WENDY BEETLESTONE, District Judge.
Plaintiff Handong Wen alleges that he was induced by Defendants Foxcode, Inc. ("Foxcode") and its principal Robert Willis (collectively, the "Defendants") to invest $4 million in a fraudulent scheme. Wen alleges that he invested money with Foxcode and Willis in a limited liability company created by the parties for Wen's benefit, but that Foxcode and Willis instead siphoned off most of his investment for their own personal use and profit. He brings seven claims under federal and state securities laws, as well as common law. Before the Court is the Defendants' motion to dismiss. They argue that several of Wen's claims are barred by the gist of the action doctrine and, in any event, he has failed to state claims for relief under Federal Rules of Civil Procedure 12(b)(6) and 9(b). For the reasons that follow, the motion shall be granted in part and denied in part.
Wen is a citizen of the People's Republic of China who is currently enrolled as an undergraduate student at Temple University. Compl. ¶ 2, 5. Willis is the principal of Foxcode, an investment and merchant banking firm. Id. ¶ 6.
According to the allegations in the Complaint, in or around the middle of 2013, Willis represented to Wen that, if Wen placed a $4 million investment with the Defendants, they would manage that investment
FFE was to be managed by its members, Wen and Foxcode Capital. Compl. Ex. A at 8 ¶ 22. As managers, Wen and Foxcode Capital had the ability to bind FFE in contract. Id. at 8 ¶ Each could call a member meeting, given appropriate notice to the other was provided. Id. at 9 ¶ 27. Each could withdraw and dissolve the company after 24 months. Id. at 9 ¶ 30. Each had the power to demand FFE's books and records. Id. at 14 ¶ 40. Wen himself had the power to request an independent valuation of FFE if at any time he had reason to believe the net assets of the company fell below $2.5 million, and if that valuation determined that the net equity value of the company was lower than that amount, he had the sole authority to dissolve the company. Id. at 12 ¶ 37(d). And the following actions required the unanimous consent of Wen and Foxcode Capital:
Id. at 20-21 ¶¶ 63(a)-(j).
After signing the agreement, Wen delivered the $4 million to FFE via two wire
Wen began to suspect that his investment had been dissipated without adequate compensation and without providing any return to him. Id. ¶ 27. He inquired of Willis on several occasions as to the performance and status of the investment and/or to seek the return of the $4 million and the return thereon, but received no satisfactory response, despite the fact that the FFE Agreement provides that "Foxcode Capital Markets will submit a monthly written report of any of the above actions together with Cash Flow and Balance Sheet statements to Handong Wen or his authorized agent." Id.; Compl. Ex. A at 21. Through counsel, Wen also requested that Willis produce all documents to show what happened to the money. Compl. ¶ 28. Wen made several requests and Willis promised to produce the records, but the records have not been produced in full. Id. ¶ 29. According to Willis, many of the records he should have kept were never created and do not exist. Id. The Defendants produced only a self-prepared general ledger, balance sheet, and profit and loss statements, as well as tax returns and a few emails. Id. ¶ 30. On the balance sheet provided by the Defendants, $3,885, 457.39 of Wen's $4,000,000.00 investment is recorded as having been "loaned" to Willis, personally, and to Foxcode. Id. ¶ 31. Of the $114,542.61 not recorded as loaned to Willis, $80,000 was paid to Foxcode as a "consulting" expense. Id. ¶ 32.
Wen alleges that the Defendants secured a profit or return on the "loaned" funds of at least $5.6 million (over and above the $4 million in principal), which they have kept for their own benefit. Id. ¶ 33.
Wen filed a seven-count Complaint in this Court on March 16, 2015. In it, he asserts claims against the Defendants for: (1) fraud; (2) fraud in the inducement; (3) securities fraud under federal law; (4) securities fraud under Pennsylvania law; (5) conversion; (6) misappropriation; and (7) breach of fiduciary duty. The Defendants contend that Wen's common law claims for fraud, fraud in the inducement, conversion, misappropriation, and breach of fiduciary duty are all barred by the gist of the action doctrine. They also argue that Wen has failed to allege sufficient facts to state any of his claims under Federal Rule of Civil Procedure 12(b)(6) and the heightened pleading requirements of Rule 9(b).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "In light of Twombly, `it is no longer sufficient to allege mere elements of a cause of action; instead a complaint must allege facts suggestive of [the proscribed conduct].'" Great W. Mining &
The Defendants contend that any representations they made regarding the investment of the $4 million and the return on the investment are expressly covered by the FFE agreement, and those representations were either breached by Foxcode Capital or not. As such, they argue that Wen's tort claims (fraud, fraud in the inducement, conversion, misappropriation, and breach of fiduciary duty) "are simply recast breach of contract claims" that are barred by the gist of the action doctrine.
The gist of the action doctrine "forecloses a party's pursuit of a tort action for the mere breach of contractual duties without any separate or independent event giving rise to the tort." Sköld v. Galderma Labs., L.P., 99 F.Supp.3d 585, 600, 2015 WL 1740032, at *9 (E.D.Pa. Apr. 17, 2015) (citations and internal quotation marks omitted). The doctrine bars tort claims:
eToll, Inc. v. Elias/Savion Advert., Inc., 811 A.2d 10, 19 (Pa.Super.Ct.2002) (citations omitted). The mere existence of a contractual relationship between the parties, however, does not preclude one party from bringing a tort claim against the other. Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79, 104 (3d Cir. 2001).
In its first foray into an analysis of the gist of the action doctrine—after a long history of predictive federal court and state court litigation on the same, see Sköld, 99 F.Supp.3d at 601 n. 10, 2015 WL 1740032, at *9 n. 10 (collecting cases)—the Pennsylvania Supreme Court, in Bruno v. Erie Insurance Co., ___ Pa. ___, 106 A.3d 48 (2014), summarized the doctrine's contours as follows:
Id. at 68 (citations omitted). "Under Bruno, cases where tort actions are permitted to arise in the context of a contractual relationship are cases in which the defendant's alleged acts are `not founded on the breach of any of the specific executory promises which compromise the contract.'" Sköld, 99 F.Supp.3d at 601, 2015 WL 1740032, at *9 (quoting Bruno, 106 A.3d at 70).
The Defendants contend that both Wen's fraud and fraud in the inducement claims should be barred by the gist of the action doctrine. See Mot. at 7-8; Reply at 2-3. Wen responds that because the fraud claims are "collateral to the investment contract, they sound in tort, not contract" and the gist of the action doctrine does not apply. Opp'n at 7.
It is the case, as Wen contends, that courts have suggested that claims of fraudulent inducement, as compared to fraudulent performance, tend to be "collateral to (i.e., not `interwoven' with) the terms of the contract itself," eToll, 811 A.2d at 17, and that claims of fraudulent inducement are "much more likely to present cases in which a social policy against the fraud, external to the contractual obligations of the parties, exists." Air Prods. & Chems., Inc. v. Eaton Metal Prods. Co., 256 F.Supp.2d 329, 341 (E.D.Pa.2003). However, it is equally the case, as the Defendants contend, that "[w]here the precontractual statements that are the basis for the fraudulent inducement claim concern specific duties that the parties later out-lined in the alleged contract, courts have repeatedly dismissed such claims as sounding in contract and, thus, barred by the gist of the action doctrine." Integrated Waste Sol'ns, Inc. v. Goverdhanam, No. 10-2155, 2010 WL 4910176, at *11 (E.D.Pa. Nov. 30, 2010).
Although not binding on this Court, the decision in Vives v. Rodriguez, 849 F.Supp.2d 507 (E.D.Pa.2012), is the most instructive and, ultimately, persuasive on this issue. In determining the "essential (and thorny) question we must confront in applying the gist of the action doctrine" to the facts of that case—"whether (and when) the gist of the action doctrine applies to bar fraudulent inducement claims"—the court undertook a sweeping, in-depth analysis of the jurisprudence chronicling the interaction between the doctrine and fraudulent inducement claims before coming to the conclusion that "the Pennsylvania Supreme Court would find fraudulent inducement claims predicated upon misrepresentations as to a party's intent to perform under a contract to be barred by the gist of the action doctrine." Id. at 520. Such a conclusion, the court found, "is consonant with decisions from this Circuit explaining that misrepresentations as to duties later enshrined in a contract are barred by the doctrine." Id. at 521; see also Williams v. Hilton Grp. PLC, 93 Fed.App'x. 384 (3d Cir.2004); Penn City Invs., Inc. v. Soltech, Inc., No. 01-5542, 2003 WL 22844210 (E.D.Pa. Nov. 25, 2003); Owen J. Roberts Sch. Dist. v. HTE, Inc., No. 02-7830, 2003 WL 735098 (E.D.Pa. Feb. 28, 2003); Werner Kammann Maschinenfabrik, GmbH v. Max Levy Autograph, Inc., No. 01-1038, 2002
Wen contends that both of his fraud claims "sound in the inducement, not in the performance of the contract," Opp'n at 9; thus, both claims are subject to the analysis outlined above. In Count I of the Complaint, Wen alleges, in pertinent part, that Willis, "to induce [him] to provide Willis and Foxcode with the $4 million, on behalf of himself and Foxcode, represented to [him] that, if [he] placed a $4 million investment with Willis/Foxcode they would. . . manage Wen's $4 million investment for his benefit, deliver a return on the investment, and guarantee that the $4 million principal would be returned in full when the investment concluded." Compl. ¶ 36. In Count II, Wen alleges the following:
Id. ¶¶ 44-45. The allegations in both these counts—that the Defendants "would manage Wen's $4 million investment for his benefit, deliver a return on the investment, and guarantee that the $4 million principal would be returned in full when the investment concluded"—involve "misrepresentation[s] as to duties later enshrined in a contract," a point Wen affirmatively assents to in Paragraph 45 of the Complaint. The FFE Agreement provides that: (1) Foxcode Capital Markets would "provide cash and all finance advis[ory] services necessary to generate earnings for Foxcode Far East LLC," Compl. Ex. A at 3 ¶ 6; (2) Wen would receive 99.9% of the
Each of the Defendants' misrepresentations Wen claims induced him to enter into the FFE Agreement was later incorporated into the FFE agreement. Accordingly, the Court finds that the claims in both Counts I and II are barred by the gist of the action doctrine, and the motion to dismiss these counts shall be granted.
The parties next dispute whether the gist of the action doctrine bars Wen's conversion claim. The Defendants contend that it should because Wen's claim "is based solely on the failure to perform under a contract." Mot. at 12 (citation and internal quotation marks omitted). Wen responds that his allegations against the Defendants are not based on such a failure, but rather on the act of transferring his money to their own personal accounts for their benefit and profit. Opp'n at 14.
"[W]here a tortious claim for conversion is based solely on the failure to perform under a contract, it is barred by the gist of the action doctrine." Vives, 849 F.Supp.2d at 516. Many state and federal courts in Pennsylvania, applying these principles, have barred conversion claims in which a plaintiff alleges that the defendant withheld money owed under a contract. See, e.g., id. at 517 (dismissing plaintiff's conversion claim because she simply alleged that the defendant failed to turn over profits from a sale of property due under an agreement); Kia v. Imaging Sciences Int'l, Inc., 735 F.Supp.2d 256, 271 (E.D.Pa.2010) (holding that such a "claim is therefore entirely dependent on the existence and validity of th[e] agreement, as there can be no liability in its absence"); Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 584 (Pa.Super.Ct.2003) (holding that the plaintiff's "tort and breach of contract claims [were] inextricably intertwined, the success of the conversion claim depending entirely on the obligations as defined by the contract"). Were Wen's conversion claim based on the Defendants' failure to make distributions or other payments to him under the FFE Agreement, such a claim would be barred under the gist of the action doctrine. However, his principal allegation under this claim is that the Defendants "intentionally converted Wen's $4 million to their own use and benefit by, among other things, causing the funds to be transferred to Willis and Foxcode and/or `loaning' the funds to Willis and Foxcode to use for their benefit instead of Wen's." Compl. ¶ 73. Such an allegation precisely implicates the "broader social dut[ies] owed to all individuals . . . imposed by the law of torts," such as a prohibition against theft, which "exist[] regardless of the contract." Bruno, 106 A.3d at 68. Accordingly, the gist of the action doctrine does not operate to bar Wen's conversion claim.
FFE was formed "in accordance with the laws of the State of Delaware," with "rights and obligations of the Members. . . as stated in the Delaware Limited Liability Company Act." Compl. Ex. A at 2 ¶ 1. The Delaware Limited Liability Company Act contemplates that equitable fiduciary duties of care and loyalty will apply by default to a manager or manager member of a Delaware LLC. Feeley v. NHAOCG, LLC, 62 A.3d 649, 661 (Del.Ch.2012). The FFE Agreement provides that "Management of [FFE] is vested in the Members," defined as Wen and Foxcode Capital. Compl. Ex. A at 8 ¶ 22. It thus follows logically that the only entities owing any fiduciary duties under the FFE Agreement are its two managers, Wen and Foxcode Capital. But Foxcode Capital is not a party here.
The Defendants argue that Wen has failed to state a federal securities fraud claim because, as a threshold matter, his membership interest is not a "security." Mot. at 15-18. Wen responds that because the Defendants exercised "total control" over the $4 million investment, the Court should find that he has sufficiently pled he is a passive investor and that the FFE Agreement is an investment contract. Opp'n at 17-18.
Before a plaintiff can invoke the protections of the anti-fraud provisions of the federal securities laws, that plaintiff must show that the alleged misconduct involves a purchase or sale of a "security." Steinhardt Grp., Inc. v. Citicorp, 126 F.3d 144, 150 (3d Cir.1997). Section 2(a)(1) of the Securities Act of 1933 defines "security" as, inter alia, an "investment contract." 15 U.S.C. § 77b(a)(1). An investment contract, not defined in the statute itself, has been defined by the Supreme Court as "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party." SEC v. W.J. Howey Co., 328 U.S. 293, 298-99, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946). Based on this definition, the Third Circuit has held that the three elements for showing an investment contract are: (1) "an investment of money"; (2) "in a common enterprise"; and (3) "with profits to come solely from the efforts of others." Steinhardt, 126 F.3d at 151. The parties do not dispute that the first two elements are met, but disagree regarding whether Wen's interest in FFE meets the third requirement: that his profits were to come solely from the efforts of others.
According to the Third Circuit in Steinhardt, the seminal case on this issue, the inquiry under the third factor, determining "whether the investor has meaningfully participated in the management of the partnership in which it has invested such that it has more than minimal control over the investment's performance," begins and ends with the operating agreement. Id. at 152-53. The Court is to look at the agreement "as a whole, considering the arrangements the parties made for the operation of the investment vehicle in order to determine who exercised control in generating profits for the vehicle." Id. This issue "does not turn on whether the investor actually exercised its rights," but rather on "what `legal rights and powers [were] enjoyed by the investor.'" Id. at 155 (emphasis omitted) (quoting Goodwin v. Elkins & Co., 730 F.2d 99, 107 (3d Cir.1984)).
In their brief, the Defendants proffered a list of legal rights and powers Wen enjoyed as a member of FFE:
Wen attempts to distinguish all of these cases from his own situation by arguing that they involved a plaintiff who "had in fact been actively involved in managing the company." Opp'n at 17 n. 4. In contrast to those plaintiffs, he states, he "is not alleged to have been a sophisticated investor" and "did not in fact exercise any control over the investment." Id. at 18. He contends that the "allegations of total control by Foxcode and Willis over the investment show `a significant variance between the terms of the [LLC Agreement] and the allocation of management power in fact.'" Opp'n at 18 (quoting Rossi v. Quarmley, 604 Fed.App'x. 171, 174 (3d Cir. 2015)). In Goodwin, the genesis of this "significant variance" language, the Third Circuit found that a managing partner's alleged excesses, in apparent contravention of the terms of the operating agreement, did not transform the plaintiff's interest into a security. 730 F.2d at 112 (Seitz, C.J., concurring). The plaintiff there, much like Wen here, argued that he could not control the management of the firm, he was dissatisfied with management decisions, and he was denied access to information necessary to protect his investment. Id. at 113. But then-Chief Judge Seitz stated that "an unhappy minority partner does not a security holder make," and "the federal securities laws are not properly invoked to protect one general partner from the deceit of his copartners." Id. At bottom, a variance, even a significant one, between the powers enjoyed by a plaintiff-investor in an agreement and the operation of those powers in reality does not per se convert an interest from a nonsecurity into a security.
To the extent Wen relies on Rossi, a nonprecedential panel decision, in making a lack-of-sophistication argument, that reliance is misplaced. The plaintiff there made a similar argument, invoking the court's suggestion in Goodwin that it might adopt the reasoning in Williamson v. Tucker, 645 F.2d 404 (5th Cir.1981), in which the Fifth Circuit held that an investor in a partnership could have an interest that constituted an investment contract, despite the powers the governing agreement afforded him, "if he could show he was `so inexperienced and unknowledgeable in business affairs that he is incapable of intelligently exercising his partnership or venture powers.'" Rossi, 604 Fed.App'x. at 174 (quoting Goodwin, 730 F.2d at 106) (internal quotation marks omitted). The panel declined to adopt the Williamson rule because the claim that the plaintiff was unsophisticated was belied by the fact that he had founded other companies with the defendants in the past and that he had successfully managed the partnership at issue. Id. at 174-75. Although it may be true that Wen is not as experienced in business as the Rossi plaintiff was, that fact alone does not persuade this Court to adopt the Williamson rule and apply it to his case when the Third Circuit would not do so under its existing jurisprudence. The Third Circuit's directive on this is issue unchanged:
Goodwin, 730 F.2d at 104. The FFE Agreement is clear. Wen enjoyed a plethora of powers as a manager-member of FFE and he had significant control over the management of the company. The allegation that he did not exercise those powers, or even the allegation that the Defendants thwarted his attempts to exercise those powers, does not make his interest in FFE a "security" for the purposes of bringing a claim under the federal securities laws. Accordingly, the motion to dismiss the federal law securities fraud claim in Count III shall be granted.
Finally, the Defendants contend that Wen's claim for securities fraud under the Pennsylvania Securities Act ("PSA") fails for two reasons. First, Wen has failed to adequately plead that his membership interest in FFE is a "security" under the PSA, because he has not stated facts sufficient to show that he did not participate actively in the management of FFE. Mot. at 20-21. Second, Wen has failed to plead with particularity the scienter element required to make out a fraud claim, as mandated by Federal Rule of Civil Procedure 9(b). Id. at 18-19, 21. Wen counters that his Complaint alleges sufficient facts to show a lack of active participation and that he has pleaded scienter with particularity. Opp'n at 19-21.
The definition of "security" is slightly different under the PSA than under the federal Securities Act. Section 102(t) of the PSA provides that a "security" presumptively includes any membership interest in a limited liability company, though the definition does not include:
70 Pa.Stat. § 1-102(t)(v). The parties do not dispute that the first condition is satisfied, as the FFE Agreement provides that FFE was to be managed by its members. Compl. Ex. A at 8 ¶ 22. The Defendants contend that the second condition is satisfied because the FFE Agreement "includes numerous provisions permitting Wen to be engaged in the management of FFE," which the Court discussed supra. Mot. at 21. Wen disputes this, stating that nothing in the FFE Agreement "constitutes a written commitment to be engaged actively and directly in the management of the company." Opp'n at 21. Guidance on this issue is sparse, given that there is a dearth of case law defining what exactly is meant by "engaged actively and directly." On the one hand, the affirmative responsibilities of the day-to-day management of FFE are ascribed solely to Foxcode Capital. See Compl. Ex. A at 3 ¶ 6 ("This Member will provide cash and all finance advis[ory] services necessary to generate earnings for Foxcode Far East LLC."). On the other, both Wen and Foxcode Capital are held to a "duty to devote time" pursuant to the FFE Agreement, requiring them to "devote such time and attention to the business of the Company as the majority of the Members will from time to
The third condition calls for a factual inquiry—whether Wen did, in fact, participate actively and directly in the management of the company. The Defendants argue that Wen fails to allege that neither he nor his attorney-in-fact, Ben Kong, actively participated in the management of FFE. Wen argues that several of the allegations in the Complaint related to the Defendants' conduct satisfies this element:
Compl. ¶¶ 25-27. Viewing the inferences drawn from these allegations in the light most favorable to Wen, the Court finds that he has sufficiently pleaded that this condition does not apply. If Wen was an active participant in the management of FFE, an argument that he would allow the transfer of over 99% of his $4 million investment out of the FFE account and into the Defendants' personal accounts strains credulity. Further, if he were an active participant, he would not have been kept in the dark regarding the reasons behind the dissipation of the investment or then frozen out when he inquired about the dissipation to Willis. Because this third condition does not apply, Wen has thus established that his membership interest in FFE is a security for the purposes of making out a PSA securities fraud claim.
Section 1-401 of the PSA was enacted to address substantially the same
In their brief, the Defendants contest only whether Wen has pleaded sufficient facts with particularity to allege that they acted with scienter. "To establish liability, . . . a private plaintiff must prove that the defendant acted with scienter, `a mental state embracing intent to deceive, manipulate, or defraud.'" Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193-94 & 193 n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)). The relevant inquiry on this element "is whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). A plaintiff can satisfy this element by "(a) by alleging facts to show that [the] defendant[] had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir. 1997). In determining whether the pleaded facts give rise to a strong inference of scienter, the court must take into account "plausible, nonculpable explanations for the defendant's conduct, as well as inferences favoring the plaintiff." Id. at 324, 127 S.Ct. 2499. "The inference . . . need not be irrefutable, i.e., of the `smoking-gun' genre, or even the most plausible of competing inferences," but the plaintiff's complaint will survive "only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged." Id. (citations and internal quotation marks omitted).
"To show conscious misbehavior or recklessness, a plaintiff must make specific allegations which constitute `strong circumstantial evidence.'" In re Urban Outfitters, Inc. Sec. Litig., 103 F.Supp.3d. 635, 653, 2015 WL 2069222, at *11 (E.D.Pa. May 4, 2015). The Defendants argue that Wen's Complaint "contains no allegations whatsoever that would support even a weak inference that Willis did not
Were these the only allegations on this point, the Defendants might prevail. However, Wen alleges further that he attempted on several occasions to inquire of Willis as to the performance and status of his investment and was given no satisfactory response; that he, through counsel, requested several times that Willis produce all documents to show what became of his money; and then after several promises by Willis to produce the records, Willis did not produce the records in full, and according to Willis, many of the records he should have kept were never created and don't exist. Compl. ¶¶ 27-29. According to the FFE agreement, Foxcode Capital was required to submit to Wen a monthly written report of relevant actions requiring unanimous consent of the members, along with cash flow and balance sheet statements. Compl. Ex. A at 21. The Court can infer from the allegations in the Complaint that this was not done, and that Wen was only made aware of the status of his account after several requests were made, both on his own behalf and through counsel. If the Defendants' activities were nothing more than business-as-usual, as they contend, it is difficult to see why they gave Wen the runaround he alleges took place. Even the Defendants' argument in their reply that the goal of FFE was "not to leave cash sitting in FFE's bank account" is dubious, given Wen's allegation that, when Willis finally produced the records, they noted only that the funds from Wen's investment were "loaned" to Willis and Foxcode. If the Defendants were acting in complete accordance with their duties under the FFE Agreement, it would seem that the records they created would chronicle the investments they made with Wen's funds, not simply list transfers made to personal accounts.
This issue "ultimately rest[s] not on the presence or absence of certain types of allegations but on a practical judgment about whether, accepting the whole factual picture painted by the Complaint, it is at least as likely as not that that defendants acted with scienter." Inst'l Inv'rs Grp. v. Avaya, Inc., 564 F.3d 242, 269 (3d Cir.2009). Taking into account the totality of the circumstances and the facts contained in the Complaint, the Court finds that Wen has set forth sufficiently specific allegations that constitute "strong circumstantial evidence" of conscious misbehavior on the part of the Defendants.
An appropriate Order follows.