| Silver Oak Capital L.L.C. v UBS AG |
| 2011 NY Slip Op 02531 [82 AD3d 666] |
| March 31, 2011 |
| Appellate Division, First Department |
| Silver Oak Capital L.L.C. et al.,Respondents-Appellants, v UBS AG et al.,Appellants-Respondents. |
—[*1] Kaplan Landau LLP, New York (Mark Landau, Mary Cecilia Sweeney and Paul Evans ofcounsel), for respondents-appellants.
Order, Supreme Court, New York County (Melvin L. Schweitzer, J.), entered May 11, 2010,which granted so much of defendants' motion pursuant to CPLR 3211 (a) (7) as sought to dismissthe negligent misrepresentation and unjust enrichment claims against all defendants and the fraudand aiding and abetting fraud claims as against UBS AG and UBS Securities, and denied somuch of the motion as sought to dismiss the fraud and aiding and abetting fraud claims as againstUBS Financial, unanimously modified, on the law, to deny the motion as to the negligentmisrepresentation claim as against UBS Financial and as to the unjust enrichment claim asagainst UBS Financial and UBS Securities, and otherwise affirmed, without costs.
The bar order issued in a federal class action that expressly relieved defendants from furtherliability for claims arising from the collapse of a certain dishonest scheme does not precludeplaintiffs' claims, to the extent plaintiffs' claims are based on different legal theories (and factsfurther to those in common with the class members' claims) and independent damages (seeGerber v MTC Elec. Tech. Co., Ltd., 329 F3d 297 [2d Cir 2003], cert denied sub nom.Daiwa Sec. Am. Inc. v Kayne, 540 US 966 [2003]; National Super Spuds, Inc. v NewYork Mercantile Exch., 660 F2d 9, 18 n 7 [2d Cir 1981]).
Plaintiffs allege, in sufficient detail to state causes of action for fraud and aiding and abettingfraud, that UBS Financial, through its officers and personnel, actively participated in plaintiffs'private placement transaction and in the dishonest scheme (see Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 493[2008]; National Westminster Bank v Weksel, 124 AD2d 144, 147-148 [1987], lvdenied 70 NY2d 604 [1987]). Contrary to Financial's argument, plaintiffs sufficiently allegeloss causation since it was foreseeable that they would sustain a pecuniary loss as a result ofrelying on Financial's alleged misrepresentations (see Sterling Natl. Bank v Ernst & Young,LLP, 9 Misc 3d 1129[A], 2005 NY Slip Op 51850[U], *6 [2005]). Nor do the generaldisclaimers contained in the private placement memorandum avail Financial since they were notspecifically applicable to the alleged misrepresentation at issue (see Steinhardt Group vCiticorp, 272 AD2d 255, 256-257 [2000]).
Plaintiffs' claims of negligent misrepresentation and unjust enrichment are not barred by theMartin Act (General Business Law article 23-A; see Assured Guar. [UK] Ltd. v J.P. Morgan Inv. Mgt. Inc., 80 AD3d293 [2010]; CMMF, LLC v J.P.Morgan Inv. Mgt. Inc., 78 AD3d 562, 563-564 [2010]). Plaintiffs sufficiently allege thatFinancial had unique and special knowledge about the source of the financing for the company inwhich they invested (namely, looted assets of the alleged dishonest scheme) to state a cause ofaction for negligent misrepresentation as against Financial (see Kimmell v Schaefer, 89NY2d 257 [1996]). Plaintiffs' allegations that the placement fee paid to Securities via Financialwas taken directly from the funds they invested are sufficient to state a cause of action for unjustenrichment as against Securities and Financial (see Cox v Microsoft Corp., 8 AD3d 39, 40 [2004];Manufacturers Hanover Trust Co. v Chemical Bank, 160 AD2d 113, 117 [1990], lvdenied 77 NY2d 803 [1991]).
The complaint, however, does not state a cause of action for fraud, aiding and abetting fraudor negligent misrepresentation as against UBS Securities, since there are no specific allegationsthat Securities knew of the alleged misrepresentations or made any representations itself with theintent to deceive; bare allegations of "access" to financial records do not raise an inference ofscienter (see Teamsters Local 445 Frgt. Div. Pension Fund v Dynex Capital Inc., 531 F3d190, 196 [2d Cir 2008]; Steinberg v Ericsson LM Tel. Co., 2008 WL 5170640, *13, 2008US Dist LEXIS 99727, *38-41 [SD NY 2008]). As the motion court observed, even the mostthorough due diligence would have been unlikely to discover "the actual situation," i.e., theactual capitalization of the company invested in, and plaintiffs allege no facts that could havealerted Securities to that situation.
Plaintiffs' allegations concerning UBS AG, the Swiss parent of Securities and Financial, areinsufficient to raise the inference that AG exercised the direct intervention in the management ofits subsidiaries required for the imposition of liability under an agency theory (see Billy vConsolidated Mach. Tool Corp., 51 NY2d 152, 163 [1980]; A.W. Fiur Co. v Ataka &Co., 71 AD2d 370, 373-374 [1979]).
We have considered defendants' remaining arguments and find them unavailing.Concur—Gonzalez, P.J., Friedman, Moskowitz, Freedman and RomÁn, JJ.