In re Dean Witter Managed Fut.
v.
Witter

Appellate Division of the Supreme Court of New York, First DepartmentApr 12, 2001
282 A.D.2d 271 (N.Y. App. Div. 2001)
282 A.D.2d 271724 N.Y.S.2d 149

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April 12, 2001.

Order, Supreme Court, New York County (Charles Ramos, J.), entered January 24, 2000, which granted defendants' motion to dismiss the consolidated second amended complaint, unanimously affirmed, without costs.

Marian P. Rosner, for Plaintiffs-Appellants.

Richard A. Rosen, for Defendant-Respondent.

Nardelli, J.P., Tom, Andrias, Rubin, Saxe, JJ.


Plaintiffs, individual investors who purchased interests in limited partnerships engaged in the trading of futures and options contracts, allege that the Dean Witter brokers who sold them such units misrepresented the suitability of such investments for plaintiffs and a putative class of similarly situated conservative investors. To the extent the named plaintiffs have alleged with particularity that any broker made such misrepresentations to them, their causes of action for fraud and negligent misrepresentation are barred by the prospectuses for the limited partnerships, which prominently disclosed in plain language that the investments in question were "speculative", involved a "high degree of risk", and should be made only with funds the investor could afford to lose entirely. Such disclosures in the written offering materials rendered any reliance on alleged contradictory oral representations unjustifiable as a matter of law (see, e.g.,Brown v. E.F. Hutton Group, 991 F.2d 1020, 1032-103 3; see also,Societe Nationale d'Exploitation Industrielle des Tabacs et Allumettes v. Salomon Bros. Intl. Ltd., 249 A.D.2d 232). To the extent plaintiffs have alleged that they did not receive the prospectuses until after they made their investment decisions, such allegations are unavailing, since, in order to invest, each plaintiff was required to sign a subscription agreement representing, inter alia, that the investor had received the prospectus, and the instructions accompanying the subscription agreement form directed investors to "carefully read and review the Prospectus".

The motion court also correctly dismissed the cause of action for breach of fiduciary duty, since plaintiffs have not alleged that they had anything more than ordinary broker-client relationships with their Dean Witter brokers (see, Perl v. Smith Barney Inc., 230 A.D.2d 664, 666, lv denied 89 N.Y.2d 803; Fekety v. Gruntal Co., 191 A.D.2d 370, 371). Finally, the cause of action under General Business Law § 349 was correctly dismissed on the ground that federally-regulated securities transactions are outside the scope of that statute (see, General Business Law § 349[d]; Schwarz v. Bear Stearns Cos., 266 A.D.2d 133; Smith v. Triad Mfg. Group, 255 A.D.2d 962, 964).

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.