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collecting Southern District of New York cases that support the proposition that "the sources of the information and belief should be sufficiently identified so as to allow each defendant and the Court to review the sources and determine, at the pleading stage, whether an inference of fraud may be fairly drawn from the information contained therein"
Summary of this case from Henneberry v. Sumitomo Corp. of AmericaOpinion
01 Civ. 0216 (RWS).
June 10, 2004
FRIEDMAN, WANG BLEIBERG, New York, NY, By: PETER N. WANG, ESQ., Of Counsel, CAHILL GORDON REINDEL, New York, NY, By: THOMAS J. KAVALER, ESQ., Of Counsel, Attorneys for Plaintiff.
CHADBOURNE PARKE, Washington, DC, By: ABBE DAVID LOWELL, ESQ., PAMELA MARPLE, ESQ., Of Counsel, CHADBOURNE PARKE, New York, NY, By: MITCHELL R. EDWARDS, ESQ., Of Counsel, Attorneys for Defendants.
OPINION
Plaintiff G-I Holdings ("Holdings") has moved pursuant to Local Civil Rule 6.3 for reconsideration of this Court's February 25, 2004 opinion denying Holdings' motion for leave to amend its fourth amended complaint to assert new allegations and an additional claim against defendants Baron Budd, Frederick Baron and Russell Budd (collectively, the "Baron Budd defendants"). Holdings has also moved to supplement the record nunc pro tunc. For the reasons set forth below, both motions are denied.
Prior Proceedings
The proceedings in this case as they relate to this motion are summarized in the opinion denying leave to amend the complaint, familiarity with which is presumed. See G-I Holdings v. Baron Budd, 02 Civ. 0216, 2004 WL 374550 (S.D.N.Y. Feb. 27, 2004). Holdings timely filed this motion for reconsideration on March 15, 2004. After submission of briefs, the motion was deemed fully submitted on March 31, 2004.
Discussion
A motion for reconsideration under Local Civil Rule 6.3 "is appropriate where a court overlooks `controlling decisions or factual matters that were put before it on the underlying motion . . . and which, had they been considered, might have reasonably altered the result before the court.'" Banco de Seguros Del Estado v. Mut. Marine Offices, Inc., 230 F. Supp.2d 427, 428 (S.D.N.Y. 2002) (quoting Range Rd. Music, Inc. v. Music Sales Corp., 90 F. Supp.2d 390, 392 (S.D.N.Y. 2000)). "The standard for granting . . . a motion [for reconsideration] is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). "Reconsideration may be granted to correct clear error, prevent manifest injustice or review the court's decision in light of the availability of new evidence." Melnitzky v. Rose, 305 F. Supp.2d 349, 350 (S.D.N.Y. 2004) (citing Virgin Atlantic Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)). However, Local Civil Rule 6.3 must be "narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the Court." Dellefave v. Access Temporaries, Inc., 99 Civ. 6098, 2001 WL 286771, at *1 (S.D.N.Y. Mar. 21, 2001).
Leave to amend the complaint was previously denied because Holdings had pleaded a critical element of its RICO fraud and common law fraud claims on information and belief, while failing to provide "a statement of facts upon which the belief is founded." G-I Holdings, 2004 WL 374550, at *4 (quoting G-I Holdings v. Baron Budd, 238 F. Supp.2d 521, 551 (S.D.N.Y. 2002). The claims pleaded on information and belief concern the alleged use of the Baron Budd memorandum in the preparation of two deponents by a Baron Budd paralegal to give false product identification and testimony.
Holdings argues that the new evidence previously overlooked by the court is the attachment to an affidavit by the former paralegal specifying the particular clients that may have been prepared by her using the Baron Budd memorandum. However, because Holdings was aware of and in possession of the affidavit before it moved to amend the complaint, Holdings has combined its motion for reconsideration with a motion to supplement the recordnunc pro tunc, presumably to the date of its initial motion for leave to amend the complaint.
Holdings argues that in moving for leave to amend, it had properly pleaded the facts upon which the belief was founded. It further argues that the Court improperly required it to submit the "evidentiary basis" upon which those facts were founded. While it is true that Holdings made very specific allegations of what it believed the paralegal to have been doing, it did not state, in the proposed complaint or in the motion papers, the facts upon which the belief was founded. Such a statement of facts need not be supported by evidence; indeed, "a complainant is not required to plead evidence." In re Blech Securities Litig., 928 F. Supp. 1279, 1290 (S.D.N.Y. 1996) (citing Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374, 379 (2d Cir. 1974),overruled on other grounds by Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1100 n. 9, 1100-06, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991)). Therefore,
the precise facts forming plaintiff's information and belief need not be pleaded on a point-by-point basis. On the other hand, the sources of the information and belief should be sufficiently identified so as to allow each defendant and the Court to review the sources and determine, at the pleading stage, whether an inference of fraud may be fairly drawn from the information contained therein.Crystal v. Foy, 80 Civ. 446, 1981 WL 1648, at *3 (S.D.N.Y. June 30, 1981).
Numerous district courts in this Circuit have required that the sources of information for fraud pleadings based on information and belief be disclosed. See, e.g., International Telecom, Inc. v. Generadora Electrica del Oriente S.A., 00 Civ. 8695, 2002 WL 465291, at *7 (S.D.N.Y. Mar. 27, 2002) (plaintiff "bases the misrepresentation on information and belief, yet provides no sources for its conclusory allegations."); Branch v. Tower Air, Inc., 94 Civ. 6625, 1995 WL 649935, at *5 (S.D.N.Y. Nov. 3, 1995) (detailed paragraph in complaint pleaded on information and belief found insufficient where it failed to identify the source of plaintiff's information); Kershaw v. Nautica S.A. Ltd., 885 F. Supp. 617, 622 (S.D.N.Y. 1995) (plaintiffs allege facts upon information and belief but "do not provide the source of this information"); Three Crown Ltd. Partnership v. Caxton Corp., 817 F. Supp. 1033, 1040 (S.D.N.Y. 1993) (despite Rule 9(b)'s requirement, "most all of the allegations in plaintiffs' complaint as to each defendant's role in the manipulation are alleged on information and belief without a statement of the source of information and the reasons upon which the belief is founded."); Moll v. U.S. Title Ins. Co. of New York, 654 F. Supp. 1012, 1035 (S.D.N.Y. 1987) ("Plaintiffs must adequately specify the sources of their information and belief under Rule 9(b)."); see also Novak v. Kasaks, 216 F.3d 300, 313 (2d Cir. 2000) (noting that "[s]ome district courts in this circuit have on occasion stated that Rule 9(b) requires plaintiffs in securities fraud cases to allege the sources that support the alleged specific facts.") (quotations and citations omitted).
Other circuit courts have similarly required a statement of the source of plaintiff's information when pleading fraud claims on information and belief. See, e.g., Weiner v. Quaker Oats Co., 129 F.3d 310, 319 (3d Cir. 1997) ("to avoid dismissal [when pleading fraud claims on information and belief], a complaint must delineate at least the nature and scope of plaintiffs' effort to obtain, before filing the complaint, the information needed to plead with particularity.") (quotations omitted);Parnes v. Gateway 2000, Inc., 122 F.3d 539, 550 (8th Cir. 1997) (same); Romani v. Shearson Lehman Hutton, 929 F.2d 875, 878 (1st Cir. 1991) (same).
As held in the underlying opinion, Holdings' motion for leave to amend the complaint was denied because the proposed complaint failed to provide any facts upon which the belief that the deponents were prepared using the Baron Budd memorandum was based. To correct that failing, Holdings now submits an affidavit showing that the deponents mentioned in the proposed complaint were prepared by the paralegal who may have used the memorandum to prepare clients. However, submission of affidavits is not permitted "unless directed by the Court." Local Civil Rule 6.3;see also Payroll Express Corp. v. Pereira, 216 B.R. 713, 716 (S.D.N.Y. 1997) (on motion for reconsideration, "no affidavits or new material may be submitted, because such a motion is limited to the record that was before the Court on the original motion.") (quotation omitted).
In order to avoid the prohibition on affidavits, Holdings made a separate motion to supplement the record, and then made its motion for reconsideration subject to the granting of the motion to supplement the record. If such an approach were to become a regular practice, it would undermine the prohibition on the submission of affidavits which, along with the Local Civil Rule 6.3's other strictures, is designed "to ensure the finality of decisions and to prevent the practice of a losing party examining a decision and then plugging the gaps of a lost motion with additional matters." Melnitzky, 305 F. Supp.2d at 350. It is particularly inappropriate in this case because the information Holdings seeks to submit was available before the motion for leave to amend was filed, and does not constitute new evidence which would merit reconsideration of the earlier opinion.
Conclusion
For the reasons set forth above, Holdings' motion to supplement the record and its motion for reconsideration are denied.
It is so ordered.