Opinion
117054/07.
October 28, 2009.
Defendants move to dismiss the plaintiffs' complaint, filed on December 21, 2007, which asserts one count of fraud, on several independent grounds, pursuant to CPLR 3211 (a) (1), (a) (3), (a) (7), (a) (8), and CPLR 3016 (b). In response, plaintiffs served an amended complaint dated September 29, 2008, in which, they add a claim for breach of contract and withdraw all claims against Winchester Global Trust Company Limited, Winchester Fiduciary Services, Ltd., and William F. Maycock. The remaining defendants, Olympia Capital International, Inc. (OCI), Olympia Capital Associates, L.P. (OCA), Brooke Securities Holdings, Inc. (BSHI), Oscar P. Lewnowski and Barbara Lewnowski argue that the amended complaint does not cure any of the alleged legal deficiencies raised by defendants' motion, and that the amended complaint should be dismissed in its entirety.
FACTUAL ALLEGATIONS
In 1998, plaintiff Conrad Seghers (Seghers) and non-party James Dickey began several hedge funds, including Integral Hedging, L.P. (III), Integral Arbitrage, L.P. (IA), and Integral Equity, L.P. (IE). The general partner of these Texas-based hedge funds was Integral Investment Management, L.P. (JIM), which, in turn, was controlled by its general partner, Integral Management, LLC (IM). None of these Integral entities is a party to this action. In 2000, Seghers launched plaintiff Integral Hedging Offshore, Ltd. (IHO), an offshore hedge fund. The amended complaint refers to IH, IA, IE, and plaintiffs IHO, Exponential Returns, L.P. (ER) and Pinnacle Option Fund (POP) as the "Funds." Amended Complaint, ¶ 20.
Notably, plaintiffs Komodo Holdings, Ltd. (Komodo), Exponential Returns Management, L.P. (ERM), and Galileo Fund Offshore, L.P. (Galileo) are not included within the definition of "Funds," are not signatories to any agreement with any of the defendants, and their role as a plaintiff in this lawsuit is not explained anywhere in the amended complaint.
The Amended Complaint alleges that, in June 2000, the Funds entered into an Agency and Administration Agreement with OCI, pursuant to which OCI agreed to perform certain administrative services, such as valuing the Funds, preparing the financial reports of the Funds, and reporting and distributing this information to the Funds' investors.
Although only OCI was named administrator, plaintiffs allege that BSHI and its subsidiary, OCA, were all paid significant fees by the Funds, based on a percentage of the Funds' asset values. Plaintiffs allege that OCI, OCA and BSHI operated as a single business enterprise, that the same individuals control the three companies, that duties required to be performed by OCI under the agreement were performed by employees of OCA, and that the three companies are essentially one and the same. OCI and OCA arc grouped together as both "Olympia" and "Olympia Capital." Amended Complaint, ¶¶ 1, 29.
It is undisputed that, in 2001, the Funds lost a significant portion of their value. In October 2001, OCI resigned as the administrator of the Funds, effective January 4, 2002. At some point, the Securities and Exchange Commission (SEC) launched an investigation, and in 2002, IA, IE and IH were placed in receivership at the direction of a Texas state court.
The amended complaint alleges that the defendants, in their role as administrator and agent of the Funds, breached their contract with the plaintiffs, and, through their deceit and malfeasance, "destroyed the viability of once-promising and producing hedge funds and the financial lives of the individual plaintiffs." Amended Complaint, ¶¶ 1, 24-26. The amended complaint asserts two causes of action. The first cause of action alleges that defendants OCI, BSHI and OCA violated the terms of the Agency and Administration Agreement numerous times, as more fully discussed below. The second cause of action alleges that these companies, together with Oscar Lewnowski, OCI's Chairman, and Barbara Lewnowski, then the Senior Vice President of OCA, committed fraud. Misrepresentations were allegedly made by these defendants to the Funds' investors, the SEC, and the court-appointed receiver for IH, IA, IE, which resulted in the destruction of the Funds and Seghers being held responsible for Olympia Capital's own misdeeds.
Defendants move to dismiss the amended complaint on several grounds. First, they argue that the court lacks personal jurisdiction over defendants OCI and Oscar Lewnowski. Second, they contend that all of the plaintiffs' claims are barred by the statute of limitations. Third, defendants contend that the amended complaint fails to plead fraud with specificity. Fourth, any allegations relating to OCI's and OCA's cooperation with the SEC fail, because these entities are immune from liability for any statements made to the SEC in connection with its investigation or trial of Seghers.
More specifically, defendants contend that when the Funds collapsed in 2001, Seghers and James Dickey immediately became the target of an investigation by the SEC for violating the securities laws with respect to the purchase and sale of shares in IE, IA, and IE. See Roll Affirm., Exh. 1. In 2004, Seghers was tried, and found liable by a Texas jury of securities fraud for overstating the value of the III, IA and IE domestic hedge funds by sending this information to OCA, who, in turn, sent monthly and quarterly statements to the investors based on Seghers' fraudulent overstatements. See id., Exh. 4, at 2. Seghers was permanently barred by the SEC from ever working in the securities industry as an investment manager. Id., Exh. 5. The administrative judge approved the SEC's proposed sanctions, despite conceding that they were harsh, because Seghers' conduct was "egregious, recurrent, and committed with a high degree of scienter." Id., at 5. A permanent bar was deemed warranted because, even after his trial, Seghers still failed to see the wrongfulness of his conduct, and was continuing to blame everyone but himself. Id.
Defendants offer documentary evidence that, immediately following Seghers' conviction, he filed two other lawsuits in which he claims that others were responsible for the securities fraud of which he was convicted. On June 16, 2006, he filed suit against Morgan Stanley, the Funds' broker, in Manhattan federal court. The complaint in that lawsuit alleges that Morgan Stanley provided false trade confirmation, account statements and misleading information, directly leading to the destruction of 1H, IE, 1A, IHO, Galileo, and Seghers' own career and reputation. See Roll Affirm., Exh. 7, ¶¶ 59, 65, 63-63. Seghers also contended that Morgan Stanley lied to the SEC and other authorities, in an effort to make him the "fall guy" for its own errors and mistakes. Id., ¶¶ 4, 63-64. The court granted Morgan Stanley's motion to dismiss the action, with prejudice, on the ground that all of the claims were time-barred. See Seghers v Morgan Stanley DW, Inc., 2007 WL 1404434 (SD NY 2007).
Seghers and IHO also sued Deloitte Touche, LLP (Deloitte), the Funds' accountants, on June 19, 2006, asserting claims for fraud and breach of contract. See Roll Affirm., Exh. 8: Complaint, Seghers v Deloitte Touche USA, LLP, Index No. 602135/06 (Sup Ct, NY County). Seghers and IHO claimed that Deloitte had "destroyed" the "business of IHO and the career and reputation of Seghers" ( id., ¶ 1), because the valuation method it certified and approved was false and deceptive and misleading to investors. Id. The allegations against Morgan Stanley included the claim that Deloitte was responsible for the SEC lawsuit and adverse jury verdict. Id., ¶ 21. The court dismissed all but one claim against Deloitte. Seghers v Deloitte Touche USA LLP, 17 Misc 3d 1118 (A), 2007 NY Slip Op 52060(U) (Sup Ct, NY County 2007).
DISCUSSION
Defendants argue that the court lacks personal jurisdiction over Oscar Lewnowski and OCI, and that both defendants were not properly served with the summons and complaint.
Plaintiffs do not dispute defendants' claim that Oscar Lewnowski and OCI were served with the summons and original complaint by United States "Express Mail" to an address in Bermuda. Service by mail is not complete, however, unless the defendant signs and returns to the plaintiff an acknowledgment of receipt within 30 days. CPLR 312-a (b), (e). Neither of these defendants accepted service of process by mail, and plaintiffs have failed to prove that they served process anew, using alternate means, either within 120 days of the filing of this action, as required by CPLR 306-b, or otherwise. See Ananda Capital Partners, Inc. v Stav Elec. Sys. (1994) Ltd., 301 AD2d 430 (1st Dept 2003); Brown v Doxsee Sea Clam, Co., 231 AD2d 440, 443 (1st Dept 1996). Accordingly, the claims against defendants OCI and Oscar Lewnowski are dismissed, without prejudice, for improper service of process.
The only affidavits of service on file with the County Clerk are for defendants OCA and Barbara Lewnowski.
Plaintiffs also fail to challenge defendants' argument that the court lacks personal jurisdiction over Oscar Lewnowski, the Chairman of OCI. Plaintiffs do not dispute the following: that Oscar Lewnowski is a citizen of Austria and a resident of Bermuda; that he does not have an office, residence or domicile in New York; that he does not own real or personal property in New York; that he does not conduct any personal business in New York; and that he never came to New York in connection with the allegations in this lawsuit. Lewnowski Aff., ¶¶ 3, 4, 6, 11. While he is the Chairman of OCI, and plaintiffs allege that he had to approve all of the major terms of the Agency Administration Agreement (Amended Complaint, ¶¶ 23), there arc no allegations that he personally engaged in any purposeful activity in New York in connection with any of the allegations in this lawsuit. Thus, in addition to improper service of process, the action must be dismissed as against Oscar Lewnowski for lack of personal jurisdiction.
With respect to defendant OCI, defendants submit evidence that it is a British Virgin Islands (BVI) corporation with its principal and only place of business in Hamilton, Bermuda. Amended Complaint, § 11; Murray Brown Aff., ¶ 3. Defendants maintain that OCI is not licensed to do business in New York and has no property or assets in New York (Murray Brown Aff., ¶ 6); that OCI's representative signed the Agency and Administration Agreement in Bermuda ( id., ¶ 58); and that the agreement provides that the parties "understand and accept that the Agent and Administrator is not in a position, and shall not in any event be required, to engage in any activity or provide any services within the United States." Id., Exh.3, at 1, § 2.
Despite any private contractual agreements between OCI, BSHI and its subsidiary, OCA, it is undisputed that OCA, a New York limited partnership, performed certain of OCI's duties under the Agency and Administration Agreement. Murray Brown Aff., ¶ 62; Lewnowski Aff., ¶ 17. Plaintiffs allege that the agreement itself was negotiated with representatives of OCA in New York, that the three companies were described as affiliates; and that the same individuals control all three companies. See Amended Complaint, ¶¶ 19-21, 23, 31. The documentary evidence defendants offer does not conclusively refute plaintiffs' argument that personal jurisdiction exists over OCI, because OCA acted as OCI's agent in New York. CPLR 302 (a); Kreutter v McFadden Oil Corp., 71 NY2d 460, 467 (1988) (plaintiff need only convince the court that the defendant's agent engaged in purposeful activities in New York in relation to the transaction for the benefit of and with the knowledge and consent of the defendant, who exercised some control over the agent in the matter).
Thus, while the action is dismissed only as to defendants Oscar Lewnowski and OCI for lack of personal jurisdiction, as discussed below, all of the claims against all of the defendants are time-barred.
Defendants argue that Texas' four-year statute of limitations for fraud and breach of contract applies due to the borrowing statute, and that all of plaintiffs' claims arising out of the Agency and Administration Agreement are time-barred, because they are based entirely on activities that occurred in 2000 and 2001. Even if New York's longer six-year statute of limitations applies, defendants contend that the claims are all still time-barred, because they are based on acts that occurred more than six years prior to the filing of this action on December 21, 2007.
In response, plaintiffs argue that either the law of BVI or New York applies, and that the applicable statute of limitations is six years. They contend that BVI law applies, because the Agency and Administration Agreement provides that it is to be construed and interpreted in accordance with the laws of BVI. The lawsuit is allegedly timely, because it was filed within six years of the January 4, 2002 termination of OCI's duties as administrator of the funds and other unspecified breaches of contract and frauds occurring from 2002 to 2006.
Plaintiffs' argument that the choice of law provision in the Agency and Administration Agreement requires the court to apply BVI's statute of limitations to their breach of contract claim is rejected. New York courts apply contractual choice of law clauses only to substantive issues. Sears, Roebuck Co. v Enco Assoc., 43 NY2d 389, 397 (1977); Portfolio Recovery Assoc, LLC v King, 55 AD3d 1074, 1075 (3d Dept 2008), lv granted 12 NY3d 711 (2009); Education Resources Inst., Inc. v Piazza, 17 AD3d 513 (2d Dept 2005). '"[T]he law of the forum normally determines for itself' whether a given question is one of substance or procedure" ( Tanges v Heidelberg North Am., Inc., 93 NY2d 48, 54), and "Statutes of Limitation arc generally considered procedural because they are '[v]iewed as pertaining to the remedy rather than the right.'" Id., at 54-55 [citations omitted].
New York's borrowing statute requires that a cause of action brought by a nonresident that accrues outside New York be timely under the limitation periods of both New York and where the cause of action accrued. CPLR 202; Global Fin. Corp. v Triarc Corp., 93 NY2d 525, 528 (1999); Aronitz v PricewaterhouseCoopers LLP, 27 AD3d 393, 394 (1st Dept 2006). CPLR 202 is intended to prevent nonresidents from forum shopping to take advantage of a longer New York limitations period. Antone v General Motors Corp., 64 NY2d 20, 27 (1984). For purposes of a CPLR 202 analysis, a cause of action accrues where the injury is sustained, and where an "injury is purely economic, the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss." Global Fin. Corp. v Triarc Corp., 93 NY2d at 529; Whale Telecom Ltd. v Qualcomm Inc., 41 AD3d 348 (1st Dept 2007).
There is no dispute that the individual plaintiffs, Seghers and his wife, Winifred B. Seghers, are residents of Texas (Amended Complaint, ¶¶ 2, 3), were injured in Texas, and the borrowing statute applies to their claims. Accord Seghers v Deloitte Touche USA LLP, 17 Misc 3d 1118 (A), 2007 NY Slip Op 52060(U), at *6; Seghers v Morgan Stanley DW, Inc., 2007 WL 1404434, at *3. Plaintiffs Galileo, ER, ERM and POP arc all limited partnerships organized under Texas law. Id., ¶¶ 2, 3. Defendants argue that these funds were all managed by Seghers from his offices in Texas, and plaintiffs do not dispute this. There is no question that the borrowing statute applies to these four funds, and, therefore, the only question is whether the borrowing statute applies to any claims by plaintiffs IHO or Komodo.
The parties dispute whether plaintiff IHO is a nonresident suing over a claim that accrued outside of New York, and thus subject to the borrowing statute. The amended complaint alleges that this hedge fund is an "International Business Company domiciled in the British Virgin Islands." Amended Complaint, ¶ 6. Defendants maintain that IHO was merely incorporated in BVI, and that it was, at all times relevant to this litigation, managed by Seghers from his offices in Texas. They submit an affidavit that Seghers provided in the Texas receiver's litigation ( Art Institute of Chicago v Integral Hedging, L.P., Cause No. 01-10623 [298th Jud Dist, Dallas, Texas]), in which Seghers stated, under oath, that IHO "did business in Texas, has a mailing address in Texas, and whose investment advisor was located in Texas" (Roll Affirm., Exh. 12: Segher Aff., ¶ 6), and that Seghers handled all of the negotiations of the Agency and Administration Agreement, which he entered into on behalf of IHO and the Texas funds, from Dallas, Texas. Id., ¶ 5.
Plaintiffs argue here, and in prior litigations, that IHO's business operations were conducted principally in New York, and that most of its activities, including marketing, documentation, valuations, the creation of shareholder letters, notifications and statements occurred in New York, and that New York was the location of its fund administrator, broker and legal counsel. See Seghers v Thompson, 2006 WL 2807203, at * 20 (SD NY 2006); Seghers v Deloitte Touche USA LLP, supra, 17 Misc 3d 1118 (A), 2007 NY Slip Op 52060(U), at *5. I notes that the May 28, 2002 shareholders' meeting where Seghers was purportedly ousted as a director of IHO took place in New York. Seghers v Thompson, supra, at * 20.
Defendants have failed to conclusively establish that IHO's principal place of business was Texas for purposes of applying the borrowing statute. Nevertheless, as discussed below, even under New York's longer six-year statute of limitations, any claim asserted on behalf of IHO is time-barred.
Plaintiff Komodo is also alleged to be an "International Business Company domiciled in the British Virgin Islands." Amended Complaint, ¶ 4. Except for this allegation, the company is not mentioned anywhere else in the pleading. In opposition to the motion, defendants maintain only that Komodo is a shareholder of IHO ( see Pls. Opp. Memo., at 14), but it is wholly unclear whether Komodo is asserting a claim derivatively on behalf of IHO, and whether Komodo has standing to assert a derivative claim on IHO's behalf under BVI law. However, the issue need not be reached herein, because even assuming that Komodo has standing and the statute of limitations to be applied is New York's six years, any contract or fraud claim by Komodo is time-barred.
The Texas statute of limitations for breach of contract is four years (Tex Civ Prac Rem Code § 16.051), while New York's statute of limitations for contract claims is six years. CPLR 213 (2), (8). An action for breach of contract accrues immediately upon breach; that is, "when a party fails or refuses to do something he has promised to do." Seureau v ExxonMobil Corp., 274 SW3d 206, 227 (Tex App, 14 Dist 2008); see also Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399, 402(1993).
The amended complaint alleges that the Agency and Administration Agreement was entered into in June 2000 (Amended Complaint, ¶ 24), although not formally executed by OCI until August 3, 2000, Id., ¶ 26; see also Murray Brown Aff., Exh. 3. It is further alleged that, "[o]n September 28, 2001, the height of the crucial time period for the Funds, without cither IIM's or the Funds' authorization. Olympia Capital mailed shareholders a letter notifying the shareholders of Olympia's suspension of calculation of net asset values of the Funds." Amended Complaint, ¶ 48. As a result, numerous investors made redemption requests to the Funds, which effectively destroyed them. Id., ¶¶ 48-49. It is further alleged, that on that day, September 28, 2001, Olympia resigned its position as administrator of the Funds, effective 90 days from that date, January 4, 2002. Id., ¶ 49. On November 29, 2001, Seghers, on behalf of IIM and the Funds, wrote a letter to Olympia Capital in which he outlined "numerous complaints" about its performance under the Agency and Administration Agreement. Id., ¶ 51; see also Roll Affirm., Exh. 13. These complaints are nearly identical to the alleged breaches outlined in subsections (i), and (iv) to (xxiv) of paragraph 37 of the amended complaint.
While the amended complaint alleges that the Agency and Administration Agreement was breached in numerous ways "through January 2002 and thereafter" or "afterwards" ( see Amended Complaint, ¶ 37), any contract claim by any of the funds that are signatories to the Agency and Administration Agreement accrued at least by November 29, 2001. This is the date on which Seghers outlined all of the breaches that had allegedly occurred, and plaintiffs first had the ability to maintain a lawsuit and obtain relief in court. Applying either Texas' four-year or New York's six-year statute of limitations, these contract claims are all untimely.
In addition to the alleged breaches of the Agency and Administration Agreement outlined in paragraph 37 of the amended complaint, plaintiffs alleged that Olympia Capital breached an alleged agreement with the Funds to procure a directors' and officers' liability policy naming as insured, among others, Seghers and his wife. See Amended Complaint, ¶ 39. It is further alleged that the policy that was purchased was entitled "BermudaPLUS Global Financial/Investment Company Professional and Management Liability Policy No. 8165-8871 from the Chubb Group of Insurance Companies (Chubb). Id.. Plaintiffs allege further that the Policy wrongfully named "Winchester," an undefined term in the amended complaint, but defined as Winchester Global Trust Company, Ltd. in the original complaint. Plaintiffs also allege that, "[a]s a direct consequence of defendants' wrongful failure to procure insurance coverage, plaintiffs were denied coverage under the Policy from 2002 through 2005, during which time the Funds were destroyed and Seghers was forced to turn over control of the Funds to a receiver." Id., ¶ 42.
Defendants maintain, in their reply papers, that this claim is also time-barred, because any breach occurred in 2000, citing paragraphs 39 and 40 of the amended complaint. But these paragraphs do not actually state that the Chubb policy was procured in 2000, only that the parties' agreement was made "during the course of the relationship between Plaintiffs and Defendants." Since that relationship ended on January 4, 2002, any contract claims by plaintiffs Seghers and Winifred B. Seghers are time-barred. The allegations in the amended complaint that Olympia Capital failed to put the required insurance in place through 2005 does not save this claim. Plaintiffs confuse the concept of breach with ability to cure the breach. The statute of limitations runs when the breach occurs, not when a defendant fails to remedy that breach, or when the plaintiff suffers damage therefrom.
As for the remaining plaintiffs, the amended complaint fails to state a claim for relief regarding the Chubb policy. None of these funds or companies were ever placed into receivership and the amended complaint fails to allege how the defendants breached any contractual obligation to procure insurance protecting them.
The amended complaint alleges two new claims that "Olympia Capital" breached the Agency and Administration Agreement by taking "$100,000 of the Funds' assets to pay the deductible for its own attorneys" on the Chubb policy (Amended Complaint, ¶ 37 [ii]), and by failing to account for $1.7 million of IHO's assets under its control. Id., Defendants argue that these new claims sound in conversion, not breach of contract, and that Texas' two-year statute of limitations for conversion claims applies to these new claims.
In response, plaintiffs argue that the misappropriation of the $100,000 is part of their fraud claim, and that the $100,000 was used to pay defendants' attorneys to evade their obligations to the plaintiffs and others. Pls. Opp. Memo., at 10. Defendants' documentary evidence establishes that, in a letter dated December 5, 2001, Seghers complained to OCI about its misappropriation of $100,000 as an advance retainer for Olympia's counsel. Roll Reply Affirm., Exh. B. Under either a two-, four-or six-year statute of limitations, the claim accrued on December 5, 2001, and is, therefore, untimely.
The claim is pleaded as part of the first cause of action for breach of contract. Amended Complaint, ¶ 37 (ii).
With respect to the loss of and failure to account for $1.7 million of IHO's assets, in opposition to defendants' motion, plaintiffs now maintain that "defendants defrauded Plaintiff Galileo Fund Offshore, L.P. of $1.7 million of assets beginning in January 2002." Pls. Opp. Memo., at 10. Since Galileo, a Texas limited partnership, is subject to the borrowing statute, the claim is untimely under cither Texas' two-year statute of limitations for conversion or the four-year statutes of limitations for fraud or breach of contract, since the claim accrued in January 2002.
For these reasons, the first cause of action for breach of contract is dismissed pursuant to CPLR 3211 (a) (1), (5), and (7).
Texas also has a four-year statute of limitations for fraud claims. Tex Civ Prac Rem Code § 16.004 (a) (4). A fraud claim accrues in Texas when the allegedly false representations are made. Woods v William M. Mercer, Inc., 769 SW2d 515, 517 (Tex 1988); Hoover v Gregory, 835 SW2d 668 (Tex App-Dallas 1992). In New York, the statute of limitations in a fraud case is the longer of six years from the time of the fraud or two years from the time of its actual or constructive discovery. CPLR 203 (g), 213 (8).
The second cause of action purports to state a cause of action for fraud against all of the defendants. It is alleged that "[o]ver the course of its business relationship with plaintiffs and the Funds, Olympia Capital, through OCI and OCA, engaged in a systematic pattern of conduct that defrauded the plaintiffs." Amended Complaint, ¶ 47. Plaintiffs allege that "Olympia Capital," through Oscar and Barbara Lewnoski, misrepresented "Olympia Capital's intentions and capacity in order to induce Plaintiffs to continue their business relationship and pay improper and excessive fees to Olympia Capital." Id. However, the only specific acts of misconduct alleged are the mailing of a letter on September 28, 2001 to "shareholders" notifying them of "Olympia's suspension of calculation of net asset values of the Funds" ( id., § 48); statements made in "the September 2001 statements" released on November 29, 2001 that "the Fund" was down in value by over 90% due to realized losses incurred in September 2001 ( id., § 51); and, beginning in February 2002, repeating this misrepresentation throughout inquiries and investigations by federal agencies. Id., § 52.
Under either a four-year or six-year limitations period, any claim based on misrepresentations made prior to execution of the Agency Administration Agreement expired in 2006, and any claims based on the September 28, 2001 letter and statements released by "Olympia Capital" in November 29, 2001, were, at the latest, all extinguished by November 29, 2007.
The claim that "Olympia Capital" repeated these misrepresentations to the SEC and the receiver for the Funds "[b]eginning in February 2002" is deficient for failure to plead the circumstances of the fraud with detailed specificity. CPLR 3016 (b). To the extent that any claim is stated, it is for defamation. However, statements made in the course of a judicial or quasi-judicial proceeding are absolutely privileged "as long as [they] 'are material and pertinent to the questions involved irrespective of the motive' with which they are made [citations omitted]." Weiner v Weintraub, 22 NY2d 330, 331 (1968); see also Sexier Warmflash, P.C. v Margrabe, 38 AD3d 163, 172 (1st Dept 2007); Cicconi v McGinn, Smith Co., 27 AD3d 59, 62 (1st Dept 2005); Herzfeld Stern, Inc. v Beck, 175 AD2d 689, 691 (1st Dept 1991).
For these reasons, the fraud claim is dismissed pursuant to CPLR 3211 (a) (1) and (5), and 3016(b).
Defendants' alternate ground for pre-answer dismissal of the claim that OCI and OCA deceived plaintiffs regarding the value of the funds based on the doctrine of collateral estoppel is rejected. Seghers' conduct in the SEC case was limited to his handling and control of III, IA and IE, who arc not parties to this litigation. While the defense might be valid, it cannot be resolved until the parties present a clearer picture of how the collapse of these funds affected the other funds and companies named as plaintiffs in this lawsuit, if at all.
CONCLUSION AND ORDER
For the foregoing reasons, it is hereby
ORDERED that defendants' motion to dismiss the amended complaint is granted, and the amended complaint is dismissed with costs and disbursements to defendants as taxed by the Clerk of the Court; and it is further ORDERED that the Clerk is directed to enter judgment accordingly.