are necessarily distinct from the existing plaintiffs’.

based on that specific misrepresentation.” Amgen Inc. v.

Each investor in the Archipel entities will present novel

Conn. Ret. Plans and Tr. Funds, 568 U.S. 455, 462 (2013)

considerations in their investments and unique interactions

(citing Erica P. John Fund, Inc. v. Halliburton Co., 563

with defendants. Accordingly, granting the intervenors’

U.S. 804, 810 (2011)). Where a plaintiff can identify such

motion would require discovery to be reopened. This case is

a specific misrepresentation, a plaintiff “plainly would have

rapidly approaching its conclusion, in fact the entire purpose

relied on the company's deceptive conduct.” Halliburton, 563

of the motion practice currently under consideration is to

U.S. at 810.

prepare this case for trial. See generally Dkt. 266.

where a plaintiff is defrauded as to the value of a stock, but the material facts, because there is no evidence that he ever

stock he purchases nevertheless causes him economic gain, made any misrepresentation or omission of material fact to

he cannot recover. See Acticon AG v. China N.E. Petroleum either Goldberg or Amerio. Plaintiffs counter by arguing

Holdings Ltd., 692 F.3d 34, 3738 (2d Cir. 2012) (discussing that nine material facts are in their favor: (1) Edwards

whether subsequent increase in stock price above inflated met with McEssy in Chicago to induce him to invest in

value of which defendant misinformed plaintiff precluded Gray's Uber scheme; (2) Edwards approved the PPMs despite

finding of economic loss). their omission of Gray's disciplinary history; (3) Edwards’

background was listed with prominence in the PPMs; (4)

Additionally, a plaintiff must prove loss causation. In re Edwards used Bennington to reassure DeCesare when she

Omnicom Grp. Inc. Sec. Litig., 597 F.3d 501, 510 (2d Cir. was unwilling to work with Gray; (5) Edwards showed a

2010). Loss causation requires proving both that the wrongful strong knowledge in one of the Archipel investments in a

act was the but-for cause of the economic loss and that meeting with McEssy; (6) Edwards referred to himself as

the harm was proximately caused by the wrong to be of a “chairman” and Gray's partner in Archipel when speaking

sort that § 10(b) was intended to prevent. Id. As such, a with McEssy; (7) Edwards downplayed Gray's disciplinary

misrepresentation is “the ‘proximate cause’ of an investment history to DeCesare and McEssy; (8) Edwards told McEssy

loss if the risk that caused the loss was within the zone of risk that he would have purchased some of the Uber shares had

concealed by the misrepresentations....” Id. at 513 (emphasis McEssy not purchased them all himself; and (9) Stelljes’

omitted). comments to plaintiffs over the course of their investments.

Additionally, Goldberg specifically argues that Edwards did

Alternatively, a plaintiff can also prove securities fraud under nothing to stop Gray once Goldberg brought to Edwards’

Rule 10b-5(a) and (c) if he can prove that the defendant: (1) attention Gray's concerns regarding the Twitter investment.

committed a manipulative or deceptive act; (2) in furtherance

of the alleged scheme to defraud; (3) with scienter; and (4) Plaintiffs’ theory of the case follows two harmonic themes.

plaintiff relied on the deceptive act to his detriment. In re First, they argue that Edwards misrepresented or omitted

Glob. Crossing, Ltd. Sec. Litig., 322 F. Supp. 2d 319, 336 Gray's disciplinary history in the PPMs. Alternatively,

(S.D.N.Y. 2004) (citing SEC v. U.S. Envtl., Inc., 155 F.3d 107, plaintiffs argue Edwards engaged in a sprawling scheme with

111 (2d Cir. 1998)).4 A “manipulative or deceptive act” is Gray to defraud all Archipel investors, and among them

defined broadly as “some act that gives the victim a false plaintiffs, by lending his own credibility in the investment

impression.” United States v. Finnerty, 533 F.3d 143, 148 (2d industry to Gray's less vital reputation.

Cir. 2008).

Ultimately, plaintiffs’ argued evidence of Edwards’ fraud falls

4 The Second Circuit does not appear to have ever into four camps: (1) acts plaintiffs would attribute to Edwards

through BIM; (2) acts plaintiffs would attribute to Edwards

established the elements of private civil liability

through Stelljes; (3) acts done by Edwards which reached

for a scheme to defraud under Rule 10b-5(a) or

people other than plaintiffs; and (4) acts done by Edwards

(c). See U.S. Envtl., 155 F.3d at 111. However, at

himself.

the least Second Circuit caselaw has established

that the SEC in bringing a Rule 10b-5(a) or (c)

The first camp can be disposed of easily enough. A district

enforcement action must prove a manipulative or

court facing a state law question is bound to apply the choice-

deceptive act in furtherance of the scheme and

of-law rules of the state in which that court sits. Klaxon Co.

scienter. Id. Additionally, a private plaintiff in more

v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under

traditional securities fraud cases must also prove

New York's choice of law rules, the law of the jurisdiction

reliance, even though the SEC need not, and thus

where the partnership was formed, in this case Delaware,

it would logically follow that the same additional

dictates how the partnership will be construed. See Dep't of

requirement applies in scheme to defraud cases.

Econ. Dev. v. Arthur Andersen & Co. (U.S.A.), 924 F. Supp.

United States v. Vilar, 729 F.3d 62, 88 (2d Cir.

449, 485 (S.D.N.Y. 1996) (noting that New York assesses

2013).

liability of partners of an out-of-state partnership under laws

12. no evidence on the record that Edwards endowed Stelljes

with actual authority, and although he might have had such

Under Delaware law, there is no authority that suggests a relationship with BIM, BIM's faults once again cannot

that general partners can be held liable for the general be attributed to Edwards. McEssy, 2019 WL 6829053 at

partnership's acts, and in fact it seems that Delaware's *12-14 (ruling that Delaware law does not impose liability on

legislature consciously reduced the scope of general partners for tortious acts of partnership). Accordingly, in the

partnership liability to prevent that form of liability from absence of actual authority, plaintiffs can only hold Edwards

attaching. See McEssy, 2019 WL 6829053, at *12-14. liable for Stelljes’ actions to whatever extent Stelljes occupied

Accordingly, Edwards cannot be held liable based on a position of apparent authority. See Meisel, 651 F. Supp. 2d

BIM's actions, and plaintiffs’ arguments tying BIM's alleged at 110.

misconduct to Edwards is misplaced.

On that score, plaintiffs have offered nothing done by

The second type of evidence plaintiffs rely on, namely Edwards to confer on Stelljes the appearance of authority

Stelljes’ comments to them throughout their investment to act on his personal behalf. On the contrary, the record

experience, is similarly ineffectual. First, in the agency only shows distance between Stelljes and Edwards, who only

context, “New York's choice of law principles require a rarely even met. Dkt. 279-5, p. 6. The closest Edwards ever

court to apply the law of the state with the most significant comes to endorsing Stelljes in any way is sharing a biography

relationship with the particular issue in conflict....” Indosuez page on the PPMs, but even those documents are silent as

Int'l Fin. B.V. v. Nat'l Reserve Bank, 774 N.E.2d 696, 700 to Stelljes’ relationship to Edwards. See Dkt. 279-8, p. 11.

(N.Y. 2002). Presumably, Stelljes worked at Archipel's offices Accordingly, Stelljes did not have actual or apparent authority

in Buffalo, New York, and given the relative lack of contact to act as Edwards’ agent, and Stelljes’ statements to plaintiffs

between Stelljes and Edwards, to the extent that Stelljes’ work do not advance plaintiffs’ claims.

can be attributed to Edwards in an agency context, New York

law should govern whether an agency relationship existed. The third camp of evidence plaintiffs muster, actions

Dkt. 279-5, p. 6, Edwards Dep. 52. performed by Edwards but directed at people other than

plaintiffs—namely his meetings and statements to McEssy

Under New York agency law, “an agency relationship results and his efforts to convince DeCesare to work with Archipel

from a manifestation of consent by one person to another that —do, finally, carry some weight. Contrary to defendants’

the other shall act on his behalf and subject to his control, arguments, Edwards’ efforts to convince McEssy and

and the consent by the other to act.” N.Y. Marine & Gen. DeCesare could present evidence of a larger scheme to

Ins. Co. v. Tradeline, (L.L.C.), 266 F.3d 112, 122 (2d Cir. defraud intended to induce plaintiffs’ investment, as well

2001) (citation omitted). The authority for an agent to act on as scienter, even if that conduct was not directed at them.

a principal's behalf can be either actual or apparent. Meisel v. After all, a reasonable jury could conclude that if Edwards

Grunberg, 651 F. Supp. 2d 98, 110 (S.D.N.Y. 2009). Apparent was willing to use his reputation and presence to attempt to

authority is created by “the written or spoken words or any coax others into working with Archipel on other occasions,

other conduct of the principal which, reasonably interpreted, it is possible that he was willing to do the same to deceive

causes [a] third person to believe that the principal consents plaintiffs.

to have [an] act done on his behalf by the person purporting to

act for him[.]” Minskoff v. Am. Express Travel Related Servs. Of course, plaintiffs had no idea that Edwards met with

Co., Inc., 98 F.3d 703, 708 (2d Cir. 1996). A principal is liable McEssy and demonstrated knowledge of and optimism in the

for the torts of his agent if the agent acted within the scope of Archipel entities. Although at least Goldberg was aware that

his actual or apparent authority. Chevron Corp. v. Donziger, BELP was named for Bennington, rather than Archipel, there

974 F. Supp. 2d 362, 566 n.1304 (S.D.N.Y. 2014). is nothing in the record to suggest that distinction was relevant

to him or that he appreciated what it meant. Edwards Dep.

*11 Even assuming that because a principal can be held 52. As a result, even this third grouping of evidence provides

liable for a tort committed by his agent, the actions of no support for the notion that plaintiffs relied on Edwards’

his agent are attributable as evidence of the principal's alleged deceptive act of concealing Gray's disciplinary history

own tortious misconduct, plaintiffs have no evidence of an

PPMs. the work ascribed to it requires more care.

Accordingly, plaintiffs depend on the fourth category of After all, the purpose of a plaintiff's burden of proving

evidence, Edwards’ own acts directed toward them, to carry reliance is to ensure a causal link between a defendant's

the day. That category consists of Edwards’ submitting his misconduct and a plaintiff's injury. Stoneridge, 552 U.S. at

biography for inclusion in the PPMs and his failure to prevent 159. By extension, plaintiffs must prove not only that they

the PPMs from misleadingly representing Gray's credentials. believed that Gray had never been disciplined, that he was still

appropriately licensed, and that Edwards would be involved

At the outset, there is no evidence that Edwards had anything in managing Archipel, but also that it was Edwards’ alleged

to do with giving plaintiffs the PPMs. Goldberg Dep. 9-10 scheme to defraud them which caused them to believe those

(Goldberg acknowledging that he never spoke to Edwards things and invest. In other words, plaintiffs must prove that

prior to investing); Amerio Dep. 10 (Amerio noting that they relied on Edwards to be the one to disclose Gray's

he read Edwards’ name in the PPM as possibly his first discipline and that they relied on his reputation in investing.

time learning about Edwards). Further, contrary to plaintiffs’ Neither plaintiff can.

arguments, Edwards’ stylistic and cosmetic suggestions on

an early draft of the PPMs are not enough to make the Several factors counsel against Goldberg's argued reliance

entire document attributable to him. Edwards Dep. 14. The on Edwards’ scheme to use his reputation and hide Gray's

same is true of plaintiffs’ argument that Edwards’ role as a disciplinary history. First, as a college graduate, Goldberg is

general partner of BIM, which was itself a general partner of far from an unsophisticated party. Goldberg Dep. 3. Second,

the Archipel entities, lays responsibility for the contents of Goldberg had no direct interactions with Edwards until well

the PPMs at Edwards’ feet. McEssy, 2019 WL 6829053, at after he had invested in the Archipel entities of which he was a

*12-14. member, at which point Goldberg only forwarded Edwards a

single email chain. Edwards Dep. 39-40; Dkt. 279-22, pp. 7-8.

*12 Thus, nothing associated with them can be considered Third, Gray's disciplinary history was not a well-kept secret;

a misrepresentation or omission on Edwards’ part, except Goldberg's sister discovered it after a single internet search

for his biography. Because plaintiffs have not pointed after having some concerns about Gray. Goldberg Dep. 15.

to any portion of the biography itself that is either Perhaps most critically of all, Goldberg remained invested in

a misrepresentation or an omission, plaintiffs have not Archipel even after discovering Gray's disciplinary history,

identified any misrepresentation or omission by Edwards to even though it clearly eroded his trust in Gray. Goldberg Dep.

them. Accordingly, summary judgment must be granted to the 17.

extent plaintiffs are seeking to bring a Rule 10b-5(b) claim

against Edwards. All told, Edwards’ three actions of not revising the PPMs to

clarify that Gray had been subjected to discipline, including

As a result, the essential question becomes whether plaintiffs his own expansive resume in the PPMs, and even agreeing

can establish that they reasonably relied on an alleged scheme to name BELP after Bennington does not count for much

to defraud involving Edwards’ use of his reputation and compared to a college graduate with easy access to the truth

concealment of Gray's discipline in investing in the Archipel of Gray's past who stayed the course after discovering that

entities. truth. True, there is a difference between staying invested in

a potentially lucrative venture and not entering that venture

As a first step, establishing what reliance would look like in the first place, but nevertheless it is impossible to believe

in terms of the scheme to defraud that plaintiffs argue is that Goldberg relied on Edwards to insist on disclosing

nettlesome. It could be argued that they relied on Gray's Gray's disciplinary history when the two shared precious little

qualifications being intact, his disciplinary history being contact.

disclosed, and Edwards’ involvement being as substantial as

his credentials. Indeed, in a straightforward misrepresentation *13 The same is even more true to the extent that Goldberg

or omission case, plaintiffs could reasonably have relied on hopes to prove reliance on Edwards’ use of his own reputation

the truth of each of those perceptions, and Edwards would to bolster Gray's sales pitch. After all, Goldberg never

have been liable. But in the context of a larger scheme to communicated with Edwards at any point before making an

Edwards’ name. Goldberg Dep. 10, 12. Of course, at some judgment to prove that Amerio relied on any scheme to

point Goldberg did learn about Edwards, and was impressed defraud that Edwards may have concocted.

by his credentials, Dkt. 279-1, pp. 40-41, but being eventually

impressed by Edwards’ name and forwarding one email to None of this is to suggest that Gray's disciplinary history

Edwards after his relationship with Gray broke down is was not an important concern, and that its being concealed

not enough to establish that Goldberg relied on Edwards’ from plaintiffs was not to their disadvantage. Rather, it is safe

presence and reputation in investing in Archipel, Dkt. 279-1, to say that Edwards’ role in that concealment as related to

p. 32; 279-22, pp. 7-8. plaintiffs was incredibly minute. It simply cannot be said that

plaintiffs reasonably relied on an individual with whom they

Amerio's claims fare no better. After all, Amerio is a highly had such minimal contact to be the one to tell them the truth.

sophisticated financial advisor in his own right. See generally Accordingly, plaintiffs have failed to establish reliance on any

Amerio Dep. 3-6. He knew going in that investing in startups scheme to defraud Edwards may have engaged in, and have

such as those that Archipel finds is risky business, but he altogether failed to prove reliance on any of Edwards’ actions,

invested anyway. Id. at 15. What is more, Morakis, a trusted fraudulent or otherwise. Accordingly, plaintiffs’ securities

and respected friend, also vouched for the quality of the fraud claims under Rule 10b-5 must be dismissed.

Archipel investments. Id. at 11. However, unlike Goldberg,

Amerio at least knew that Edwards existed at the time he

invested and that Gray referred to Edwards as his partner. 2. Common Law Fraud.

Id. at 10. Both considerations and Edwards’ credentials were *14 To recover damages for common law fraud under

factors, although not dispositive, in Amerio's decision to New York law, a plaintiff must prove four elements: “(1) a

invest in Bloom. Id. at 12. However, despite his familiarity misrepresentation or a material omission of fact which was

with Edwards in theory, the two never directly communicated. false and known to be false by [the] defendant; (2) made for

Id. at 27. the purpose of inducing the other party to rely upon it; (3)

justifiable reliance of the other party on the misrepresentation

Weighing these competing factors, no reasonable jury could or material omission; and (4) injury.”5 Premium Mortg.

conclude that Amerio relied on Edwards to insist that the Corp. v. Equifax, Inc., 583 F.3d 103, 108 (2d Cir. 2009).

PPMs disclose Gray's disciplinary history and that Edwards

was present as a partner. If Amerio truly relied on Edwards 5 Defendants note the possibility that under the

to bring Gray's disciplinary deficiencies to light, he would applicable choice of law rules, Amerio, as a New

presumably have tried to confront Edwards in some way when Jersey resident who interacted with defendants in

he discovered the deception. But the record is utterly silent that state, may be subject to New Jersey law.

as to any such confrontation. Moreover, there are other actors However, New York and New Jersey treat common

equally or more responsible for the PPMs not disclosing law fraud much the same, so the distinction is

Gray's discipline, including the attorney who assembled without difference. Winter v. Am. Inst. of Med. Scis.

the PPM and of course Gray himself. Amerio provides no & Educ., 242 F. Supp. 3d 206, 225 (S.D.N.Y. 2017).

evidence to suggest that he relied on Edwards to insist on

disclosure to the extent that he can be held culpable despite Neither party disputes that the analysis of common law fraud

Gray's outright misrepresentation in the PPM and Archipel's and securities fraud is identical for the purposes of this case,

lawyer's review of the document. given that the central issues at stake are reliance and the

existence of a misrepresentation, omission, or scheme to

Moreover, Amerio never had any indication that Edwards defraud. Accordingly, plaintiffs have also failed to establish

would actively manage the Archipel entities, and Gray a dispute of material fact as to whether Edwards defrauded

already had the strong backing of Morakis, whom Amerio them under the common law. Those claims must also be

deeply respected. Amerio Dep. 11-12. Given such a strong dismissed.

vote of confidence from an admired colleague, and given the

dearth of evidence that Amerio actually expected Edwards

3. Negligent Misrepresentation.

to make the risky Archipel entities enough safer to tip

Under New York law, a claim for negligent misrepresentation

his decision to invest from “maybe” to “yes,” Amerio has

information; (2) the defendant made a false representation sensing the vulnerability of his argument that he had a special

that he or she should have known was incorrect; (3) the relationship with a financial advisor that never actually

information supplied in the representation was known by the managed his accounts and with whom the sum total of his

defendant to be desired by the plaintiff for a serious purpose; communication is a single forwarded email chain, Edwards

(4) the plaintiff intended to rely and act upon it; and (5) Dec. ¶ 14; Edwards Dep. 23, 40; Dkt. 279-1, p. 32; 279-22,

the plaintiff reasonably relied on it to his or her detriment.” pp. 7-8, this plaintiff relies on the doctrine of law of the case

Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 114 (2d to hold the Court to its earlier determination on a motion

Cir. 2012) (citing Hydro Inv'rs, Inc. v. Trafalgar Power Inc., to dismiss that Edwards had a special relationship to him

227 F.3d 8, 20 (2d Cir. 2000)). through Archipel and BIM.

The first element of whether the defendant had a special One circumstance in which law of the case is implicated is

relationship to the plaintiff weighs several factors, including “when a court reconsiders its own ruling on an issue in the

“whether the person making the representation held or absence of an intervening ruling on the issue by a higher

appeared to hold unique or special expertise; whether a special court.” United States v. Quintieri, 306 F.3d 1217, 1225 (2d

relationship of trust or confidence existed between the parties; Cir. 2002). In such a circumstance, the court should generally

and whether the speaker was aware of the use to which the follow the earlier decision unless “cogent and compelling

information would be put and supplied it for that purpose.” reasons militate otherwise[.]” Id.

Suez Equity Inv'rs, L.P. v. Toronto-Dominion Bank, 250 F.3d

87, 103 (2d Cir. 2001) (citing Kimmell v. Schaefer, 675 N.E.2d As defendants correctly note, law of the case is not applicable

450, 454 (N.Y. 1996)). in the circumstances Goldberg presents. First, law of the

case “is discretionary and does not limit a court's power to

Should a plaintiff prove the existence of a special relationship, reconsider its own decision prior to final judgment.” Aramony

the defendant is obligated to “exercise reasonable care in v. United Way of Am., 254 F.3d 403, 410 (2d Cir. 2001).

giving the information [because the] plaintiffs’ reliance upon Accordingly, the Court is not bound to follow its earlier

the information [is] foreseeable.” Eternity Glob. Master Fund decision. In any event, the decision Goldberg relies on held

Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 187 (2d only that, for the limited purposes of a motion to dismiss, he

Cir. 2004). had adequately pled that Edwards owed him a duty of honesty

arising from a special relationship. Goldberg v. Gray, 2016

Under New Jersey law, by contrast, a negligent WL 4099189, at *10 (N.D.N.Y. Aug. 2, 2016).

misrepresentation claim requires the plaintiff to prove only

that “an incorrect statement was negligently made” by the The question now at issue is whether there is record evidence

defendant upon which the plaintiff “justifiably relied [in to support that Edwards had a special relationship with

order] to recover damages for economic loss or injury Goldberg. There is none. This plaintiff relies on partnership

sustained as a consequence of that reliance.” Thomas v. principles to impute a special relationship with this defendant,

JPMorgan Chase & Co., 811 F. Supp. 2d 781, 793 (S.D.N.Y. but there is nothing to suggest that under Delaware law

2011). Edwards’ role as a general partner to BIM, which was itself

a general partner of the Archipel entities in which Goldberg

A plaintiff must also show that he relied on the defendant's invested, would artificially create the necessary relationship.

misstatement, and that reliance was the proximate cause of McEssy, 2019 WL 6829053, at *12-14.

his injury. Caspersen as Tr. for Samuel M.W. Caspersen

Dynasty Tr. v. Oring, 2020 WL 999209, at *12 & n.8 (D.N.J. Additionally, as alluded to above, Goldberg has not created a

Feb. 28, 2020) (noting that for both fraud and negligent disputed issue of material fact as to whether he and Edwards

misrepresentation reliance must proximately cause injury). shared a special relationship based on their actual interactions.

One means of demonstrating reliance is to show that the The record is barren as to any interactions between Edwards

defendant possessed superior knowledge. Id. and Goldberg save the lone email chain that this plaintiff

forwarded to this defendant. Edwards Dec. ¶ 14; Edwards

*15 First, Goldberg has plainly failed to establish that Dep. 23, 40; Dkt. 279-1, p. 32; 279-22, pp. 7-8. Such a

Edwards owed him a special relationship as required by

misrepresentation, and thus that claim must be dismissed. F.3d 131, 138 (2d Cir. 2011).

Similarly, neither plaintiff has alleged that Edwards actually 8 Once again, New Jersey and New York law are

made any misrepresentation to them. Unlike in cases

treated substantially similarly, which both parties

of fraud, negligent misrepresentation claims require an

acknowledge. Accordingly, the Court will apply

actual misrepresentation, rather than a broader spectrum of

New York law. See, e.g., Schwarz v. ThinkStrategy

deceptive conduct.6 See, e.g., Anschutz Corp., 690 F.3d

Capital Mgmt. LLC, 797 F. Supp. 2d 439, 447 n.43

at 114 (including misrepresentation as element of negligent (S.D.N.Y. 2011).

misrepresentation under New York law); Thomas, 811 F.

A fiduciary duty can exist “when confidence is reposed on

Supp. 2d at 793 (same for New Jersey law).

one side and there is resulting superiority and influence on the

other.” Nuss v. Sabad, 976 F. Supp. 2d 231, 248 (N.D.N.Y.

6 Of course, both New York and New Jersey 2013). One useful gauge in whether that superiority and

alternatively allow for claims of fraudulent influence exists are ongoing interactions of trust and reliance

omission, Clark v. Prudential Ins. Co. of Am., 736 between the plaintiff and defendant. Id. Other barometers

F. Supp. 2d 902, 907 (D. N.J. 2010); Mandarin for a fiduciary duty include “reliance, de facto control and

Tr. Ltd. v. Wildenstein, 994 N.E.2d 1104, 1108 dominance.” United States v. Halloran, 821 F.3d 321, 338

(N.Y. 2011), but plaintiffs have not pled that claim (2d Cir. 2016) (quoting AG Capital Funding Partners, L.P. v.

against Edwards, and cannot assert that claim for State St. Bank & Trust Co., 896 N.E.2d 61, 68 (N.Y. 2008)).

the first time at this late stage in litigation. In any

event, because the only statement that Edwards In all, exact definitions of what constitutes a fiduciary

ever made either plaintiff on this record is his relationship are “impossible to [state],” but a fiduciary

biography in the PPMs, and he could hardly be relationship may be found in cases where “influence has

expected to include an advertisement that Gray been acquired and abused, [or] in which confidence has been

had a substantial disciplinary history in his own reposed and betrayed.” Pension Comm. of Univ. of Montreal

biography, that claim would be meritless in any Pension Plan v. Banc of Am. Sec., LLC, 446 F. Supp. 2d

case. 163, 196 (S.D.N.Y. 2006). However, courts routinely hold

*16 The only statement that Edwards ever made to either that parties dealing at an arm's length are not in a situation

plaintiff was providing his biography, which was adopted “of confidence or trust sufficient to find the existence of a

and included in the PPMs. Dkt. 279-8, p. 11. Plaintiffs fiduciary relationship” and thus no fiduciary duty “will arise

have not alleged, argued, or proven that the biography itself absent extraordinary circumstances.” In re Mid-Island Hosp.,

contained any material misrepresentations, and thus plaintiffs Inc., 276 F.3d 123, 130 (2d Cir. 2002). It is up to the factfinder

have failed to provide any evidence on summary judgment to determine if there was a fiduciary duty owed to the plaintiff

that Edwards made a negligent misrepresentation to them. based on the available evidence. See id.

Accordingly, plaintiffs’ negligent misrepresentation claims

must be dismissed.7 However, even if such a duty is owed, the defendant must

have knowingly participated in the breach of that duty. In re

Platinum-Beechwood Litig., 400 F. Supp. 3d 2, 5 (S.D.N.Y.

7 Because the existence of a misrepresentation is a 2019). This requires the defendant to have taken some

fundamental element under both New York and affirmative action in the breach by assisting in it, helping

New Jersey law, the Court need not decide which conceal it, or by otherwise failing to act when his duty

law applies to Amerio's claim. requires he do so. Id. Finally, to support a claim for a breach

of fiduciary duty, a plaintiff must establish that the breach

4. Breach of Fiduciary Duty. proximately caused the damages he suffered. Nordwind v.

Under New York law,8 a claim for a breach of fiduciary duty Rowland, 584 F.3d 420, 433 (2d Cir. 2009).

requires a plaintiff to prove: (1) “the existence of a fiduciary

duty”; (2) “a knowing breach of that duty”; and (3) “damages Finally, plaintiffs have failed to establish that Edwards owed

either of them a fiduciary duty. Familiar as the refrain must

Edwards Dec. ¶ 14; see Edwards Dep. 23, 40. Neither did could survive summary judgment. Accordingly, just as all

either plaintiff discuss their investments with Edwards at any claims must be dismissed against Edwards, all claims must

point, except for when Goldberg forwarded him a single email also be dismissed against Bennington.

chain. Dkt. 279-1, p. 32; 279-22, pp. 7-8. Plaintiffs had barely

any relationship with Edwards at all, let alone one that would 10 Bennington is a corporation whose sole purpose

rise to the level of confidence or trust. In re Mid-Island Hosp.,

was to hold a Canadian securities license so that

276 F.3d at 130. Instead, to the extent that plaintiffs interacted

Edwards could provide advice to an unrelated

with Edwards, that relationship was at arms’ length, and there

venture capital fund. Edwards Dec. ¶ 9. Bennington

is no further evidence to support a fiduciary relationship. Id.

was never directly involved in operating an

Archipel entity. Id.

*17 Plaintiffs attempt to circumvent the lack of a direct

connection between themselves and Edwards by describing

the extent of his involvement in Archipel and BIM, but that D. Plaintiffs’ Motion for Default Judgment.

is irrelevant to his relationship to plaintiffs specifically. Once A “corporation may appear in the federal courts only through

again, it may be that BIM owed plaintiffs a fiduciary duty, and licensed counsel.” Rowland v. Cal. Men's Colony, 506

it may be that Edwards owed a fiduciary duty to BIM. But a U.S. 194, 201-02 (1993). Therefore, “where a corporation

fiduciary duty is inherently based on the relationship between repeatedly fails to appear by counsel, a default judgment may

the fiduciary and those relying on him, and it is not enough be entered against it pursuant to Rule 55[.]” SEC v. Research

to be a fiduciary of a fiduciary. Accordingly, plaintiffs have Automation Corp., 521 F.2d 585, 589 (2d Cir. 1975); accord

failed to establish that Edwards was their fiduciary, and their Jacobs v. Patent Enf't Fund, Inc., 230 F.3d 565, 568 (2d Cir.

breach of fiduciary duty claims against Edwards, and indeed 2000). The same prohibition extends to partnerships. Leviton

all of their claims against Edwards, must be dismissed. Mfg. Co., Inc. v. Fastmac Performance Upgrades, Inc., 2013

WL 4780045, at *2 (S.D.N.Y. July 8, 2013) (citing Jones

v. Niagara Frontier Transp. Auth., 722 F.2d 20, 22 (2d Cir.

C. Plaintiffs’ Claims Against Bennington. 1983)).

Defendants correctly note that given the paucity of evidence

of Bennington or its agents acting within the scope of Having properly received an entry of default against BIM

their agency to commit the torts plaintiffs allege, plaintiffs and Archipel (“the Archipel defendants”), plaintiffs have

must establish “reverse” piercing of the corporate veil to moved for default judgment against those defendants on

hold Bennington liable for the tortious conduct they lay at Counts: (I) securities fraud; (IV) common law fraud; (V)

Edwards’ feet. See Am. Fuel Corp. v. Utah Energy Dev. Co., negligent misrepresentation; and (VI) breach of fiduciary

Inc., 122 F.3d 130, 134 (2d Cir. 1997) (noting that piercing duty.11 The Archipel defendants have still yet to appear

of corporate veil is necessary under New York law9 to with licensed counsel, and at this point that failure more

hold corporation liable for independent actions of its agents); than adequately establishes default. Jacobs, 230 F.3d at

JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & 568. Accordingly, plaintiffs are entitled to default judgment

Trade Servs., Inc., 306 F. Supp. 2d 482, 485 (S.D.N.Y. 2004) against these defendants so long as plaintiffs’ allegations

(describing that “reverse” veil-piercing is necessary to hold establish liability against them as a matter of law.

corporation liable for unrelated actions of its agents).

11 The SAC technically only asserts these claims

9 Because Bennington is a Canadian corporation, against Gray, Edwards, and Bennington, without

Canadian law on piercing of the corporate veil mention of BIM or Archipel as defendants for

technically applies, but because neither party any claim. However, each count also includes a

identifies any meaningful difference between the paragraph which re-alleges every other allegation

two bodies of corporate law, the Court will apply of the complaint, and other paragraphs charge

the more readily-accessible New York law. BIM and Archipel as culpable actors. Thus,

plaintiffs’ claims against BIM and Archipel will be

However, even assuming that plaintiffs could establish that

considered.

reverse veil-piercing is appropriate in this case, for the reasons

1. Facts Attributable to Each Defendant. thus have failed to pierce the corporate veil. Although there

*18 However, the antecedent question to be answered is can be little doubt that Gray exhibited a great deal of influence

which facts in the complaint are attributable to which Archipel over Archipel, the SAC levies several allegations that both

defendant. To that end, under New York's choice of law Edwards and Gray steered Archipel, and that Stelljes also

rules, “the liability of partners of an out-of-state partnership exhibited a degree of control. See, e.g., Dkt. 132 (“SAC”),

[are judged] according to the laws of the jurisdiction ¶¶ 69-70, 86, 137, 168, 174. Moreover, the record evidence

where the partnership was organized.” Dep't of Econ. Dev. clarifies that Stelljes was a frequent point of contact between

v. Arthur Andersen & Co. (U.S.A.), 924 F. Supp. 449, Archipel and Goldberg, and that he was Archipel's Managing

485 (S.D.N.Y. 1996). Thus, because BIM was formed in Director. See Goldberg Dep. 8, 10; Dkt. 279-8, p. 11.

Delaware, Delaware law applies. Gray Dep. 12.

Accordingly, plaintiffs have not established that any one

Under Delaware law, a partnership is liable for a loss or injury Archipel figure truly dominated its operations. Thus,

caused to a third party as a result of a wrongful act or omission Archipel's liability can only be measured against the

by a partner within the course of partnership business. 6 DEL. allegations that the complaint aims directly at the company.

C. § 15-305. Therefore, BIM can be held liable both for the See, e.g., Monteleone, 2008 WL 4541124, at *9.

misconduct the complaint charges against it directly and for

Gray's alleged misconduct within the course of partnership

business. 2. Securities Fraud.

*19 Once again, the elements of securities fraud under Rule

The same cannot be said of Archipel, which is a limited 10b-5(b) are: (1) a material misrepresentation or omission

liability company formed under New York law. Dkt. 132, ¶ by the defendant; (2) scienter; (3) a connection between the

18. In assessing the liability of a limited liability company, misrepresentation or omission and the purchase or sale of a

New York courts apply the law of the state under which the security; (4) reliance upon the misrepresentation or omission;

company is organized. See, e.g., Finkelstein v. Warner Music (5) economic loss; and (6) loss causation. Matrixx, 563 U.S.

Grp. Inc., 820 N.Y.S.2d 264, 266 (App. Div. 1st Dep't 2006) at 37-38.

(noting that limited liability company formed in Delaware

would have nature of claims as direct or derivative decided At the outset, both plaintiffs have sufficiently alleged that

based on Delaware law). the losses they suffered as a result of their Archipel entity

investments were connected to a security. SAC ¶ 143. Both

To attribute the tortious acts of a member to a limited liability plaintiffs also alleged in no uncertain terms that both Archipel

company under New York law, much like for corporate and BIM “intentionally and fraudulently” misrepresented

entities such as Bennington above, would-be plaintiffs must Gray's disciplinary history in the PPMs, which establishes

establish the “reverse” variant of the legal principle of the elements of a material misrepresentation and scienter.

piercing the corporate veil. Monteleone v. Leverage Grp., Id. ¶ 162. The SAC also alleges that plaintiffs relied on the

2008 WL 4541124, at *9 (E.D.N.Y. Oct. 7, 2008) (citing Am. information provided them, and that they would not have

Fuel Corp. v. Utah Energy Dev. Co., Inc., 122 F.3d 130, 134 invested in the Archipel entities and lost their money if not

(2d Cir. 1997)) (applying reverse piercing the corporate veil to for those statements. Id. ¶¶ 181-82. Finally, plaintiffs allege

attribute liability for controller to limited liability company). that they have suffered economic loss. Id. ¶ 183. Accordingly,

To pierce the corporate veil, New York law requires a plaintiffs have sufficiently alleged each element of securities

plaintiff to prove both: (1) “that the owner exercised complete fraud against both Archipel defendants, and default judgment

domination over the [company] with respect to the transaction must be granted in plaintiffs’ favor on Count I.

at issue”; and (2) that the domination itself was used to

commit the wrong the injured party seeks to redress. See Am.

Fuel Corp., 122 F.3d at 134. Naturally, then, domination is 3. Common Law Fraud.

necessary but not sufficient for the veil-piercing analysis. Id. The elements of common law fraud applicable in this case are:

“(1) a misrepresentation or a material omission of fact which

In determining whether Archipel can be held liable for was false and known to be false by [the] defendant; (2) made

Gray's misconduct as well as its own to establish entitlement for the purpose of inducing the other party to rely upon it; (3)

108. Much as with the discussion of plaintiffs’ securities and in his favor as to Count V against both Archipel defendants.

common law fraud claims above, there is sufficient overlap

in the elements at play in the two counts that the analysis To the extent that New York law governs Amerio's claims,

is identical. Plaintiffs have adequately pled every element the same logic requires default judgment in his favor on this

of common law fraud against both Archipel defendants, and count as well. Alternatively, if his claims fall under New

therefore their motion for default judgment on Count IV must Jersey law, Amerio must prove that “an incorrect statement

be granted. SAC ¶¶ 162, 181-83. was negligently made” by the Archipel defendants upon

which he “justifiably relied” and that he is thus entitled “to

recover damages for economic loss or injury sustained as a

4. Negligent Misrepresentation. consequence of that reliance.” Thomas, 811 F. Supp. 2d at

To prove his New York negligent misrepresentation claims 793. Amerio has adequately alleged reliance on a negligently-

against the Archipel defendants, Goldberg must once again made statement. SAC ¶¶ 181-82, 226. Of course, he has also

prove: “(1) the defendant had a duty, as a result of a special alleged economic loss and injury. Id. ¶ 183. As a result,

relationship, to give correct information; (2) the defendant default judgment must also be granted for Amerio against

made a false representation that he or she should have both Archipel defendants on Count V.

known was incorrect; (3) the information supplied in the

representation was known by the defendant to be desired by

the plaintiff for a serious purpose; (4) the plaintiff intended to 5. Breach of Fiduciary Duty.

rely and act upon it; and (5) the plaintiff reasonably relied on To sustain their claim for a breach of fiduciary duty, plaintiffs

it to his or her detriment.” Anschutz, 690 F.3d at 114. must again allege: (1) “the existence of a fiduciary duty”; (2)

“a knowing breach of that duty”; and (3) “damages resulting

Goldberg has adequately alleged that defendants, a broad therefrom.” Johnson, 660 F.3d at 138. The issue of damages

label that includes the Archipel defendants, failed to correct or breach is not at issue for either plaintiff against either

the misrepresentation in the PPMs that Gray was properly defendant, because the complaint alleges misconduct up to

licensed despite knowing that the NYSE had stripped his and including outright fraud and resulting damages. SAC

licensure. SAC ¶ 226. He has also alleged that he reasonably ¶¶ 162, 181-183. Similarly, plaintiffs have alleged that all

relied on that information to his loss. Id. ¶¶ 181-83. defendants owed plaintiffs several duties as fiduciaries. Id. ¶

223. Accordingly, plaintiffs have adequately alleged that all

Where Goldberg runs into trouble is in establishing a special defendants owed them a fiduciary duty, and default judgment

relationship. Of course, the SAC alleges that Gray and must be granted as to Count VI as well.

Edwards owed him such a relationship, which is enough for

liability to attach to BIM as a partnership. SAC ¶ 225; 6 DEL.

C. § 15-305. However, Goldberg does not allege that Archipel 6. Plaintiffs’ Remaining Claims Against the Archipel

itself, being a limited liability company and thus only liable Defendants.

for its own actions, had a special relationship with him. See Lastly, the Court informed plaintiffs in the March 31 decision

SAC ¶ 225. Nevertheless, Goldberg specifically alleges that that any count for which they did not move for default

all defendants owed them a duty to act with reasonable care judgment would be dismissed for failure to prosecute under

in disseminating information. Id. ¶ 224. Rule 41(b). Plaintiffs timely moved for default judgment only

on Counts (I) and (IV-VI). As a result, plaintiffs’ claims

*20 Under New York law, that duty of care in dissemination under Counts (II-III) and (VII-XII) are dismissed for failure

explicitly emerges only from the existence of a special to prosecute under Rule 41(b). As for the claims to which

relationship. Anschutz, 690 F.3d at 114 (noting that plaintiff plaintiffs are entitled to default judgment, an assessment of

must establish defendant's “duty, as a result of a special damages and final judgment shall wait until plaintiffs’ claims

relationship, to give correct information” (emphasis added)). against Gray are resolved.

In other words, by pleading that the duty exists, the necessary

implication is that the special relationship existed first.

E. Plaintiffs’ Claims Against Gray.

Accordingly, for the broad purposes of default judgment,

The bombardment of motion practice having at last grown

Goldberg has sufficiently alleged that he and Archipel shared

silent, plaintiffs’ claims against Gray remain untouched as the

in the field, and although trying this case will be much 1. The motion to intervene brought by Andrew C. Russo,

more manageable than it would have been in the absence Caroline Hardman, Lee Knight, Todd Morakis, and

of the present motions, nevertheless several of plaintiffs’ David Work is DENIED;

claims against Gray would perhaps inject an unwarranted

degree of complication. In this Court's August 2, 2016 2. Gregory Edwards’ and Bennington Investment

Memorandum-Decision and Order, all claims were dismissed Management, Inc.’s motions for summary judgment are

against Edwards and Bennington for failure to state a claim GRANTED;

except Counts (I) and (IV-VI). Goldberg v. Gray, 2016 WL

4099189, at *16 (N.D.N.Y. Aug. 2, 2016). Accordingly, 3. Plaintiffs’ claims against Gregory Edwards and

plaintiffs are ordered to show cause why Counts (II-III) and Bennington Investment Management, Inc. are

(VII-XII) should not be dismissed under Rule 56(f)(3) for the DISMISSED;

same reasons no later than Wednesday, August 12, 2020.

4. Plaintiffs’ motion for default judgment against BIM

Management LP and Archipel Capital LLC under

*21 Of course, according to plaintiffs’ allegations, Gray is

counts (I) securities fraud, (IV) common law fraud,

more culpable than Edwards and Bennington ever were, and it

(V) common law negligent misrepresentation, and (VI)

is possible that some additional claims could survive review.

common law breach of fiduciary duty is GRANTED;

Should plaintiffs wish to preserve those additional counts,

they may explain why they should remain and why dismissal 5. Plaintiffs’ claims against BIM Management LP and

would be inappropriate. Archipel Capital LLC under Counts: (II) Control Person

Liability under § 20(a) of the Exchange Act, 15 U.S.C.

§ 78t; (III) the Racketeering Influenced and Corrupt

V. CONCLUSION

Organizations Act, 18 U.S.C. § 1962; (VII) common

Plaintiffs are understandably frustrated—to say the least—

law conversion; (VIII) common law unjust enrichment;

with their experience investing in the Archipel entities. This

and (IX-XII) New York's Debtor and Creditor Law §§

litigation and its scattered siblings sound an outraged keen

273-76 are DISMISSED for failure to prosecute under

at what they allege to be profound lies and manipulations

Rule 41(b);

which have taken from them an aggregate total of millions of

dollars. The Court is not unmoved by their allegations, but 6. Plaintiffs’ damages under Counts (I), (IV), (V), and (VI)

nevertheless it must carefully safeguard its own mechanisms owed by BIM Management LP and Archipel Capital

and procedures such that justice be done proportionate to LLC will be ascertained after plaintiffs’ claims against

whatever wrongs a finder of fact determines were caused by Gregory Gray are resolved;

each defendant.

7. Plaintiffs are ordered to show cause why summary

That justice would be best served to come swiftly. As a result, judgment should not be granted in Gregory Gray's

the would-be intervenors must be denied their intrusion into favor as to counts (II-III) and (VII-XII) no later than

this case so that it can proceed to its resolution. Additionally, Wednesday, August 12, 2020; and

in the absence of any stronger indication of malfeasance than

plaintiffs have mustered, Edwards and Bennington cannot be 8. A date for a jury trial on the merits of plaintiffs’

held to answer for the wrongs that plaintiffs allege. However, remaining claims against defendant Gregory Gray and

at the least plaintiffs have achieved an important victory in for damages as to BIM Management LP and Archipel

vindicating their rights by attaining default judgment against Capital LLC will be set.

BIM and Archipel. All that remains now is to proceed onward

toward trial of this matter, and the final determination of what It is SO ORDERED.

else, if anything, plaintiffs are owed.

All Citations

Therefore, it is

Not Reported in Fed. Supp., 2020 WL 4192618

End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works.

2022 WL 17517312 District before the court may permit the plaintiff to proceed

Only the Westlaw citation is currently available. with this action in forma pauperis. See id.

United States District Court, N.D. New York.

2 To determine whether an action is frivolous, a court

Manetirony CLERVRAIN, Plaintiff, must look to see whether the complaint “lacks an

v. arguable basis either in law or in fact.” Neitzke v.

Jonathan ROBBINS, et al., Defendants. Williams, 490 U.S. 319, 325 (1989).

1:22-CV-1248 (MAD/DJS) Likewise, under 28 U.S.C. § 1915A, a court must review

| any “complaint in a civil action in which a prisoner seeks

Signed December 8, 2022 redress from a governmental entity or officer or employee of

a governmental entity” and must “identify cognizable claims

Attorneys and Law Firms or dismiss the complaint, or any portion of the complaint,

if the complaint ... is frivolous, malicious, or fails to state a

MANETIRONY CLERVRAIN, Plaintiff, Pro Se, Anderson, claim upon which relief may be granted; or ... seeks monetary

IN 46013. relief from a defendant who is immune from such relief.” 28

U.S.C. § 1915A; see also Carr v. Dvorin, 171 F.3d 115, 116

(2d Cir. 1999) (per curiam); Abbas v. Dixon, 480 F.3d 636,

REPORT-RECOMMENDATION and ORDER 639 (2d Cir. 2007) (stating that both sections 1915 and 1915A

are available to evaluate pro se prisoner complaints).

DANIEL J. STEWART, United States Magistrate Judge

In reviewing a pro se complaint, the court has a duty to show

*1 The Clerk has forwarded for review what has been

liberality toward pro se litigants, see Nance v. Kelly, 912 F.2d

docketed as a civil complaint filed by Plaintiff. Dkt. No. 1,

605, 606 (2d Cir. 1990) (per curiam), and should exercise

Compl. Plaintiff has not paid the filing fee but has submitted

“extreme caution ... in ordering sua sponte dismissal of a

an application to proceed in forma pauperis (“IFP”), Dkt. No.

pro se complaint before the adverse party has been served

2, which the Court has granted.1

and both parties (but particularly the plaintiff) have had an

opportunity to respond.” Anderson v. Coughlin, 700 F.2d 37,

1 Plaintiff has also moved for leave to file 41 (2d Cir. 1983) (internal citations omitted). Therefore, a

electronically. Dkt. No. 3. Given the recommended court should not dismiss a complaint if the plaintiff has stated

disposition of this case, that Motion is denied with “enough facts to state a claim to relief that is plausible on its

leave to renew if Plaintiff files a complaint that face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

survives review under section 1915. “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

I. SUFFICIENCY OF THE COMPLAINT alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing

Bell Atl. Corp. v. Twombly, 550 U.S. at 556).

A. Governing Legal Standard

*2 Although a court should construe the factual allegations

28 U.S.C. § 1915(e) directs that, when a plaintiff seeks to in the light most favorable to the plaintiff, “the tenet that

proceed in forma pauperis, “(2) ... the court shall dismiss a court must accept as true all of the allegations contained

the case at any time if the court determines that – ... (B) in a complaint is inapplicable to legal conclusions.” Id.

the action ... (i) is frivolous or malicious; (ii) fails to state a “Threadbare recitals of the elements of a cause of action,

claim on which relief may be granted; or (iii) seeks monetary supported by mere conclusory statements, do not suffice.” Id.

relief against a defendant who is immune from such relief.” 28 (citing Bell Atl. Corp. v. Twombly, 550 U.S. at 555). “[W]here

U.S.C. § 1915(e)(2)(B).2 Thus, even if a plaintiff meets the the well-pleaded facts do not permit the court to infer more

financial criteria to commence an action in forma pauperis, it than the mere possibility of misconduct, the complaint has

is the court's responsibility to determine whether the plaintiff alleged - but it has not show[n] - that the pleader is entitled

more than an unadorned, the-defendant-unlawfully-harmed- FED. R. CIV. P. 10(b). The purpose of Rule 10 is to “provide

me accusation.” Ashcroft v. Iqbal, 556 U.S. at 678 (citing Bell an easy mode of identification for referring to a particular

Atl. Corp. v. Twombly, 550 U.S. at 555). Thus, a pleading paragraph in a prior pleading[.]” Sandler v. Capanna, 1992

that only “tenders naked assertions devoid of further factual WL 392597, at *3 (E.D. Pa. Dec. 17, 1992).

enhancement” will not suffice. Id. (internal quotation marks

and alterations omitted). A complaint that fails to comply with basic pleading

requirements presents too heavy a burden for defendants to

craft a defense “and provides no meaningful basis for the

Court to assess the sufficiency of [the plaintiff's] claims,” and

B. Analysis of the Complaint may properly be dismissed. Gonzales v. Wing, 167 F.R.D. 352,

355 (N.D.N.Y. 1996).

A court's initial review of a complaint under § 1915(e) must

encompass the applicable standards of the Federal Rules

Plaintiff's Complaint clearly does not satisfy these

of Civil Procedure. Rule 8 of the Federal Rules of Civil

requirements. The nature of the Complaint is unclear. The

Procedure provides that a pleading must contain:

Complaint recites a wide variety of federal statutes and

(1) a short and plain statement of the grounds for the court's case law, but a thorough review of the main Complaint and

jurisdiction ...; the numerous attachments does not provide clarity as to

what federal claim Plaintiff seeks to pursue in this Court.

(2) a short and plain statement of the claim showing that It is unclear what relationship the individuals identified by

the pleader is entitled to relief; and Plaintiff as Defendants have to Plaintiff and how he alleges

they violated his rights.

(3) a demand for the relief sought, which may include relief

in the alternative or different types of relief. Given its lack of clarity, the Complaint is clearly subject to

dismissal. “[A] court should not dismiss a complaint filed

FED. R. CIV. P. 8(a). The purpose of Rule 8 “is to give

fair notice of the claim being asserted so as to permit the by a pro se litigant without granting leave to amend at least

adverse party the opportunity to file a responsive answer [and] once ‘when a liberal reading of the complaint gives any

prepare an adequate defense.” Hudson v. Artuz, 1998 WL indication that a valid claim might be stated.’ ” Bruce v.

832708, at *1 (S.D.N.Y. Nov. 30, 1998) (quoting Powell v. Tompkins Cty. Dep't of Soc. Servs. ex rel. Kephart, 2015 WL

Marine Midland Bank, 162 F.R.D. 15, 16 (N.D.N.Y. 1995)). 151029, at *4 (N.D.N.Y. Jan. 7, 2015) (quoting Branum v.

Moreover, Rule 10 of the Federal Rules of Civil Procedure Clark, 927 F.2d 698, 704-05 (2d Cir. 1991)). Accordingly, the

provides, in part: Court recommends that the Complaint be dismissed, but that

Plaintiff be afforded an opportunity to amend.

*3 The Court advises Plaintiff that should he be permitted

(b) Paragraphs; Separate

to amend his Complaint, any amended pleading she

Statements. A party must state its

submits must comply with Rules 8 and 10 of the Federal

claims or defenses in numbered

Rules of Civil Procedure. Any such amended complaint,

paragraphs, each limited as far

which shall supersede and replace in its entirety the

as practicable to a single set of

previous Complaint filed by Plaintiff, must contain

circumstances. A later pleading may

sequentially numbered paragraphs containing only one

refer by number to a paragraph in an

act of misconduct per paragraph. Thus, if Plaintiff claims

earlier pleading. If doing so would

that his civil and/or constitutional rights were violated by

promote clarity, each claim founded on

more than one defendant, or on more than one occasion,

a separate transaction or occurrence –

he should include a corresponding number of paragraphs

and each defense other than a denial –

in his amended complaint for each such allegation, with

must be stated in a separate count or

each paragraph specifying (i) the alleged act of misconduct;

defense.

(ii) the date, including the year, on which such misconduct

occurred; (iii) the names of each and every individual who

nexus between such misconduct and Plaintiff's civil and/or Pursuant to 28 U.S.C. § 636(b)(1), the parties have fourteen

constitutional rights. (14)3 days within which to file written objections to the

foregoing report. Such objections shall be filed with the Clerk

Plaintiff is further cautioned that no portion of his prior of the Court. FAILURE TO OBJECT TO THIS REPORT

Complaint shall be incorporated into his amended complaint WITHIN FOURTEEN (14) DAYS WILL PRECLUDE

by reference. Any amended complaint submitted by Plaintiff APPELLATE REVIEW. Roldan v. Racette, 984 F.2d 85, 89

must set forth all of the claims he intends to assert against the (2d Cir. 1993) (citing Small v. Sec'y of Health and Human

defendants and must demonstrate that a case or controversy Servs., 892 F.2d 15 (2d Cir. 1989)); see also 28 U.S.C. §

exists between the Plaintiff and the defendants which Plaintiff 636(b)(1); FED. R. CIV. P. 72 & 6(a).

has a legal right to pursue and over which this Court has

jurisdiction. If Plaintiff is alleging that the named defendant 3 If you are proceeding pro se and are served with

violated a law, he should specifically refer to such law. this Order by mail, three additional days will be

added to the fourteen-day period, meaning that you

have seventeen days from the date the order was

II. CONCLUSION mailed to you to serve and file objections. FED. R.

CIV. P. 6(d). If the last day of that prescribed period

For the reasons stated herein, it is hereby falls on a Saturday, Sunday, or legal holiday, then

the deadline is extended until the end of the next

RECOMMENDED, that Plaintiff's Complaint be day that is not a Saturday, Sunday, or legal holiday.

DISMISSED with leave to amend; and it is FED. R. CIV. P. 6(a)(1)(C).

ORDERED, that the Clerk of the Court serve a copy of this All Citations

Report-Recommendation and Order upon the parties to this

action. Not Reported in Fed. Supp., 2022 WL 17517312

End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works.

2023 WL 3170384 2007). After the appropriate review, “the court may accept,

Only the Westlaw citation is currently available. reject, or modify, in whole or in part, the findings or

United States District Court, N.D. New York. recommendations made by the magistrate judge.” 28 U.S.C.

§ 636(b)(1).

Manetirony CLERVRAIN, Plaintiff,

v. “[I]n a pro se case, the court must view the submissions

Jonathan ROBBINS, Jean-Max Bellerive, by a more lenient standard than that accorded to ‘formal

Josue Pierre-Louis, Garry Conille, Jean-Claude pleadings drafted by lawyers.’ ” Govan v. Campbell, 289

F. Supp. 2d 289, 295 (N.D.N.Y. 2007) (quoting Haines v.

Theogene, Barthelemy Anteno, Kwasi Amoako-

Kerner, 404 U.S. 519, 520 (1972)) (other citations omitted).

Attah, and Victor (Ito) Bisono Haza, Defendants.

The Second Circuit has held that the court is obligated to

1:22-CV-1248 (MAD/DJS) “ ‘make reasonable allowances to protect pro se litigants’ ”

| from inadvertently forfeiting legal rights merely because they

Signed May 1, 2023 lack a legal education. Govan, 289 F. Supp. 2d at 295 (quoting

Taguth v. Zuck, 710 F.2d 90, 95 (2d Cir. 1983)).

Attorneys and Law Firms

Having reviewed the December 8, 2022 Report-

MANETIRONY CLERVRAIN, 4326 South Scatterfield Recommendation and Order, Plaintiff's complaint and the

Road, Suite 153, Anderson, Indiana 46013, Plaintiff, Pro Se. applicable law, the Court finds that Magistrate Judge Stewart

correctly determined that the complaint should be dismissed.

The complaint is largely incomprehensible and suffers from

ORDER several deficiencies. Rule 8(a) of the Federal Rules of Civil

Procedure provides that a pleading must contain “a short

Mae A. D'Agostino, United States District Judge: and plain statement of the claim showing that the pleader is

entitled to relief.” Fed. R. Civ. P. 8(a)(2). Plaintiff's complaint

*1 On November 22, 2022, pro se Plaintiff Manetirony

is neither short nor plain. See Dkt. No. 1. As currently

Clervrain (“Plaintiff”) filed a complaint against Defendants

drafted, and even with the leniency given to a pro se litigant's

consisting of 70 pages of forms and documents, see Dkt. No.

pleadings, Plaintiff failed to meet pleading standards such

1, “recit[ing] a wide variety of federal statutes and case law,”

that the Court is unable to meaningfully analyze whether

Dkt. No. 7 at 5, and around two hundred pages of attachments.

Plaintiff can allege any colorable claim against Defendants.

See Dkt. Nos. 1-1, 1-5, 1-6. On the same day, Plaintiff moved

See Canning v. Hofmann, No. 1:15-CV-0493, 2015 WL

for leave to proceed in forma pauperis (“IFP”), see Dkt. No.

6690170, *5 (N.D.N.Y. Nov. 2, 2015) (“[H]aving found

2, and to obtain an ECF login and password. See Dkt. No. 3.

that none of the allegations in Plaintiff's meandering and

indecipherable Complaint raise a cognizable cause of action,

On December 8, 2022, Magistrate Judge Daniel J. Stewart

the Court concludes that the Complaint fails to state a claim

granted Plaintiff's motion to proceed IFP. See Dkt.

upon which relief may be granted and is subject to dismissal”)

No. 6. Additionally, Magistrate Judge Stewart issued a

(citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

Report-Recommendation and Order recommending that the

complaint be dismissed with leave to amend. See Dkt.

*2 Finally, the Court agrees with Magistrate Judge Stewart

No. 7. Plaintiff has not filed an objection to the Report-

that Plaintiff should be granted an opportunity to amend

Recommendation and Order.

out of deference to Plaintiff's pro se status. See Nielsen

v. Rabin, 746 F.3d 58, 62 (2d Cir. 2014) (“ ‘Generally,

When a party declines to file objections to a magistrate judge's

leave to amend should be freely given, and a pro se

report-recommendation or files “[g]eneral or conclusory

litigant in particular should be afforded every reasonable

objections or objections which merely recite the same

opportunity to demonstrate that he has a valid claim’ ”)

arguments [presented] to the magistrate judge,” the district

(quotation omitted). Should Plaintiff choose to amend the

court reviews those recommendations for clear error. O'Diah

complaint, the Court urges Plaintiff to review Magistrate

v. Mawhir, No. 9:08-CV-322, 2011 WL 933846, *1 (N.D.N.Y.

and Order thoroughly. See Dkt. No. 7 at 4-6. within thirty (30) days of the date of this Order, the Clerk of

the Court shall enter judgment in Defendants’ favor and close

this case without further order from this Court; and the Court

Accordingly, the Court hereby

further

ORDERS that the Report-Recommendation and Order (Dkt.

No. 7) is ADOPTED in its entirety; and the Court further

ORDERS that the Clerk of the Court shall serve a copy of

this Order on the parties in accordance with the Local Rules.

ORDERS that Plaintiff's complaint (Dkt. No. 1) is

DISMISSED with leave to amend; and the Court further

IT IS SO ORDERED.

ORDERS that Plaintiff shall file his amended complaint All Citations

within thirty (30) days of the date of this Order; and the Court

further Slip Copy, 2023 WL 3170384

End of Document © 2024 Thomson Reuters. No claim to original U.S. Government Works.