New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
Commercial Litigation and Arbitration
« Back to Complex Lit Blog

Court May Allow Affirmative Defense to Be Raised Initially in Pretrial Order or at Summary Judgment — PSLRA’s RICO Bar Applies to Securities in Private Entities — Predicate Acts Sharing Same Purpose, Result, Victims = Single RICO Enterprise

Download PDF

Gilmore v. Gilmore, 2012 U.S. App. LEXIS 24403 (2d Cir. Nov. 28, 2012):

Plaintiff David Gilmore ("David") appeals from the September 1, 2011 memorandum decision and order of the United States District Court for the Southern District of New York (Pauley, J.) granting summary judgment to Defendants Abby Gilmore, Arthur Freierman, and Southbridge Financial Corp. (together, "Abby") and the November 10, 2011 memorandum and order denying his motion for reconsideration.***

Defendants did not raise the Private Securities Litigation Reform Act ("PSLRA") as an affirmative defense until the parties were preparing their joint pretrial order ("PTO"). We assume arguendo, as the parties and district court did, that Section 107 of the PSLRA is an affirmative defense generally required to be pleaded in conformance with Fed. R. Civ. P. 8(c). We find the district court did not abuse its discretion in allowing defendants to assert the PSLRA as an affirmative defense for the first time in the joint PTO. Waiver of affirmative defenses not raised in a defendant's answer is not automatic, and "as a practical matter there are numerous exceptions." Am. Fed. Grp. v. Rothenberg, 136 F.3d 897, 910 (2d Cir. 1998) (internal quotation marks omitted). In Curry v. City of Syracuse, we held that where plaintiffs are provided with "notice and an opportunity to respond," a court may, in its discretion, permit the defense to be raised for the first time on summary judgment. 316 F.3d 324, 331 (2d Cir. 2003). As David had both notice and an opportunity to be heard, there was no abuse of discretion in allowing the defense to be raised.

The district court correctly determined that both the stock of Covington Industries Inc. and the limited membership interests in CIRS, LLC are securities within the meaning of the PSLRA. The fact that Covington's stock was closely held is no bar to being considered a security. Sulkow v. Crosstown Apparel, Inc., 807 F.2d 33, 37 (2d Cir. 1986) ("neither the small size of the corporation nor the restrictions on transferability remove such a corporation's stock from the reach of Rule 10b-5"). Moreover, the membership interests in CIRS, LLC satisfied the "economic realit[ies]" test for securities set forth in SEC v. W.J. Howey Co., 328 U.S. 293, 299 (1946).

Nor do we find error in the district court's decision not to split the alleged predicate acts into two separate enterprises asserted under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). The two sets of predicate acts shared an alleged purpose and result - defrauding the other Gilmore siblings. The alleged victims are the same. The only arguable difference is the alleged method - taking money out of the Gilmore companies by charging finders' fees, rather than making misrepresentations to acquire stock from the Gilmore siblings on favorable terms. As the predicate acts were related to a single RICO enterprise, the district court properly refused to allow David an opportunity to amend his complaint to split the predicate acts into two separate RICO enterprises. Cf., Howard v. America Online Inc., 208 F.3d 741, 749 (9th Cir. 2000) (securities fraud claims were not related to the other predicate acts pleaded, because they had "a different purpose, result, victim and method than the billing fraud, misrepresentations against PTP and the flat-fee advertising claims"); Seippel v. Jenkens & Gilchrist, P.C., 341 F. Supp. 2d 363, 373 (S.D.N.Y. 2004) ("Having alleged . . . that defendants acts were part of a single fraudulent scheme, the [plaintiff] cannot divide the scheme into its various component acts. Allowing such surgical presentation here would undermine the congressional intent behind the [PSLRA's] Amendment to RICO"); Ling v. Deutsche Bank AG, No. 04 CV 4566(HB), 2005 WL 1244689, at * 4 (S.D.N.Y. May 26, 2005) ("[b]ecause here the Plaintiffs contend the wrongful acts were committed as part of a single fraudulent scheme, all of the components must be considered together for securities fraud purposes. Also, because the tax strategy at issue is part of a single scheme, if any predicate act is barred by the PSLRA it is fatal to the entire RICO claim."). For the same reasons, the district court did not abuse its discretion in refusing David permission to file a third amended complaint.

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

(1) Electronic Spoliation — Rule 37(e)(2) Dismissal Sanction — Temporal Proximity of Spoliation to Production Due Date = Circumstantial Evidence of Intent; (2) While Discovery Sanctions Are Reviewed For Abuse Of Discretion, Findings Of Fact Related To Discovery Sanctions Are Reviewed For Clear Error; (3) Dismissal under Rule 37(e)(2) Plus Attorney’s Fees under Inherent Power Appropriately Combined [But see 2015 Advisory Committee Note: “New Rule 37(e) … authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures. forecloses reliance on inherent authority or state law to determine when certain measures should be used.”]; (4) Compensatory Sanctions under Goodyear v. Haeger Appropriately Include Fees and Costs Resulting from Attempts to Settle Spoliation Motion

(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

(1) § 1927 and Inherent Power Sanctions — Extrajudicial Misconduct After Obtaining Verdict: Filing Lis Pendens Based on False Statements and in Violation of Governing Law, Filing Fraudulent Abstracts of Judgment That Represented They Had Been Court-Issued; (2) Rule 37 Sanctions for Baseless Motion to Compel Required Unless Target Shows That the Motion Was Substantially Justified Or Other Circumstances Make An Award Of Expenses Unjust

Rule 37 Dismissal Factors (10th Circuit) — Rule 37(d) Sanctions Apply Without Regard to Whether the Court Has Ordered the Delinquent Party to Appear for His, Her or Their Deposition

Rule 37 Dismissal Factors (Sixth Circuit) — Refusal to Answer Deposition Questions on Relevancy Grounds Is Not Valid Rule 30(c)(2) — Pro Se Deponent’s Attendance At Zoom Deposition While Driving A Semi, Refusing to Answer Questions, Inter Alia, Held Contumacious

Rule 26(a)(1) Disclosures and Rule 37 Preclusion: Rule 26 Does Not Require Disclosure of Legal Theories Underlying Damages Computations Provided Pursuant to 26(a)(1)(A)(i)

Rule 37 Sanctions: (1) Forfeiture of Objections to Produce Specific Categories of Documents (Including Tax Returns, Social Media Passwords) as Sanction for Violation of Discovery Order — (2) Default Judgment for Multiple Violations of Discovery Orders — (3) Ninth Circuit’s 5-Factor Test for Dismissal or Default Sanction — (4) Three Additional Factors Considered by Court of Appeals in Assessing Whether Lesser Sanctions Were Adequately Considered — (5) District Court Need Not Recite Each Factor: It Suffices If Record Permits Appellate Court to Apply Them — (6) Public Policy Favoring Disposition of Cases on the Merits Is Not Dispositive Where At Least 4 Factors “Support,” Or 3 Factors “Strongly Support,” Dismissal/Default — (7) And Lends Little Support to A Party Whose Conduct Impedes Adjudication on the Merits — (7) Order to Show Cause Why FRAP 38, § 1927 and Inherent Power Sanctions Should Not Issue for Multiple Misstatements Of Counsel At Oral Argument

Electronic Spoliation Sanctions: “Intent to Deprive” in Rule 37(e)(2) Means Willful Destruction of Evidence to Avoid Its Discovery by an Adverse Party — Relevant Circumstantial Evidence in Determining “Intent to Deprive” — Rule 37(e)(2)(C)’s Standards Trump Circuit’s Multi-Factor Test for Determining Whether Dismissal Is Appropriate — No Prejudice Required for 37(e)(2) Sanctions Because Intent to Deprive Creates Inference the Loss of Information Favored the Spoliator

Sanctions and Appealability — Fifth Circuit’s 2023 Survey of Circuit Cases Concerning Whether Judgment of Dismissal As a Sanction Bars Review of Earlier Sanctions Orders Due to Lack of Jurisdiction or Whether The Decision to Review Pre-Dismissal Sanctions Orders Is Prudential

Sanctions and Appealability — Prior Sanctions Orders Do Not Merge into Judgment of Dismissal Imposed As Sanction under Rules 16(f), 37(b) and 41(b) and Are Unappealable — Courts of Appeal Differ As to Whether This Lack of Reviewability Is Jurisdictional or Discretionary (Jurisdictional in Second Circuit)

Archives
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

New York Office

© 2024 Joseph Hage Aaronson LLC  
Disclaimer | Attorney Advertising Notice | Legal Notice