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dismissing aiding and abetting claims where plaintiff "failed to plead non-conclusory facts that Millennium had actual knowledge of BCP's breach of fiduciary duty and that Millennium provided substantial assistance to BCP"
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10 Civ. 4697 (GBD)
02-15-2011
JAMES FRANK HORVATH, Plaintiff, v. BANCO COMERCIAL PORTUGUES, S.A. and MILLENNIUM BCPBANK, N.A., Defendants.
MEMORANDUM DECISION AND ORDER
:
Plaintiff James Horvath brings this action against Defendants Banco Comercial Portugues, S.A. ("BCP"), a Portuguese bank, and Millennium BCP Bank, N.A. ("Millennium"), its U.S. subsidiary. Plaintiff alleges claims against BCP for common law fraud, breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, negligent misrepresentation, and violations of Section 10(b) of the Securities and Exchange Act of 1934, Rule 10b-5, and Section 206 of the Investment Advisers Act of 1 940. Plaintiff asserts claims for negligent misrepresentation and aiding and abetting a breach of fiduciary duty against Millennium. Defendants moves to dismiss the complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), for improper venue pursuant to Fed. R. Civ. P. 12(b)(3), and for failure to plead fraud with particularity pursuant to Fed. R. Civ, P. 9(b). Defendants' motion is granted.
Facts
James Horvath is a citizen of the United States and a former advertising executive. Compl. ¶¶ 4, 9. Horvath's wife was born and raised in Portugal and Plaintiff and his wife spend part of the year there. Id. ¶ 11.
In 2002, Horvath wanted to acquire investment properties in Europe and sought to open up a European bank account to facilitate that. Id. ¶ 11. Horvath already had personal accounts with Millennium in the United States and knew many of its senior executives socially. Id. ¶ 12. Millennium recommended that Horvath open up accounts with BCP in Portugal. Id. Horvath met frequently with BCP and Millennium executives in the U.S. Id. ¶ 18-21. He worked frequently with Estevao Horta ("Horta") who was based out of BCP's Lisbon office but traveled to the United States frequently for business. Id. ¶ 18.
The Agreements
Upon opening his account in 2002, Horvath and his wife signed a signature card acknowledging that they consented to the Genera] Terms and Conditions of the contract. See Horta Decl. Ex. A at 12. Plaintiff now contends that he does not remember receiving a copy of the General Terms and Conditions, which was in Portuguese, when he signed the signature card in 2002. See Horvath Decl. ¶ 8. Translated, the General Terms and Conditions requires that "for any disputes arising from the execution of the present agreement, the Courts of Lisbon or Oporto will have sole jurisdiction, with express waiver of any other." Horta Decl. Ex B § 12(4). In 2005, Horvath received and signed another copy of the agreement written in Portuguese, containing the same forum selection clause. See id. Ex. C. In 2006, Horvath received and signed an English translation of the General Terms and Conditions which also contained the same forum selection clause in English. Id.
Any documents referenced here have been incorporated by their reference in the Complaint. See Chambers v. Time Warner, Inc., 282 F.3d 147, 151-52 (2d Cir. 2002)
The Fraudulent Transactions
In 2005, Horvath received $4.5 million in real estate proceeds and placed those funds in his BCP account for investing. Id. ¶ 23. Horvath wanted to earn a modestly high rate of return in short-term investments and to preserve his principal. Id.
Horta recommended that Horvath purchase preferential shares in HSH Nordbank AG, a German bank. Id. ¶ 24. On Horta's recommendation, Horvath invested approximately $3.3 million. ¶ 29. What Horvath actually purchased were "Silent Participation Hybrid Equity Regulatory Securities" ("SPHERE") issued by the Bank of Luxembourg whereby the Bank of Luxembourg would use funds collected to make capital contributions to HSH Nordbank in exchange for prospective profit participations. Id. ¶ 25. Horta represented that these shares were callable on June 30, 2008 when in fact the shares were "perpetual" securities with no fixed maturity date and an earliest possible redemption date of June 30, 2011. Id. ¶¶ 26-27. These securities are not alleged to have been traded on a U.S. exchange, nor issued by a U.S. company. See id. ¶¶ 24-29. In fact, they could not be bought in the U.S. or for the benefit of a United States citizen. Id. ¶ 28.
Horvath also invested €995,300 in, on Horta's recommendation, "Snowball Notes," which Horta described to Horvath as securities issued by Helba, a regional German bank with a better credit rating than the Deutsche Bank. Id. ¶¶ 30-31. In fact, these were capital securities issued by an Island of Jersey Special Purpose Vehicle ("SPV"). Id. ¶ 32. Similar to the HSH shares, the SPV would make capital contributions to Helba in exchange for profit participation. Id. These securities were not registered in the U.S., nor were they supposed to be purchased to benefit a U.S. citizen. Id. ¶ 33.
Beginning in 2005 and continuing in 2006, Horvath complained about the declining balance in his account. See id. ¶¶ 35-37. Each time Horvath complained, Horta and others, including employees of Millennium, suggested that Horvath remain patient, even offering to cover his losses. Id. ¶¶ 36-41. 44. At one point, Fernando Abrantes, an employee of Millennium, allegedly told Horvath that the German securities were "very secure" and "at worst, the German bank securities would miss dividend payments but . . . [he would] still receive his principal at maturity." Id. ¶ 44. Over the course of several years, Horvath's account balance dropped from $4.5 million to approximately $600,000. Id. ¶ 34.
Claims against BCP
Federal Securities Act Claim
Horvath alleges a breach of the Securities Act of 1934 for BCP's material misrepresentations concerning the HSH and Snowball notes. This claim is squarely precluded under the Supreme Court's decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010). In Morrison, the Supreme Court held that it was "only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which § 10(b) [of the Securities Act of 1934J applies." Morrison, 130 S. Ct. at 2884. The Court created no exception for those transactions involving foreign securities but with significant U.S. contacts; in fact, the Court rejected out of hand such an analytical framework. See id. at 2886-2888 (rejecting the significant and material conduct test). Ultimately, the Court concluded that since the securities at issue were not listed on domestic exchanges and "all aspects of the purchases complained of by those petitioners" occurred outside of the United States, no claim had been stated and the Court dismissed the case. Id. at 2888.
Just as in Morrison, the securities at issue here are not listed on domestic exchanges nor were they purchased or sold in the United States. Though the Complaint does not indicate whether these securities were listed on foreign exchanges, the HSH Shares and the Snowball notes involve the purchasing of shares of German banks through Luxembourg and Island of Jersey entities. See Compl. ¶¶ 25, 32. These securities were purchased by BCP, a Portuguese bank. Therefore, the transactions at issue fall outside of the scope of Section 10(b) of the Securities Act and must be dismissed. See Morrison, 130 S. Ct. at 2888.
Forum Selection Clause
When opening his account, Horvath consented to a mandatory forum selection clause that requires "for any dispute arising from the execution of the present agreement, the Courts of Lisbon or Oporto shall have sole jurisdiction, with express waiver of any other." Horta Decl. Ex B § 12(4). Horvath attempts to circumvent this clause by arguing that he does not remember seeing a copy of the General Terms and Conditions in 2002 when he initially opened his account, and of the three contracts he signed, the first two were in Portuguese, a language he does not understand.
Defendants do not indicate under which procedural rule it seeks to dismiss the Complaint in light of the forum selection clause. The Second Circuit has dismissed cases where there was a forum selection clause for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1), improper venue pursuant to Fed. R. Civ. P. 12(b)(3) and failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). See Asoma Corp. v. SK Shipping Co., Ltd., 467 F.3d 817, 822 (2d Cir. 2006) ("The Supreme Court has not specifically designated a single clause of Rule 12(b) as the proper procedural mechanism to request dismissal of a suit based upon a valid forum selection clause, nor have we") (internal quotation marks omitted), see also AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d 148, 152 (2d Cir. 1984) (dismissing for lack of subject matter jurisdiction); Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (dismissing for improper venue); Evolution Online Sys., Inc. v. Koninklijke PTT Nederland N.V., 145 F.3d 505, 508 n. 6 (2d Cir. 1998) (dismissing for failure to state a claim). Thus, the Second Circuit has "refused to pigeon-hole these claims to a particular clause of Rule 12(b)," and does not require the application of one particular standard of review. See id.
In determining whether to dismiss a claim based upon a forum selection clause, the Second Circuit applies a four part test. See Phillips, 494 F.3d at 383. Under Phillips:
the first inquiry is whether the clause was reasonably communicated to the party resisting enforcement. The second step requires us to classify the clause as mandatory or permissive . . . Part three asks whether the claims and parties involved in the suit are subject to the forum selection clause. . . .The fourth, and final, step is to ascertain whether the resisting party has rebutted the presumption of enforceability by making a sufficiently strong showing that "enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.Id. at 383-84. (citations omitted). As to the first inquiry - whether the clause was reasonable communicated to the party resisting enforcement - Plaintiff contends there are two reasons why the agreement was not reasonably communicated. First, he contends that the first two agreements he signed were in Portuguese, and thus he did not know what he was signing. Second, he contends that he does not remember receiving a copy of the first agreement and only signed the signature card consenting to its terms.
As to the first, the fact that the first two contracts were in another language does not mean they were not "reasonably communicated" to him. Other than the language difference, the terms were not hidden. The forum selection clause was set off on its own and in normal sized font.
As to the language of the agreement, it is a fundamental principle of contract law that a person who signs a contract is presumed to know its terms and consents to be bound. Failure to read a contract, even if such failure is brought about by an inability to understand the language, is not an excuse or defense to enforcement of the contract terms. See AXA Versicherung AG v. New Hampshire Ins. Co., 391 Fed. App'x. 25, 30 (2d Cir. 2010) ("If the signer could read the instrument, not to have read it was gross negligence; if he could not read it, not to procure it to be read was equally negligent; in either case the writing binds him") (citing Pimpinello v. Swift & Co., 253 N.Y. 159, 162-63, 170 N.E. 530 (1930)); Paper Express Ltd. V. Pfankuch Maschinen GmbH, 972 F.2d 753, 758 (7th Cir. 1992) ("the fact that the rules were in German [does not] preclude enforcement of the [forum selection clause]. In fact, a blind or illiterate party (or simply one unfamiliar with the contract language) who signs the contract without learning of its contents would be bound. Mere ignorance will not relieve a party of her obligations and she will be bound by the terms of the agreement"); Morales v. Sun Constructors, Inc. 541 F.3d 218, 222 (3d Cir. 2008) ("In the absence of fraud, the fact that an offeree cannot read, write, speak, or understand the English language is immaterial to whether an English-language agreement the offeree executes is enforceable"); Weiss v. La Suisse 154 F.Supp.2d 734. 737 (S.D.N.Y. 2001) ("While the Court was originally troubled by the fact that the paperwork to obtain the policies was printed in a language the plaintiffs do not speak, defendants remind me of the ancient contract maxim that even a blind man must protect himself by procuring someone to read a contract for him"); Envirolite Enterprises, Inc. v. Glastechnische Industrie Peter Lisec Gesellschaft M.B.H., 53 B.R. 1007, 1013-14 (S.D.N.Y. 1985) (enforcing a forum selection clause despite it being in German when the rest of the contract was in English); Cheshire Place Associates v. West of England Ship Owners Mut. Ins. Ass'n (Luxembourg), 815 F. Supp. 593, 597 (E.D.N.Y 1993) ("Presumably Frank reads and understands English. Even if he does not, failure to read or investigate the terms of the contract one signs is not a defense to enforcement of the contract"); Gaskin v. Stumm Handel GmbH, 390 F.Supp. 361, 367 (S.D.N.Y. 1975) (enforcing a forum selection clause in German even when one party did not speak German and asked for and did not receive an English translation).
Plaintiff is a sophisticated business man who has a residence in Portugal and has a wife who speaks Portuguese fluently. He signed multiple agreements containing the forum selection clause, including one in English. He cannot now circumvent these agreements by saying he did not understand the language of the contract. It was his responsibility to request a translation or to request clarification of the terms he was signing.
In fact, Plaintiff first asked for, and received, an English version of the contract in 2006, nearly four years after he signed the initial agreement. See Horta Decl. ¶ 11. He could have requested and received such a translation at the first two opportunities, when he opened the account in 2002 or again acknowledged receipt of the Terms and Conditions in 2005.
Further, the fact that Plaintiff now alleges that he does not remember receiving a copy of the agreement does not mean the forum selection clause was not reasonably communicated to him and thereby unenforceable. See Anwar v. Fairfield Greenwich, Ltd., 2010 WL 3910197, at *4 (S.D.N.Y. Sept. 27, 2010) (enforcing forum selection clause despite Plaintiff's allegation that he never saw the agreement that contained the clause); Madison Who's Who of Executive and Prof'ls Throughout The World, Inc. v. SecureNet Payment Sys., LLC, 2010 WL 2091691, at *3 (E.D.N.Y. May 25, 2010) (citing to PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1201 (2d Cir.1996)) (enforcing a forum selection clause despite Plaintiff's allegation that he never saw it when it was incorporated by reference). The forum selection clause was reasonably communicated to Plaintiff.
As to the second requirement, a mandatory forum selection clause is one where it "grants exclusive jurisdiction to a selected forum," while a permissive one "only reflects the contracting parties' consent to resolve disputes in a certain forum, but does not require that disputes be resolved in that forum." Macsteel Intern. USA Corp. v. M/V Larch Arrow, her engines, boiler, etc., 354 Fed. App'x. 537, 538 (2d Cir. 2009). In other words, to be mandatory, a forum selection clause must contain mandatory and exclusive language. See id. The forum selection clause contained in the Terms and Conditions provides such language. It provides that the Courts of Lisbon shall be the "sole jurisdiction" with "express waiver" of any other. By its plain language, the agreement requires any dispute to be resolved exclusively in the courts of Lisbon, Portugal. This is plainly mandatory. See id.
As to the third Phillips requirement, Horvath's claims are subject to the forum selection clause. The clause applies to all claims that "arise out of the execution of the present agreements." All of Plaintiff's claims against BCP are grounded on his investment advisor relationship with BNP. BNP would have violated the Investors Advisors Act, made fraudulent misrepresentations about investments and breached its fiduciary duty all arising out of the parties' agreements. All of his claims arise "post contract." See Armco Inc v. North Atlantic Insurance Comp Ltd., 68 F. Supp. 2d 330 (S.D.N.Y. 1999) (drawing a distinction between claims that arose post- and pre- contract). Therefore, Horvath's claims relate to the agreements and are subject to the clause. See Abbey v. Skokos, 303 Fed. App'x 911, 913 (2d Cir. 2008) (finding that a forum selection clause applied to securities fraud claims when the parties were connected via a partnership agreement and the claims arose through that relationship); Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1361 (2d Cir. 1993) (finding that a forum selection clause that applied to all claims "relating to" the contract was not restricted to mere breach of contract claims and incorporated the federal securities laws).
Having found that the first three Phillip factors apply, the forum selection clause enjoys a strong presumption of enforceability. See Phillips, 494 F.3d at 383; Aguas Lenders Recovery Group v. Suez, S.A., 585 F.3d 696, 700 (2d Cir. 2009). To overcome this presumption, Plaintiff bears the burden of showing that enforcement would be unreasonable or unjust or that the clause is invalid because of fraud or overreaching. See id.; TradeComent.com LLC v. Google, Inc., 693 F. Supp. 2d 370, 381 (S.D.N.Y. 2010).
In his response to Defendants' motion, Plaintiff does not articulate any basis upon which this Court could conclude that the forum selection clause should be invalidated because of fraud or overreaching. Rather, Plaintiff contends that the forum selection clause should not be enforced because Defendant allegedly sold securities to him without registering with the appropriate United States federal agencies. Pl. Mem. of Law at 18-19. Plaintiff did not allege such a violation of law in his Complaint. Regardless, this does not rise to the level of "unreasonable" or "unjust."
Forcing Plaintiff to abide by his agreement and litigate this case in Portugal would not be unreasonable or unfair. See Roby's, 996 F.2d at 1363. Generally, a forum selection clause is unreasonable "(1) if their incorporation into the agreement was the result of fraud or overreaching, (2) if the complaining party will for all practical purposes be deprived of his day in court, due to the grave inconvenience or unfairness of the selected forum, if the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy if the clauses contravene a strong public policy of the forum state," Id. (citing to The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32 L.Ed.2d 513 (1972)); S.K.I. Beer Corp v. Baltika Brewery, 612 F.3d 705, 711-12 (S.D.N.Y. 2010). Plaintiff established an investment account in Portugal with a Portuguese firm to invest in foreign securities and has a residence in Portugal. It cannot be said that the choice of Portugal as a forum is either gravely inconvenient or unfair.
Plaintiff has a full opportunity to pursue his claims in Portugal. Plaintiff has not contended that application of the forum selection clause deprives him of a remedy. See Roby's, 996 F.2d at 1363 ("it is not enough that the foreign law or procedure merely be different or less favorable than that of the United States. Instead, the question is whether the application of the foreign law presents a danger that the [Plaintiff] will be deprived of any remedy or treated unfairly.")(internal citations and quotation marks omitted). Nothing in this record indicates that enforcing the forum selection clause would contravene a strong public policy of New York, especially given that Plaintiff's federal securities claims are precluded under Morrison by virtue of his foreign investment activity.
Because Plaintiff has not presented a sufficient showing to overcome the presumption of enforceability of the forum selection clause, Plaintiff's claims against BCP are dismissed.
Claims against Millennium
Plaintiff asserts a claim for negligent misrepresentation and aiding and abetting against Millennium Bank. Defendants move to dismiss these claims for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). The claims against Millennium are dismissed.
Millennium has consented to jurisdiction for any claims asserted against it by Plaintiff in Portugal. See Lourenco Decl. ¶ 6, Def. Mem. of Law at 16.
In deciding a 12(b)(6) motion, the court is to liberally construe the complaint, accepting the factual allegations as true and drawing all reasonable inferences in Plaintiff's favor. Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir. 2008). The complaint must plead "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). However, the rule requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation" or a series of legal conclusions and factually unsupported accusations. Id.
Plaintiff's common law claims for negligent misrepresentation and aiding and abetting a breach of fiduciary duty against Millennium are precluded by New York's Martin Act, N.Y. Gen. Bus Law § 352 et seq. ("Martin Act" or "Act"). The Martin Act prohibits various fraudulent and deceitful practices in the distribution, exchange, sale and purchase of securities. See id. § 352-c(1)(c); CPC Int'l Inc. v. McKesson Corp., 70 N.Y.2d 268, 275, 519 N.Y.S.2d 804, 514 N.E.2d 116 (1987)). The purpose of the Martin Act "[is] to create a statutory mechanism in which the Attorney-General would have broad regulatory and remedial powers to prevent fraudulent securities practices by investigating and intervening at the first indication of possible securities fraud on the public." CPC Int'l Inc. at 70 N.Y.2d at 277 (citing N.Y. General Business Law §§ 352, 353, 353-a, 354, 358). The Attorney General's authority is exclusive and the Act creates no implied private right of action. See id.
Because of this, the Second Circuit and many courts within this district have found that non-fraud related common law securities claims are precluded by the Martin Act because sustaining such common law actions would effectively create an end-run around the New York Attorney General's exclusive enforcement authority. See Castellano v. Young & Rubicam, Inc., 257 F.3d 171, 190 (2d Cir. 2001) (finding that Plaintiff's breach of fiduciary duty claim is barred by the Martin Act); Ashland, Inc., 700 F. Supp. 2d at 472 (dismissing Plaintiff's negligent misrepresentation and breach of fiduciary duty claims as precluded under the Martin Act); Abu Dhabi Comm. Bank, 651 F. Supp. 2d at 472 (finding that the Martin Act preempts "the following common law claims when they are predicated on the purchase or sale of securities within or from New York: negligence, breach of fiduciary duty; negligent misrepresentation; [and] unjust enrichment."); Kassover v. UBS AG, 619 F.Supp.2d 28, 36-37 (S.D.N.Y. 2008); Sabella v. Scantek Medical, Inc., 2009 WL 3233703, at *37 (S.D.N.Y. 2009) (dismissing negligent misrepresentation and breach of fiduciary duty claims for foreign bought securities because they were precluded under the Martin Act); Kerusa Co. LLC v. W10Z/515 Real Estate Ltd. Partnership, 12 N.Y.3d 236, 244 (N.Y. 2009) (recognizing that under the Martin Act there is no private right of action).
The Martin Act applies if the underlying transactions that give rise to the claims occur "within or from" New York. See id. § 352-c(1)(c). Courts in this District have interpreted the phrase "within or from" to apply to transactions where Plaintiff alleges that "a substantial portion of the events" giving rise to the claim occurred in New York. See Ashland Inc. v. Morgan Stanley & Co., 700 F. Supp. 2d 453, 472 (S.D.N.Y. 2010); Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 651 F. Supp. 2d 155, 181 (S.D.N.Y. 2009); Heller v. Goldin Restructuring Fund, L.P., 590 F. Supp. 2d 603, 611 n.9 (S.D.N.Y. 2008).
Though much of the claims against BCP are international in scope, the events giving rise to the claims against Millennium, a U.S. based company, are decidedly more local. Some of Millennium's activity occurred in Newark, NJ, but the activity that gives rise to the claims against Millennium occurred in New York. Horvath had meetings with Millennium in New York where Millennium employees made all the alleged material misrepresentations about the maturity date of the "Snowball Notes." See Compl. ¶¶ 44, 45. These statements form the basis of Horvath's negligent misrepresentation claim. Also at these New York meetings, Millennium allegedly provided the "substantial assistance" that is the basis of Horvath's aiding and abetting claim. See Compl. ¶¶ 42-46, 79-80; see also, Musalli Factory For Gold & Jewelry v. JPMorgan Chase Bank, N.A., 261 F.R.D. 13, 23 (S.D.N.Y. 2009) (an aiding and abetting a breach of a fiduciary duty requires, inter alia, a finding that defendant provided "substantial assistance" to the primary violator, which requires "[it] affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed; and (2) the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated."); Dover Ltd. v. A.B. Watley, Inc., 423 F.Supp.2d 303, 331 (S.D.N.Y.2006) (finding that the assertion in the Complaint that a substantial portion of the events took place in New York sufficient).
Because alleged events that took place in New York are central to Horvath's claims against Millennium, Horvath's claims are within the ambit of the Martin Act and are therefore precluded.
Even if the claims were not precluded, Plaintiff has failed to properly plead the elements of those claims. To properly state an aiding and abetting claim for breach of fiduciary duty, Plaintiff must plead sufficient facts establishing: "(1) the existence of a ... violation by the primary (as opposed to the aiding and abetting) party; (2) 'knowledge' of this violation on the part of the aider and abettor; and (3) 'substantial assistance' by the aider and abettor in the achievement of the primary violation." Design Strategy, Inc. v. Davis, 469 F.3d 284, 303 (2d Cir. 2006). The knowledge required is actual knowledge of the breach. Musalli Factory For Gold & Jewelry v. JPMorgan Chase Bank, N.A., 261 F.R.D. 13, 23 (S.D.N.Y. 2009) (citing Goldin Assocs., L.L.C. ex rel. SmarTalk Teleservices, Inc. v. Donaldson, Lufkin & Jenrette Sec. Corp., No. 00 Civ. 8688, 2003 U.S. Dist. LEXIS 16798, at *27 (S.D.N.Y. Sept. 25, 2003)) (dismissing the Complaint when Plaintiff plead no facts suggesting that Defendant had actual knowledge). Also, an aider and abetter provides substantial assistance when "(1) [it] affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed; and (2) the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated." Id. (internal citations and quotation marks omitted).
Plaintiff has failed to plead non-conclusory facts that Millennium had actual knowledge of BCP's breach of fiduciary duty and that Millennium provided substantial assistance to BCP. Plaintiff alleges that BCP breached its fiduciary duty because it "failed to fully disclose all relevant information concerning . . . securities, [and] failed to provide disinterested advice concerning its recommendations that Horvath continue to hold the securities." Compl. ¶ 75. Thus, Plaintiff would have to plead that Millennium had actual knowledge that BCP did not disclose relevant information about the Snowball and HSH Notes, and failed to provide disinterested advice when it advised Plaintiff to continue holding the securities. Other than baldy asserting that Millennium had actual knowledge, the Complaint does not allege any facts that allow this Court to infer that Millennium had such knowledge. Plaintiff points to one meeting between Fernando Abrantes, a manager at Millennium, and Horvath where Abrantes tried to reassure Horvath and mentioned that Horvath's principle in the HSH and Snowball Notes was secure. See Compl. ¶ 44. This does not demonstrate that Millennium had actual knowledge that BCP had not disclosed to Horvath that the HSH and Snowball Notes were perpetual, risky securities. For similar reasons, Plaintiff has failed to plead sufficient facts to establish that Millennium provided BCP substantial assistance. Plaintiff has not pled any facts that suggest that Millennium affirmatively assisted, helped conceal or failed to act on BCP's allegedly misrepresentations. Because Plaintiff has failed to state an aiding and abetting a breach of fiduciary duty claim, this claim must be dismissed.
To properly state a claim for negligent misrepresentation under New York law, Plaintiff must allege sufficient facts to establish: "(1) the defendant had a duty, as a result of a special relationship, to give corrective information; (2) the defendant made a false representation that he or she should have 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 rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment." Hydro Investors, Inc. v. Trafalgar Power, Inc., 227 F.3d 8, 20 (2d Cir. 2000). Plaintiff fails to allege that Millennium and Horvath were in a special relationship. Millennium is a nationally chartered bank and Plaintiff had personal accounts there. See Compl. ¶¶ 6, 12. However, Plaintiff does not allege any facts that suggest that Millennium acted in any way other than as a bank. A bank-depositor relationship is not a fiduciary relationship. See Nay ex rel Thiele v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 2006 WL 2109467, at *6 (S.D.N.Y. 2006) (citing Banque Arabe et Internationale D'Investissement v. Maryland Nat'l Bank, 57 F.3d 146, 158 (2d Cir. 1995)). Because Plaintiff fails to plead sufficiently the elements of negligent misrepresentation, this claim must also be dismissed.
Conclusion
Plaintiff's Complaint is dismissed in its entirety.
Dated: February 15, 2011
New York, New York
SO ORDERED:
/s/_________
GEORGE B. DANIELS
United States District Judge