VICTOR MARRERO, District Judge.
By letters dated May 29, 2012 (Docket No. 886) and July 13, 2012 (Docket No. 901), defendants PwC Canada and PwC Netherlands (together, the "PwC Defendants") have requested a pre-motion conference to discuss the effect on the negligence-based claims in this case of two recent Second Circuit Court of Appeals summary orders, Stephenson v. PricewaterhouseCoopers, LLP, 482 Fed.Appx. 618, No. 11-1204-cv, 2012 WL 1764191 (2d Cir. June 13, 2012) ("Stephenson"), and Meridian Horizon Fund, LP v. KPMG (Cayman) (In re Tremont Sec. Law), 487 Fed. Appx. 636, Nos. 11-3311-cv, 11-3275-cv, 2012 WL 2754933 (2d Cir. July 10, 2012) ("Tremont").
The PwC Defendants — who are joined in their request by the Fairfield Defendants,
As explained in greater detail in previous opinions in this case,
The Court has twice addressed the adequacy of Plaintiffs' negligence-based claims, once at the motion to dismiss phase and once upon reconsideration.
In Anwar II, the Court granted in part and denied in part the Defendants' motions to dismiss the Plaintiffs' negligencebased claims. See Anwar II, 728 F.Supp.2d at 431-357, 448-50, 454-57. In reaching that conclusion, the Court rejected the Defendants' argument that the Plaintiffs lacked standing to bring their common law claims because, according to Defendants, those claims were derivative. Id. at 401 ("[T]o the extent that Plaintiffs properly allege duties owed by each defendant directly to them ... they have standing to pursue such claims.")
In order to determine whether the Plaintiffs had adequately pled that the Defendants owed them a duty of care, the Court applied the test articulated in Credit Alliance Corp. v. Arthur Andersen & Co., 65 N.Y.2d 536, 493 N.Y.S.2d 435, 483 N.E.2d 110, 118 (1985):
Anwar II, 728 F.Supp.2d at 432 (quoting Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 446 F.Supp.2d 163, 199 (S.D.N.Y.2006)) (citation omitted). The Court found that the SCAC satisfied all the requirements of Credit Alliance, and therefore the Plaintiffs had adequately pled that the Citco Defendants, GlobeOp Financial Services LLC, and the PwC Defendants owed a duty of care to the Plaintiffs, despite the
A year later, the Court denied the PwC Defendants' motion for reconsideration of Anwar II's ruling regarding the negligence-based claims. Anwar v. Fairfield Greenwich Ltd., 800 F.Supp.2d 571 (2d Cir.2011).
Reconsideration of a previous order by the Court is an "extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." In re Health Mgmt. Sys. Inc. Sec. Litig., 113 F.Supp.2d 613, 614 (S.D.N.Y.2000) (internal citations and quotation marks omitted). "The provision for reargument is not designed to allow wasteful repetition of arguments already briefed, considered and decided." Schonberger v. Serchuk, 742 F.Supp. 108, 119 (S.D.N.Y.1990). "The major grounds justifying reconsideration are 'an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.'" Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992) (quoting 18 C. Wright, et al., Federal Practice & Procedure § 4478 at 790).
To these ends, a request for reconsideration under Local Rule 6.3 ("Rule 6.3") must demonstrate controlling law or factual matters put before the court in its decision on the underlying matter that the movant believes the court overlooked and that might reasonably be expected to alter the conclusion reached by the court. See Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir.1995). Rule 6.3 is intended to "`ensure the finality of decisions and to prevent the practice of a losing party ... plugging the gaps of a lost motion with additional matters.'" Sec. and Exch. Comm'n v. Ashbury Capital Partners, No. 00 Civ. 7898, 2001 WL 604044, at *1 (S.D.N.Y. May 31, 2001) (quoting Carolco Pictures, Inc. v. Sirota, 700 F.Supp. 169, 170 (S.D.N.Y.1988)). A court must narrowly construe and strictly apply Rule 6.3 so as to avoid duplicative rulings on previously considered issues and to prevent Rule 6.3 from being used either to advance different theories not previously argued or as a substitute for appealing a final judgment. See Montanile v. Nat'l Broad. Co., 216 F.Supp.2d 341, 342 (S.D.N.Y.2002); Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 151 (S.D.N.Y.1999).
Here, the PwC Defendants move for reconsideration on the basis of a change in law as a result of the Stephenson and Tremont summary orders.
In Stephenson and Tremont, the Second Circuit affirmed judgments dismissing the negligence-based claims of investors in Madoff feeder funds.
Stephenson held that, under Delaware law, the plaintiff lacked standing to make a holder claim because he had not pled individualized harm. 482 Fed.Appx. at 621, 2012 WL 1764191, at *2 (quoting Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del.2004)) ("Stephenson cannot 'prevail [on his holding claim] without showing injury to the [partnership as a whole].'"). While the Court held that Stephenson did have standing to bring an inducement claim, it found that he had failed to satisfy the "Known Party" prong of the Credit Alliance test:
Id. at 622, at *3 (quoting White v. Guarente, 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315 (1977)).
In Tremont, the Second Circuit held that the plaintiff-investor had failed to satisfy both the "Known Party" requirement of Credit Alliance, as well as the requirement that the plaintiff show "some conduct on the part of the accountants linking them to [the plaintiffs], which evinces the accountants' understanding of [the plaintiffs'] reliance." Credit Alliance, 493 N.Y.S.2d 435, 483 N.E.2d at 118; see Tremont, 487 Fed.Appx. at 642, 2012 WL 2754933, at *4 (same). Specifically, Tremont held that the allegation that the defendant-auditors addressed their audit reports to "The Partners" of the fund was not sufficient linking conduct because the fund itself, rather than the auditors, sent the report to the limited partners (including the plaintiffs). Id. at 642, at *4 (quoting CRT Invs., Ltd. v. BDO Seidman, LLP, 85 A.D.3d 470, 925 N.Y.S.2d 439, 441 (1st Dep't 2011)).
Although Stephenson and Tremont are summary orders, and thus do not have precedential effect, see Second Circuit Local Rule 32.1.1, they are nevertheless persuasive authority to the extent that their factual patterns align with the instant case and their reasoning is compelling.
As a preliminary matter, in their letter dated June 4, 2012, the Plaintiffs concede that, following Stephenson, "damages are not available from PwC for the class negligent misrepresentation cause of action with respect to new investors making initial investments." (Docket No. 908.) This conclusion is correct because Stephenson held that the "known party" prong of Credit Alliance cannot be satisfied when the claim pertains to inducement of an initial investment. See Stephenson, 482 Fed.Appx. at 622-23, 2012 WL 1764191, at *3. Defendants, who were not in privity with Plaintiffs, cannot owe a duty to prospective investors who were unknown to Defendants at the time they made the alleged misrepresentations. Therefore, the Plaintiffs' negligence-based initial investment claims are dismissed without prejudice. Such claims may be repled only if Plaintiffs — either as individuals or as members of a certified class — can show that they were, in fact, known to the Defendants prior to their initial investment in the Funds.
Despite this concession, Plaintiffs are correct that Stephenson and Tremont do not directly address claims regarding inducement to make subsequent investments. The plaintiff in Stephenson made an initial investment of $60 million in the Greenwich Sentry fund, but there is no indication or discussion of subsequent investments. See id. at 620, at *1. According to Defendants, the plaintiffs in Tremont did make subsequent investments; however, the Second Circuit's decision does not discuss this nuance. Thus, the Court cannot conclude that Plaintiffs' claims regarding inducement to make subsequent investments should necessarily fail the "Known Party" requirement of Credit Alliance.
Nor does the Second Circuit's ruling in Tremont regarding the "Linking Conduct" requirement of Credit Alliance compel dismissal of Plaintiffs' Inducement Claims. In Anwar II, the Court specifically cited the SCAC's allegation that the PwC Defendants
Moreover, in Tremont, the Second Circuit cited CRT Invs. Ltd., 925 N.Y.S.2d 439 ("CRT II"), in reaching its holding on the Linking Conduct requirement. CRT II affirmed the holding and underlying reasoning of CRT Invs. Ltd. v. Merkin, 29 Misc.3d 1218(A), 918 N.Y.S.2d 397 (N.Y.Sup.2010) ("CRT I"), a New York Supreme Court case that this Court already distinguished from Anwar when it denied the PwC Defendants' first motion for reconsideration. See Anwar, 800 F.Supp.2d at 573. In CRT I, the New York Supreme Court held that the pleadings failed to satisfy the "Linking Conduct" requirement of Credit Alliance because "the direct contact between the accountant and the plaintiff is minimal or nonexistent[.]" Id. at *12. As this Court explained in denying the first Anwar motion for reconsideration,
Id. Unlike this case, neither Tremont nor CRT I included allegations that the defendant-auditor agreed to provide audit reports directly to the plaintiffs or that the defendant was aware that providing such information to investors was the primary purpose of its engagement. Thus, the Court is not persuaded that Tremont, which cites and is factually similar to New York case law which the Court already found distinguishable, compels dismissal of the Plaintiffs' negligence-based Inducement Claims at this stage of the proceedings.
However, the Court recognizes that evidence uncovered during discovery might determine whether the Plaintiffs ultimately have proved all the elements of the Credit Alliance test. The Defendants are free to raise Stephenson and Tremont at the motion for summary judgment phase, when their argument may benefit from a fuller record.
The PwC Defendants argue that the Plaintiffs have no standing to bring Holder Claims because Stephenson held that such claims are derivative. However, Stephenson based that portion of its holding on Delaware law, while Anwar II found that New York law is applicable to the claims in this case.
In fact, in Anwar II, the Court noted that the Plaintiffs would have standing even under Delaware law. 728 F.Supp.2d at 401 n. 9. Stephenson does not change that analysis because its facts are distinguishable. The plaintiff in Stephenson had no standing because his "holding claim involve[d] no 'harm' to an individual partner and s[ought] no 'recovery' for any individual partner, distinct from other partners." 482 Fed.Appx. at 621, 2012 WL 1764191, at *2. In contrast, in Anwar II, the Court explained that the "asymmetrical injury alleged" in the SCAC — the fact that some investors lost money, while others did not — further supported the Court's conclusion that, "[a]t the pleadings stage, Plaintiffs have alleged sufficient information to show that Plaintiffs suffered individual harm distinct from losses experienced by other investors." 728 F.Supp.2d at 402.
Indeed, the Court explained in Anwar II that "this facet of Plaintiffs' standing argument [i.e., the differential injury argument] is ripe for further factual development and is more properly decided at the class certification or summary judgment stage of this proceeding." Id. (citation omitted). The Court notes that after many months of litigation, the discovery phase of this case is now nearly complete, and the Plaintiffs' motion for class certification is currently sub judice. Given how far litigation has progressed, the issue of standing at this point would be more appropriately and fairly addressed following the Court's decision regarding class certification and with the benefit of a full record at summary judgment. The Court therefore denies the PwC Defendants' motion for reconsideration with respect to the Plaintiffs' Holder Claims without prejudice
For the reasons stated above, it is hereby