Opinion
Civil No. JFM 99-1778
January 9, 2001
MEMORANDUM
On June 30, 1997 Brian Holman ("Holman") and Richard Toomey ("Toomey") entered into an agreement with IMC Mortgage Co. ("IMC") to sell the assets of their company, Central Money Mortage Co., Inc. ("CMM"). The Asset Purchase Agreement ("APA") resulted from lengthy negotiations between Holman and Toomey and IMC representatives, in particular Mitchell Legler ("Legler"), who was IMC general counsel and one of its directors. Under the terms of the APA, IMC would pay Holman and Toomey a base payment equal to $11 million and a contingent payment calculated according to CMM's financial condition and future earnings. IMC would pay the base payment by issuing $11 million worth of stock to Holman and Toomey. The APA determined the number of shares by dividing $11 million by the stock's average closing price during the last 10 days of June 1997 ("Average Quoted Price" or "AQP"), which equaled 640,933 shares. To enable Holman and Toomey to convert some of these securities into cash, IMC and the plaintiffs entered into another agreement, the Registration Rights Agreement ("RRA"), which required IMC to register a number of shares with the Securities and Exchange Commission ("SEC"). The RRA calculated this subset of shares by dividing $5.4 million (roughly half the total base payment) by the AQP. Under this formula, IMC agreed to register 314,640 of the 640,933 base payment shares within 20 days of the closing. The remaining shares could not be sold without meeting an exemption to the SEC rules governing restricted securities.
IMC also entered into employment agreements with Holman and Toomey. Under the terms of the identical agreements, Holman became the President of CMM (now an IMC affiliate) and Toomey served as Vice-President. The agreement provided five-year terms and base salaries for Holman and Toomey of $300,000 per year with annual cost of living adjustments. Although either party could terminate the agreement, if IMC did not terminate Holman or Toomey for cause, it was obligated to pay the respective employee the remaining salary through the term.
The parties closed the transaction on August 19, 1997 but IMC failed to register the shares within 20 days of closing. Accordingly to IMC, its securities counsel advised it that registering the shares would undermine a potential IMC debt offering; the debt offering subsequently feel through. In January and February of 1998 the parties discussed alternative ways to give Holman and Toomey the benefit of their bargain. Under SEC rules, as of August 19, 1998, all the shares transferred to Holman and Toomey would be alienable. IMC proposed that on August 19, 1998, if the value of the nonregistered 314,640 shares did not equal $5.4 million, they would "top off" the plaintiffs with sufficient "saleable" shares so that their shares would equal $5.4 million.
On August 19th and 20th, 1998, Legler and Stuart Marvin ("Marvin"), IMC's Chief Financial Officer, drafted documents affecting this proposal. Because the August 19, 1998 share price was less than the AQP, Legler prepared documents transferring to the plaintiffs an additional 96,790 shares in order to give the plaintiffs value of $5.4 million. The necessary documents did not reach the plaintiffs until August 24, 1998. Between August 19th and 24th, the share price dropped from $12.56 to $10.50. The plaintiffs did not sell their shares; they claim that Legler failed to issue a required opinion letter. They claim Legler's inaction also prevented them from selling the 326,293 shares constituting the remainder of the base payment. By October 1998, the shares were selling for less than $2.
The plaintiffs filed suit against IMC and Legler on June 17, 1999. They claimed that Legler and IMC fraudulently induced them into entering the APA by promising to register the 314,640 shares. On August 13, 1999 IMC terminated their employment. The plaintiffs subsequently amended their complaint to include claims for breach of the APA and RRA, negligence and breach of the employment contracts.
The plaintiffs move for summary judgment on counts IV and V for breach of the APA (and RRA), and counts VII and VIII for breach of the employment contracts. IMC and Legler move for summary judgment on counts I, II and III for fraud; IMC also moves for summary judgment on counts VII and VIII for breach of the employment contract. The plaintiffs have filed a Motion to Amend the Amended Complaint to include a claim for fraud based on Legler's representations after September 9, 1997. I will address the counts in order.
Neither party addresses count VI for negligence.
I.
In counts I-III, the plaintiffs assert claims against Legler and IMC for fraud under Maryland common law, 15 U.S.C. § 78j ("Section 10(b)" and "Rule 10(b)-5") and Md. Code Ann. Corps. Ass'ns § 11-703 (1999). To succeed on any of these claims, the plaintiffs must show, inter alia, that Legler intended to deceive them by misrepresenting a material fact. Gross v. Sussex, Inc., 630 A.2d 1156, 1161 (Md. 1993) (to recover for common law fraud, a plaintiff must prove, inter alia, a false representation for the purpose of defrauding the plaintiff); Cooke v. Manufactured Homes, Inc., 998 F.2d 1256, 1260-61 (4th Cir. 1993) (to recover under Section 10(b) and Rule 10(b)-5, a plaintiff must prove, inter alia, that the defendant made a false representation or omission of material fact with scienter). The plaintiffs claim that Legler represented that IMC would register the relevant securities within twenty days of closing, enabling Holman and Toomey to sell them. Neither party disputes that IMC did not register the securities within 20 days. An unfulfilled promise may serve as the basis for a fraud claim if the defendant did not have a present intention to perform it. Tufts v. Poore, 147 A.2d 717, 723 (Md. 1959) (noting that Maryland recognizes claim based on fraudulent promise); Alleco Inc. v. Harry Jeanette Weinberg Found., 665 A.2d 1038, 1048 (Md. 1995) (same); Pross v. Katz, 784 F.2d 455, 457 (2d Cir. 1986) ("Making a specific promise to perform a particular act in the future while secretly intending not to perform may violate Section 10(b) . . . if the promise is part of the consideration for a sale of securities"); Burns v. Paddock, 503 F.2d 18, 23 (7th Cir. 1974) ("Where a promise is made with the intention of not keeping it, there is a scheme or artifice to defraud" under Section 10(b)).
There is little state case law applying section 11-703. Although the statutory text differs from Section 10(b), the plaintiffs have not argued that the state statute offers broader protection than its federal counterpart, nor have the defendants argued that it offers narrower protection. Accordingly, I will assume that if the plaintiffs cannot prevail under Section 10(b), they cannot prevail under section 11-703, and vice versa. Cf. O'Neil v. Marriot Corp., 538 F. Supp. 1026, 1032 (D.Md. 1982) ("In light of the identity of statutory terms and in the absence of state law to the contrary, the reasonable conclusion is that the Maryland courts would not find a cause of action under state law when there is none under federal law").
I find that the plaintiffs have not produced direct evidence of fraudulent intent and that a jury could not infer intent from other facts. Fraudulent intent can be inferred from the situation of the parties, the activity of the promisor in procuring a transaction, the length of time between the promise and the failure to perform and the defendant's subsequent conduct. Tufts, 147 A.2d at 722. Although the short time span between closing and IMC's failure to register the stock may militate in favor of an inference of fraud, IMC has offered evidence indicating that it started the registration process but then changed its position. Marvin states that shortly after the closing he directed Ashley Roberts-Ise, an in-house lawyer, to draft an S-3 registration short form. Marvin Dep. at 70-75; Roberts-Ise Dep. at 21. He reviewed a draft of the document at the end of August. Marvin Dep. at 72-73. On September 5, 1997, Ise sent the draft via overnight mail to Peter Kolevzon, the New York lawyer in charge of reviewing securities documentation. Ise Dep. at 22-23. Kolevzon reviewed the document on September 7th. Kolevzon Dep. at 155-56. But at a meeting in Tampa on September 8th or 9th, IMC executives discussed a debt offering. Legler Dep. at 115-16. At a break in the meeting, Kolevzon advised IMC personnel that registering the plaintiffs' stock would undermine the offering. Kolevzon Dep. at 13, 30-34; Marvin Dep. at 80-83. Kolevzon explained that IMC could not give accurate disclosures in a stock registration prospectus until it finalized the debt covenants. Kolevzon Dep. at 33-34; Marvin Dep. at 80-88. He also explained that disclosing a potential debt offering in the stock registration would raise "gun jumping" concerns with regard to the bond offering itself. Kolevzon Dep. at 32-33. Accordingly, Kolevzon advised Legler and other company officers to delay registration pending completion of the debt offering. Kolevzon Dep. at 13-14, 34-35.
The plaintiffs have provided no evidence disputing this chain of events. Holman states that his primary reason for believing IMC committed fraud was the fact that it never registered the stock. Holman Dep. at 145. Fraudulent intent not to perform cannot be inferred "from the failure to perform the promise alone." Tufts, 147 A.2d at 722. Accordingly, I grant summary judgment to IMC and Legler on the first three claims because the plaintiffs have not created a triable issue that IMC promised to register securities when it did not intend to do so.
I grant the plaintiffs' Motion for Leave to File Declarations. I have reviewed the declarations, but I do not believe that this evidence changes the outcome. These documents do not create a dispute as to whether Legler and IMC had a present intention not to register shares when they represented that they would.
II.
The plaintiffs move for summary judgment as to the breach of contract claims in counts IV and V. In count IV, they allege that IMC breached the APA (and the RRA) by failing to register 314,640 shares within 20 days of closing. In count V, they allege that IMC breached the APA by failing to issue an opinion letter allowing the plaintiffs to sell all of their shares on the one-year anniversary of closing.
Although counts IV and V have overlapping factual issues, they pertain to different shares of stock and implicate different contractual rights. Count IV pertains to the 314,640 shares which IMC promised to register and which subsequently became the subject of the alleged accord. Count V pertains to the 326,293 shares not subject to the registration promise and arises under paragraph 14.3 of the APA (the "further assistance" clause). Under SEC rules, these latter shares became alienable after the plaintiffs held them for one year (subject to the current dispute over whether an opinion letter was required).
Because material factual disputes exist under both counts, I deny the plaintiffs' motion for summary judgment. With regard to count IV, there are factual disputes over whether IMC and the plaintiffs reached an accord and whether IMC performed under its terms. Assuming that the parties agreed that on August 19, 1998 IMC would deliver to the plaintiffs $5.4 million worth of saleable shares, the parties, in essence, dispute the meaning of "saleable." IMC argues that the shares were saleable because the plaintiffs could initiate a sale (and thereby protect their market price), even though they would not receive sale proceeds until an opinion letter issued. Padgett Aff. ¶¶ 7-10; Legler First Aff. ¶¶ 3-7; Legler Second Aff. ¶ 8. I think a reasonable juror could reach this conclusion. If it did, it could determine that IMC did not breach the accord (assuming one is found), since IMC transferred to the plaintiffs the shares of stock.
Although the subject has been briefed in both the present and earlier motions, I reach no conclusion on whether the parties reached an accord. An accord settles a pre-existing claim by a substituted performance. Jacksonville Elec. Auth. v. Draper's Egg Poultry Co., 557 So.2d 1357, 1358 (Fla. 1990). The substituted performance must differ from that claimed due. Id. at 1359. I leave for trial whether the two considerations differed, although I note that proof at trial may make appropriate an order pursuant to Fed.R.Civ.P. 50(a)(1).
IMC argues that the plaintiffs are estopped from challenging the validity of the accord because they received a benefit under it. Whether or not the plaintiffs benefitted from the proposed accord depends on resolution of the same factual disputes underlying IMC's performance. Moreover, there is evidence that IMC released the "top off" shares from an account holding contingency payment shares, in which the plaintiffs already may have had an interest.
The plaintiffs have presented evidence indicating that the shares were not saleable without an opinion letter or without an assurance that the opinion letter would issue. Sutton Dep. at 63- 64; Simpson Dep. at 93-95, 97-98, 113-15. If the jury adopted this interpretation, which I believe it could, it would raise additional disputes. If an assurance was necessary, a question arises as to whether Legler's phone call in late July or early August constituted an "assurance" allowing Alex. Brown to sell the shares in the absence of a written opinion letter. Legler Dep. at 263-65; Simpson Dep. at 108 (noting that a month's length of time after first "verbal" may require Alex. Brown to call issuer again before sale is authorized). If a written opinion letter was necessary, IMC would argue that completion of the plaintiffs' forms was a condition precedent to IMC's performance. Because Holman, Toomey and Sutton state in their depositions that the necessary paperwork had been completed, Sutton Dep. at 64; Holman Dep. at 101; Toomey Dep. at 196, a dispute arises as to whether Legler's failure to return phone calls from Alex. Brown representatives prevented the plaintiffs from performing the condition precedent by sending the information to IMC. Sutton Dep. at 55-56.
Last, I think a reasonable jury could determine that saleable meant that on August 19, 1998, the plaintiffs would be able to convert their shares into $5.4 million. There is considerable testimony on both sides equating the "benefit of the bargain" originally and in the alleged accord with allowing plaintiffs to acquire cash for their shares. Legler Dep. at 193; Pl.'s Mot. Summ. J. Ex. 16 ("Brian and Dick had bargained for the right to be able to convert half of the shares they received into cash;" parties discussed strategies "enabling Dick and Brian to monetize certain of their holdings"); Marvin. Aff. ¶ 6. If the jury adopted this interpretation, and because IMC admits that the plaintiffs could not recover sale proceeds until an opinion letter issued, I think the jury reasonably could find that IMC breached the proposed accord by not providing an opinion letter on August 19, 1998. In sum, there is testimony and evidence to support all these positions, and while a reasonable jury could agree with any one of them, I do not believe that they would be obligated to adopt any one of them. Accordingly, I deny the plaintiffs' motion for summary judgment.
Had the parties signed a written accord, questions of formation and interpretation might be easier. But the parties did not, meaning that their intent will guide construction of an accord. Because there is conflicting evidence on intent, it must go to the jury.
Count V involves similar issues. The defendants do not dispute their obligation under the APA to provide further assistance. Indeed, they argue that they stood ready to provide it. But disputes again arise as to the procedures for obtaining an opinion letter and whether Legler and IMC (and Holman and Toomey) followed this course. A jury will have to resolve these issues.
III.
The plaintiffs also assert two breach of contract claims arising under the employment agreements. First, they claim that IMC breached the agreements by failing to pay the plaintiffs the pro rated portion of the salary for August 1999, the month they were terminated. Second, they claim that IMC breached the agreements by failing to pay them the amount of their salaries through August 2002, the remainder of the contractual term. Both parties move for summary judgment on these counts. I grant the plaintiffs' motion on both counts.
Holman and Toomey signed identical employment agreements. Paragraph 2 of the agreements states a five-year term, ending on August 1, 2002. Employment Agreement ("Emp. Agr.") ¶ 2. It also provides that IMC may terminate the agreement at any time for cause. Id. If termination is not for cause, IMC must pay Holman or Toomey "through the remaining term of the Agreement." Emp. Agr. ¶ 6. Paragraph 2 defines cause as "serious misconduct by the Employee in respect to his obligation to the Company or Employer." Emp. Agr. ¶ 2. The agreement provides examples of cause, which include:
(i) Employee's conviction of a felony . . .; (ii) the perpetration by Employee of a common law fraud relating to the scope of Employee's employment or the business of the Company or Employer; (iii) the violation by Employee of any material term of this Agreement or the failure of Employee to perform the amount and quality of service to Employer reasonably expected of him, which violation is not cured or rectified after reasonable notice thereof and a reasonable opportunity to do so; or (iv) willful refusal to follow the Employer's policies and directives which violation is not cured or rectified after reasonable notice thereof and a reasonable opportunity to do so.
Emp. Agr. ¶ 2. IMC argues that it terminated Holman and Toomey for three reasons: (1) they filed suit against it; (2) they did not follow underwriting guidelines; (3) CitiFinancial's acquisition of IMC, which ceased business operations. Florida law governs the agreement. Emp. Agr. ¶ 14.
I do not believe that the plaintiffs' lawsuit against IMC provided cause for termination. Paragraph 2 does not mention this contingency. Moreover, the plaintiff's lawsuit does not fit the general category created by the listed definitions. Although the plaintiffs may not succeed on all their claims, I do not find them frivolous or fraudulent in any respect. Although IMC cites DeMarco v. Publix Super Markets, Inc., 360 So.2d 134 (Fla.Dist.Ct.App. 1978), which allowed an employer to terminate an employee who filed a personal injury suit against the employer, the case is distinguishable because it did not involve an employment for term. The court held that the employer could terminate the employee because "[t]he employment agreement . . . having been for an indefinite time, Publix could terminate [the employee] for any reason without incurring liability." Id. at 136. IMC did not employ Holman and Toomey at will; they had a contract for term. To allow IMC to discharge Holman and Toomey based on the lawsuit would be to insert a contractual term for which IMC did not bargain.
IMC seems to have understood that the lawsuit would have to be fraudulent in some way to fit the spirit of paragraph 2. In the termination letter, George Nicholas, IMC's Chief Executive Officer, justifies the termination, in part, because the plaintiffs filed "a lawsuit against the Company which is based upon false, fraudulent and malicious allegations." Pl.'s Mot. Summ. J. Ex. 19.
Moreover, even assuming that Holman and Toomey violated company underwriting guidelines, IMC cannot avail itself of this reason for cause because it did not adhere to the section's "notice and cure" provision. The agreement defines cause, in part, as failure "to perform the amount and quality of service to Employer reasonably expected" or "willful refusal to follow the Employer's policies and directives. Emp. Agr. ¶ 2. But termination is not proper under either prong unless the conduct "is not cured or rectified after reasonable notice thereof and a reasonable opportunity to do so." Id. Holman and Toomey have submitted affidavits indicating that IMC never informed them prior to termination of a violation of the company's underwriting guidelines. Holman Aff. ¶ 6; Toomey Aff. ¶ 6. Diana DiPino states she was never disciplined either. DiPino Aff. ¶ 4; DiPino Dec. ¶ 3. IMC counters with the affidavit of Timothy Griffin, the Vice President and Chief Underwriter for IMC, who states that both in writing and orally he and his staff informed Holman and Toomey of loan deficiencies. Griffin Aff. ¶ 5. IMC provides none of this correspondence, however, or testimony of those who communicated with CMM. Nor does Griffin state he informed Holman and Toomey that a failure to rectify any deficiencies would result in termination. Although Griffin does provide a log of deficiencies on loans originated at CMM during the relevant time period, Griffin Aff. Ex. A, Diana DiPino states that IMC created this log after the fact. Moreover, she notes that calls regarding deficiencies were a "low priority" for her and the IMC underwriter with whom she communicated. They were simply a "routine loan review and exchange of written comments." DiPino Dec. ¶ 5. Holman likewise refers to the discussions as a "management tool" by which IMC and CMM reached decisions. Sometimes CMM's interpretations controlled; other times IMC's did. Holman Dep. at 195-96. Other evidence affirms this. DiPino received excellent performance reviews. DiPino Dec. Ex. A. There simply is no evidence that IMC brought to Holman or Toomey's attention serious loan deficiencies, the continuation of which would lead to their dismissal. Compare AHC Physicians Corp. v. Dulock, 504 S.E.2d 464, 465 (Ga.Ct.App. 1998) (finding that an employer had complied with a notice and cure provision where it provided letters stating "more than mere criticisms" of employee's performance). In sum, I do not believe a reasonable juror could find that IMC complied with paragraph 2's "notice and cure" provision.
The plaintiffs have presented evidence rebutting IMC's argument that deficient performance prompted the discharge. They present the affidavits of Diana DiPino (the Senior Underwriter at CMM during the relevant time period) and Frank Antico (the Vice President of Operations, who supervised DiPino), neither of whom was discharged or disciplined for poor underwriting at CMM. DiPino Aff. ¶ 4; DiPino Dec. ¶ 3; Antico Aff. ¶ 4. Moreover, there is no dispute that IMC had its own "on site" underwriter at CMM as of January, 1999 and that he approved all of CMM's loans after that time. Yet IMC did not terminate the plaintiffs until either months later.
Last, IMC argues that it had cause to terminate the plaintiffs after CitiFinancial acquired IMC in July of 1999. It relies on Telesphere Int'l, Inc. v. Scollin, 489 So.2d 1152 (Fla.Dist.Ct.App. 1986), in which an employer hired an employee specifically to market overseas a hotel call accounting system. Id. at 1153. The employer subsequently abandoned the project and terminated the employee. Id. The court held that the project's end provided "cause" for terminating the employee. But there was no formal employment contract in that case, only a letter agreement allowing the employer to terminate, among other reasons, "for cause." Id. The letter did not contain a term of employment nor did it define "cause." Id. The present agreement, which provided a five-year term, defined cause and focused on egregious job-related conduct by the plaintiffs. It did not contain a cessation of business clause. Compare Monte Carlo Dev. Mgmt. Corp. v. Montgomery, 510 So.2d 1007, 1008 (Fla. Dist.Ct.App. 1987) (construing a cessation of business provision in a contract involving a term of employment). Thus, I find that a reasonable jury could not find that IMC terminated the plaintiffs for cause.
Although I grant the plaintiffs' motion for summary judgment on count VIII, I do not award their requested damages. Paragraph 6 provides for payment only of the plaintiffs' "base salary" for the term August 1999 to August 2002. Emp. Agr. ¶ 6. Benefits for this period are not ecoverable.
I also grant the plaintiffs' motion for summary judgment on count VII. The agreement clearly provides for pro rata payment of Holman and Toomey's August 1999 salary. Emp. Agr. ¶ 3(a). Again, however, it provides for payment only of the base salary, and not the benefits that the plaintiffs request. Accordingly, the plaintiffs may recover only the pro rata base salary payment.
I calculate the total recovery under counts VII and VIII as three years of salary for each plaintiffs (August 1, 1999 to August 1, 2002). At $300,000 per year, this equals $1.8 million.
IV.
The plaintiffs also filed a Motion to Amend the Amended Complaint. They ask to include a claim for fraud, alleging that Legler represented to them after September 9, 1997 that their 314,640 shares would be registered when he had no intention to register them. I grant the motion.
Under Fed.R.Civ.P. 15(a), leave to amend the complaint "shall be freely given when justice so requires." See Foman v. Davis, 371 U.S. 178, 182 (1962) (the mandate in Fed.R.Civ.P. 15(a) "is to be heeded"). Leave should be denied only when "the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile." Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999) (citation omitted). This case does not fit these circumstances. The defendants argue that the plaintiffs have known about the post-closing fraud theory since May 3, 1999. In a letter bearing that date, Stuart Marvin informed the plaintiffs' counsel that outside securities counsel had advised IMC that registering the shares would create "substantial difficulty for IMC because of a number of other pending transactions." Def.'s Mem. Opp'n Pl.'s Mot. to Amend Am. Compl at 5. Alternatively, they note that the plaintiffs have had notice to amend since the May 25, 2000 deposition of Peter Kolevzon. Kolevzon testified that he advised Legler of the problems with registering the plaintiffs' stock in September 1997. The plaintiffs argue that discovery on the debt offering did not end until the August 11, 2000 deposition of Ashley Robert Ise. The plaintiffs filed their motion on September 8, 2000. Although I am troubled by the plaintiffs' failure to file their motion sooner, I do not believe this time line suggests bad faith.
More importantly, absent prejudice, possible delay does not mandate a denial of leave. Deasy v. Hill, 833 F.2d 38, 41 (4th Cir. 1987) ("Delay alone, without prejudice, does not support the denial of a motion for leave to amend"). I do not believe the amendment prejudices the defendants. First, the proposed amendment relates to facts that the original complaint contained. Compl. ¶¶ 29-39; see Edwards, 178 F.3d at 243 (abuse of discretion for district court to deny motion to amend where amendment involved facts learned during discovery regarding matters contained in the complaint). Second, the defendants inquired at length about post-closing conversations between Legler and Toomey (and Holman) during Holman's deposition, Toomey's February deposition and Toomey's continued deposition on August 17, 2000. See Pl.'s Reply to Def.'s Opp'n to Mot. to Amend Ex. A, B, D. Compare Lone Star Steakhouse Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 940 (4th Cir. 1995) (not an abuse of discretion for court to deny leave to amend where proposed amendment concerned a defense that was "not the subject" of earlier discovery); Remington Arms Co. v. Modern Muzzleloading, Inc., 1998 WL 1040949, at *2 (M.D.N.C. Dec. 17, 1998) (denying leave to amend where no discovery taken on subject of amendment). Third, the plaintiffs filed the motion before summary judgment and prior to trial. Indeed, no trial date has been set. Compare Deasy, 833 F.2d at 41 (affirming denial of leave where amendment proposed "right before trial").
The defendants claim prejudice because they did not seek rulings on privilege assertions by two witnesses, Jordan Bailowitz and Steve Owen, whose testimony now is relevant to the proposed amendment. They may do so by motion. Moreover, to the extent that the defendants require additional discovery, I will entertain motions for a reasonable extension of discovery.
Nor does the claim appear futile. A cursory review of the affidavits reveals evidence to support the plaintiffs' amended theory of fraud. Although the defendants suggest that the plaintiffs cannot show reliance, I will not at this time treat the defendants' motions as ones for failure to state a claim. If they wish to brief this issue in such a motion or in a motion for summary judgment, they may, of course, do so. Accordingly, I grant the plaintiffs' motion to amend the second amended complaint.
An order effecting the rulings herein shall be entered forthwith.
ORDER
For the reasons stated in the foregoing memorandum, it is, this 9th day of January, 2001, hereby ORDERED that:
1. IMC's and Legler's motions for summary judgment on counts I, II and III are granted;
2. The plaintiffs' motion for summary judgment on counts IV and V is denied;
3. IMC's cross-motion for summary judgment on counts VII and VIII is denied;
4. The plaintiffs' motion for summary judgment on counts VII and VIII is granted and judgment is entered for the plaintiffs in the amount of $1.8 million;
5. The plaintiffs' motion to amend the amended complaint to state a count IX is granted;
6. The plaintiffs' motion for leave to file declarations is granted.