11-4443
     Landesbank Baden-Wurttemberg v. Goldman, Sachs & Co.


                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Daniel Patrick Moynihan
 3       United States Courthouse, 500 Pearl Street, in the City of
 4       New York, on the 19th day of April, two thousand twelve.
 5
 6       PRESENT: DENNIS JACOBS,
 7                              Chief Judge,
 8                ROSEMARY S. POOLER,
 9                SUSAN L. CARNEY,
10                              Circuit Judges.
11
12       - - - - - - - - - - - - - - - - - - - -X
13
14      LANDESBANK BADEN-WURTTEMBERG,
15
16                   Plaintiff-Appellant,
17
18                   -v.-                                               11-4443
19
20      GOLDMAN, SACHS & CO., TCW ASSET
21      MANAGEMENT COMPANY,
22
23                   Defendants-Appellees.
24
25      - - - - - - - - - - - - - - - - - - - -X
26
27


                                                 1
 1   FOR APPELLANT:             Arthur R. Miller, Of Counsel
 2                              (William H. Narwold, Motley Rice
 3                              LLC, Hartford, CT; Vincent I.
 4                              Parrett, William S. Norton, John
 5                              Brandon Walker, Motley Rice LLC,
 6                              Mount Pleasant, SC, on the
 7                              brief)
 8                              New York, NY
 9
10
11   FOR APPELLEE GOLDMAN, SACHS
12   & CO.:                      Theodore Edelman (Richard H.
13                               Klapper, William B. Monahan,
14                               Christopher J. Dunne, W. Rudolph
15                               Kleysteuber, Jacob E. Cohen, on
16                               the brief)
17                               Sullivan & Cromwell LLP
18                               New York, NY
19
20   FOR APPELLEE TCW ASSET
21   MANAGEMENT COMPANY:        Mark A. Kirsch (Christopher M.
22                              Joralemon, on the brief)
23                              Gibson, Dunn & Crutcher LLP
24                              New York, NY
25
26        Appeal from a judgment of the United States District
27   Court for the Southern District of New York (Pauley, J.).
28
29        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
30   AND DECREED that the district court’s judgment is AFFIRMED.
31
32        Landesbank Baden-Wurttemberg (“Landesbank”) appeals
33   from the dismissal of its common law claims for fraud,
34   negligent misrepresentation, and unjust enrichment. We
35   assume the parties’ familiarity with the underlying facts,
36   the procedural history, and the issues presented for review.
37
38        We review de novo the grant of a motion to dismiss
39   pursuant to Federal Rule of Civil Procedure 12(b)(6).
40   Harris v. Mills, 

, 71 (2d Cir. 2009).
41   “[A]lthough a court must accept as true all of the
42   allegations contained in a complaint, that tenet is
43   inapplicable to legal conclusions, and threadbare recitals
44   of the elements of a cause of action, supported by mere

                                  2
 1   conclusory statements, do not suffice.” 

(internal
 2   quotation marks and brackets omitted). “To survive a motion
 3   to dismiss, a complaint must plead enough facts to state a
 4   claim to relief that is plausible on its face.” ECA & Local
 5   134 IBEW Joint Pension Trust of Chi. v. JP Morgan Chase Co.,
 6   

, 196 (2d Cir. 2009) (internal quotation marks
 7   omitted).
 8
 9   [1] Landesbank asserts claims for common law fraud against
10   the defendants, Goldman, Sachs & Co. (“Goldman”) and TCW
11   Asset Management Company (“TCW”), in connection with the
12   marketing and sale to a subsidiary of Landesbank of notes in
13   a collateralized debt obligation known as Davis Square
14   Funding VI (“Davis Square”).1
15
16        Under New York law, “[t]he elements of a cause of
17   action for fraud require a material misrepresentation of a
18   fact, knowledge of its falsity, an intent to induce
19   reliance, justifiable reliance by the plaintiff and
20   damages.” Eurycleia Partners, LP v. Seward & Kissel, LLP,
21   

, 559 (2009). A claim for common law fraud is
22   subject to the particularity pleading requirements of
23   Federal Rule of Civil Procedure 9(b), “which requires that
24   the plaintiff (1) detail the statements (or omissions) that
25   the plaintiff contends are fraudulent, (2) identify the
26   speaker, (3) state where and when the statements (or
27   omissions) were made, and (4) explain why the statements (or
28   omissions) are fraudulent.” Eternity Global Master Fund
29   Ltd. v. Morgan Guar. Trust Co. of N.Y., 

, 187
30   (2d Cir. 2004) (internal quotation marks omitted).
31
32        “[W]e have repeatedly required plaintiffs to plead the
33   factual basis which gives rise to a strong inference of
34   fraudulent intent.” O’Brien v. Nat’l Prop. Analysts
35   Partners, 

, 676 (2d Cir. 1991) (internal
36   quotation marks omitted). A strong inference of fraudulent
37   intent “may be established either (a) by alleging facts to
38   show that defendants had both motive and opportunity to
39   commit fraud, or (b) by alleging facts that constitute
40   strong circumstantial evidence of conscious misbehavior or
41   recklessness.” Lerner v. Fleet Bank, N.A., 

,

          1
           For simplicity, both Landesbank and its subsidiary
     are referred to herein as Landesbank.
                                  3
 1   290-91 (2d Cir. 2006) (quoting Shields v. Citytrust Bancorp,
 2   Inc., 

, 1128 (2d Cir. 1994)).
 3
 4        The complaint in this case does not ascribe to Goldman
 5   or TCW any particular motive for committing fraud beyond a
 6   general profit motive common to all corporations, which does
 7   not suffice. See Novak v. Kasaks, 

, 307 (2d
 8   Cir. 2000). Landesbank argues that a strong inference of
 9   fraudulent intent arises because the defendants “knew facts
10   or had access to information suggesting that their public
11   statements were not accurate.” 

12   (internal quotation marks omitted). The complaint alleges
13   that Goldman had access to confidential due diligence
14   reports which showed that the quality of the mortgages
15   underlying the collateral for the Davis Square notes did not
16   justify the notes’ triple-A ratings. However, an allegation
17   that defendants had access to information that was
18   inconsistent with their alleged misstatements “must
19   specifically identify the reports or statements containing
20   this information.” 

; see also San
21   Leandro Emergency Med. Grp. Profit Sharing Plan v. Philip
22   Morris Cos., 

, 812-13 (2d Cir. 1996). The only
23   due diligence report specifically identified in the
24   complaint is dated from 2007, after the issuance of the
25   Davis Square notes, and the due diligence conveyed in that
26   report therefore does not bear on the defendants’ knowledge
27   at the time of issuance. The generalized references in the
28   complaint to other due diligence reports commissioned by
29   Goldman are insufficient to sustain Landesbank’s pleading
30   burden as to intent.
31
32   [2] Landesbank argues that the complaint sufficiently
33   states a claim for negligent misrepresentation under New
34   York law. “[T]he elements of negligent misrepresentation
35   are: (1) carelessness in imparting words; (2) upon which
36   others were expected to rely; (3) and upon which they did
37   act or failed to act; (4) to their damage. Most relevant,
38   the action requires that (5) the declarant must express the
39   words directly, with knowledge or notice that they will be
40   acted upon, to one to whom the declarant is bound by some
41   relation or duty of care.” Dall. Aerospace, Inc. v. CIS Air
42   Corp., 

, 788 (2d Cir. 2003) (citation omitted).
43   “[T]he law of negligent misrepresentation requires a closer
44   degree of trust between the parties than that of the

                                  4
 1   ordinary buyer and seller in order to find reliance on such
 2   statements justified.” 

whether a
 3   complaint adequately pleads justifiable reliance, we
 4   “consider whether the person making the representation held
 5   or appeared to hold unique or special expertise; whether a
 6   special relationship of trust or confidence existed between
 7   the parties; and whether the speaker was aware of the use to
 8   which the information would be put and supplied it for that
 9   purpose.” Kimmell v. Schaefer, 

, 264 (1996).
10   “[A] sparsely pled special relationship of trust or
11   confidence is not fatal to a claim for negligent
12   misrepresentation where the complaint emphatically alleges
13   the other two factors enunciated in Kimmell.” Eternity
14   Global Master 

(internal quotation
15   marks omitted).
16
17        The Offering Circular by which the Davis Square notes
18   were marketed disclaimed both the existence of a special
19   relationship of trust or confidence between the defendants
20   and Landesbank and any particular expertise on the part of
21   the defendants with respect to the credit quality of the
22   Davis Square notes. It cautioned investors to consider and
23   assess for themselves the likely level of defaults on the
24   underlying collateral, and disclaimed a fiduciary or
25   advisory role. The Offering Circular also required
26   Landesbank to represent that it was a “sophisticated
27   investor” and had sufficient access to financial and other
28   information to make an informed investment decision,
29   including an opportunity to ask questions and request
30   additional information concerning Davis Square. The
31   relationship between Landesbank and the defendants was that
32   of buyer and seller in a standard arm’s length transaction;
33   and by its own representations Landesbank possessed
34   sufficient expertise to evaluate the risks of its
35   investment. The complaint therefore fails to plead
36   justifiable reliance. See Dall. 

37   (“[Plaintiff] cannot claim it relied on [defendant’s]
38   special expertise because it is clear that [plaintiff]
39   itself had the relevant expertise at issue.”).
40
41        Landesbank argues that its representations affirming
42   its status as a “sophisticated investor” with means to make
43   an informed investment decision do not “undermine [its]
44   allegation of reasonable reliance,” because “the allegedly

                                  5
 1   misrepresented facts [were] peculiarly within [defendants’]
 2   knowledge.” Warner Theatre Assocs. Ltd. P’ship v. Metro.
 3   Life Ins. Co., 

, 136 (2d Cir. 1998). However,
 4   as previously discussed, Landesbank’s complaint fails to
 5   allege facts plausibly establishing existence of such
 6   knowledge. This argument is therefore meritless.
 7
 8   [3] Landesbank also seeks to recover under a theory of
 9   unjust enrichment. “To prevail on a claim for unjust
10   enrichment in New York, a plaintiff must establish 1) that
11   the defendant benefitted; 2) at the plaintiff’s expense; and
12   3) that equity and good conscience require restitution.”
13   Kaye v. Grossman, 

, 616 (2d Cir. 2000) (internal
14   quotation marks omitted). Landesbank has failed to state a
15   claim for either fraud or negligent misrepresentation, and
16   has not otherwise shown that it is entitled to restitution
17   as a matter of equity.
18
19        We have considered Landesbank’s remaining arguments and
20   find them to be without merit. For the foregoing reasons,
21   the judgment of the district court is hereby AFFIRMED.
22
23
24
25                              FOR THE COURT:
26                              CATHERINE O’HAGAN WOLFE, CLERK
27




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