In re Apple REITs Litigation
MEMORANDUM AND ORDER: For the reasons discussed in the attached Memorandum and Order, Defendants' motions 146 and 152 to dismiss the Amended Consolidated Class Action Complaint 82 with prejudice are granted in their entirety. The Clerk of the Court is respectfully directed to enter judgment in favor of (1) defendants Apple REIT Six, Inc., Apple REIT Seven, Inc., Apple REIT Eight, Inc., Apple REIT Nine, Inc., and Apple REIT Ten, Inc.; (2) defendants Glenn W. Bunting, Kent W. Colton, M ichael S. Waters, Robert M. Wiley, Bruce H. Matson, Garnett Hill, Jr., Anthony Francis "Chip" Keating, Ronald A. Rosenfeld, David J. Adams, and Lisa B. Kern, Glade M. Knight, Bryan Peery, Apple Fund Management, LLC, Apple Suites Realty Group Inc., Apple Eight Advisors, Inc., Apple Nine Advisors, Inc., and Apple Ten Advisors, Inc.; and (3) defendants David Lerner and David Lerner Associates, Inc., and to close this case. Ordered by Judge Kiyo A. Matsumoto on 3/25/2015. (Gong, LiJia)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
IN RE APPLE REITs LITIGATION
MEMORANDUM & ORDER
MATSUMOTO, United States District Judge:
Putative class plaintiffs Stanley and Debra Kronberg,
Marvin Bendavid, Laura Berger, Barbara Shefsky, and William
Murray (“Plaintiffs”) commenced this Consolidated Class Action
pursuant to the Private Securities Litigation Reform Act, 15
U.S.C. § 77a et seq. (“PSLRA”) and Federal Rule of Civil
Procedure 23 on behalf of themselves and others similarly
situated against defendants, alleging claims under the Securities
Act of 1933
(“Securities Act”), specifically, 15 U.S.C. § 77k
(“section 11”); 15 U.S.C. § 77l(a)(2) (“section 12(a)(2)”); and
15 U.S.C. § 77o (“section 15”); claims alleging common law breach
of fiduciary duty, unjust enrichment, and negligence; the
Connecticut Uniform Securities Act; and the Florida Securities
Investor Protection Act.
(See generally Amended Consolidated
Class Action Complaint (“Compl.”), ECF No. 82.)
Plaintiffs filed the instant Complaint on February 17,
Defendants Apple REIT Six, Inc., Apple REIT Seven, Inc.,
Apple REIT Eight, Inc., Apple REIT Nine, Inc., and Apple REIT
Ten, Inc. (collectively, the “Apple REITs”); Glenn W. Bunting,
Kent W. Colton, Michael S. Waters, Robert M. Wiley, Bruce H.
Matson, Garnett Hill, Jr., Anthony Francis “Chip” Keating, Ronald
A. Rosenfeld, David J. Adams, and Lisa B. Kern, Glade M. Knight,
Bryan Peery, Apple Fund Management, LLC, Apple Suites Realty
Group Inc., Apple Eight Advisors, Inc., Apple Nine Advisors,
Inc., and Apple Ten Advisors, Inc., (collectively, “Apple
Individuals & Affiliates”) (all of the foregoing Apple-related
defendants are referred to as “Apple Defendants”); and David
Lerner and David Lerner Associates, Inc. (“DLA”) (collectively,
“DLA Defendants”) (all defendants, collectively, “Defendants”)
moved to dismiss the Complaint on July 13, 2012. (See Mot. to
Dismiss for Failure to State a Claim by Apple REITs, ECF No. 104;
Mot. to Dismiss for Failure to State a Claim by Apple Affiliates,
ECF No. 105; Mot. to Dismiss for Failure to State a Claim by DLA
Defendants, ECF No. 115.)
The court assumes familiarity of the backgrounds facts as set
forth in its prior opinion in this case. See In re Apple REITs
Litigation, No. 11-cv-2919, 2013 WL 1386202 (E.D.N.Y. April 3,
By Memorandum and Order dated April 3, 2013, this court
granted defendants’ motions to dismiss the Complaint in its
See In re Apple REITs Litig., No. 11-cv-2919, 2013 WL
1386202 (E.D.N.Y. Apr. 3, 2013).
April 3, 2013 order.
Plaintiffs appealed the court’s
By Summary Order dated April 23, 2014, the
Second Circuit affirmed the court’s decision to dismiss
Plaintiffs’ claims under section 11, section 12(a)(2), and
section 15 of the Securities Act (Counts 1-5); the Connecticut
Uniform Securities Act (Counts 10-12); and the Florida Securities
Investor Protection Act (Count 13) on the grounds that Plaintiffs
failed to identify any actionable misstatements or omissions.
See Berger v. Apple REIT Ten, Inc., 563 F. App’x. 81 (2d Cir.
The Second Circuit also determined that this court’s
decision to dismiss Plaintiffs’ common law unjust enrichment
claims (Count 8) on the ground that the Plaintiffs’ “rights to
payment were based on the Subscription Agreements and
Acknowledgement of Risk forms between the parties” was not
challenged on appeal and, thus, was waived.
Id. at 84 n.1.
Finding that the Plaintiffs adequately pleaded a cognizable loss,
the Second Circuit vacated the court’s decision to dismiss
Plaintiffs’ claims alleging common law breach of fiduciary duty
(Count 6) and aiding and abetting the alleged breach of fiduciary
duty (Count 7) and negligence (Count 9), finding that the
plaintiffs adequately alleged a cognizable loss, and remanded for
further proceedings. Id.
Plaintiffs’ Remaining Claims
The parties do not dispute that, pursuant to the Second
Circuit’s order, the following claims remain: (1) Count Six,
alleging that that DLA Defendants breached their common law
fiduciary duties (Compl. ¶¶ 232-36); (2) Count Seven, alleging
that the Apple Defendants aided and abetted the DLA Defendants’
breach of their fiduciary duties (Compl. ¶ 243)2; and Count Nine,
alleging common law negligence against all Defendants. (Compl. ¶¶
Presently before the court are two motions to dismiss
by the DLA Defendants and the Apple Defendants. (See Mot. to
Dismiss Remaining Claims by Apple Defendants (“Apple Defs.’
Mot.”), ECF No. 147; Mot. to Dismiss Remaining Claims by DLA
Defendants (“DLA Defs.’ Mot.”), ECF No. 154.)
For the reasons
set forth below, Defendants’ motions to dismiss plaintiffs’
remaining claims are granted in their entirety.
Plaintiffs previously stated that they “do not intend to assert claims
against the Apple REITs or their directors, officers and affiliates for breach
of fiduciary duty . . . ” (ECF No. 116, Pl. Mem. of Law in Opp. filed July 13,
2012) and did not dispute Defendants’ assertion that Plaintiffs abandoned
these claims. (DLA Defs.’ Mot. at 1; Apple Defs.’ Mot. at 6.) Accordingly,
the court finds that Plaintiffs have voluntarily withdrawn these claims and
dismisses Plaintiffs’ breach of fiduciary duty claims against the Apple REITs,
and their directors, officers, and affiliates. See Schwapp v. Town of Avon,
118 F.3d 105, 112 (2d Cir. 1997) (appellant had abandoned claims not supported
by any factual or legal arguments in his brief).
Standard for Rule 12(b)(6) Motion to Dismiss
Rule 12(b)(6) provides for the dismissal of a cause
of action if plaintiff’s complaint fails “to state a claim upon
which relief can be granted.”
Fed. R. Civ. P. 12(b)(6).
order 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)).
To determine whether a complaint states a
plausible claim for relief, the Supreme Court has suggested a
Hayden v. Paterson, 594 F.3d 150, 161
(2d Cir. 2010) (quoting Iqbal, 556 U.S. at 679).
First, a court
should begin “by identifying pleadings that, because they are no
more than conclusions, are not entitled to the assumption of
Iqbal, 556 U.S. at 679 (“While legal conclusions can
provide the framework of a complaint, they must be supported by
Second, “[w]hen there are well-pleaded
factual allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an entitlement
The plausibility determination is “a context-specific
task that requires the reviewing court to draw on its judicial
experience and common sense.”
A claim is plausible “when
the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for
the misconduct alleged.”
Id. at 678.
The plausibility standard,
however, does not require a showing of a “probability” of
misconduct, but it does demand more than a “sheer possibility
that a defendant has acted unlawfully.”
A well-pleaded complaint may survive a motion to
dismiss even where “it strikes a savvy judge that actual proof of
those facts is improbable, and that a recovery is very remote and
Twombly, 550 U.S. at 556 (citation and internal
quotation marks omitted).
This is because the court’s function
is “not to weigh the evidence that might be presented at trial
but merely to determine whether the complaint itself is legally
Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.
In conducting such an assessment on a Rule 12(b)(6)
motion to dismiss, courts must “‘accept as true all allegations
in the complaint and draw all reasonable inferences in favor of
the non-moving party.’” Vietnam Ass’n for Victims of Agent Orange
v. Dow Chem. Co., 517 F.3d 104, 115 (2d Cir. 2008) (citation
omitted); Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 321 (2d
Further, courts may consider “the full text of
documents that are quoted in the complaint or documents that the
plaintiff either possessed or knew about and relied upon in
bringing the suit.”
Holmes v. Air Line Pilots Ass’n, 745 F.
Supp. 2d 176, 193 (E.D.N.Y. 2010) (internal quotations marks
Plaintiffs have stated that they do not assert fraud
(See Pls.’ Mem. of Law in Opp. to Defs.’ Mots. to
Dismiss (“Pls.’ Opp.”), ECF No. 150.)
Where, as in this case, a
plaintiff’s claims are not premised on allegations of fraud, (see
generally Compl.), Rule 8(a) governs the complaint and “notice
pleading supported by facially plausible factual allegations is
all that is required--nothing more, nothing less.”
Defendants’ Motions to Dismiss
In addition to the parties’ previous submissions, the
court’s April 3, 2013 decision and the Second Circuit’s Summary
Order dated April 23, 2014, the court has considered Defendants’
motions to dismiss the remaining claims and Plaintiffs’
opposition thereto and the accompanying exhibits.
(See Decl. of
Samuel E. Bonderoff in Supp. of Pls.’ Opp. (“Bonderoff Decl.”),
ECF No. 151, Ex. A; DLA Defs.’ Mot. Addendum A-1 to A-4.)
A. Plaintiffs’ Breach of Fiduciary Duty and Aiding and
Abetting a Breach of Fiduciary Duty Claims
Plaintiffs allege that DLA Defendants owed plaintiffs a
fiduciary duty arising from “the relationships between DLA and
its customers and DLA’s position and status as the underwriter
and sole selling agent of Apple REIT securities, as a financial
and investment advisor to DLA’s customers, and as a registered
(Compl. ¶ 233.)
Plaintiffs allege that DLA
Defendants used the following marketing tactics to solicit
DLA sold the Apple REITs through the internet, radio,
cold calls, mailings, and open invitation seminars at
senior centers, retirement communities, and membership
clubs. David Lerner identifies himself as “Poppy” in
commercials that pitch seminars about the Apple REITS.
The seminars offer door prizes like umbrellas and flatscreen TVs. DLA financial advisors also often make
personal visits to customers’ homes.
(Compl. ¶ 85.)
Plaintiffs also claim that “DLA’s customers are
individual retail investors, typically retirees, and all, or
nearly all, of DLA’s sales of the Apple REITs were ‘solicited,’
meaning that a DLA representative persuaded a DLA customer to buy
Plaintiffs allege that the “DLA Defendants
had a fiduciary duty to deal fairly with Plaintiffs and class
members and to communicate promptly to them all material facts
they knew or should have known about the nature of the
investments in the Apple REITs.”
(Id. at ¶ 254.)
Defendants allegedly “breached the duties and obligations of
ordinary care” by:
offering investments in Apple REITs Six, Seven, Eight,
Nine and Ten to DLA’s customers without having
conducted a reasonable due diligence investigation to
understand the potential risks and rewards associated
with investment in the Apple REITs; failing to conduct
further inquiry when red flags were present; failing to
ensure the Apple REITs were suitable investments;
failing to disclose material information about the
prior Apple REITs, including the source of their
distributions and the value of their shares; not
providing a full and fair disclosure of the risks and
rewards associated with an investment in the Apple
REITs; negligently making numerous false and misleading
misrepresentations about the Apple REITs to Plaintiffs
and class members about the $11 per share valuation,
the expected distributions, the safety and conservative
nature of the Apple REITs as an investment, and their
true economic performance.
(Compl. ¶ 235.)
DLA Defendants move to dismiss Plaintiffs’ claims for
breach of fiduciary duty on the grounds that (1) brokers of
nondiscretionary accounts do not owe any ongoing fiduciary duties
to customers and (2) Plaintiffs’ claims are predicated on alleged
misrepresentations and omissions that have already been held nonactionable by this court and the Second Circuit. (See generally
DLA Defs.’ Mot. at 8-17.)
Ordinarily, brokers of nondiscretionary accounts do not
owe ongoing fiduciary duties to their customers.
See, e.g., De
Kwiatkowski v. Bear, Stearns, & Co., Inc., 306 F.3d 1293, 1302
(2d Cir. 2002); Indep. Order of Foresters v. Donaldson, Lufkin &
Jenrette, Inc., 157 F.3d 933, 940 (2d Cir. 1998).
Circuit has explained:
It is uncontested that a broker ordinarily has no duty
to monitor a nondiscretionary account, or to give
advice to such a customer on an ongoing basis. The
broker’s duties ordinarily end after each transaction
is done, and thus do not include a duty to offer
unsolicited information, advice, or warnings concerning
the customer’s investments. A nondiscretionary
customer by definition keeps control over the account
and has full responsibility for trading decisions. On a
transaction-by-transaction basis, the broker owes
duties of diligence and competence in executing the
client’s trade orders, and is obliged to give honest
and complete information when recommending a purchase
or sale. The client may enjoy the broker’s advice and
recommendations with respect to a given trade, but has
no legal claim on the broker’s ongoing attention.
De Kwiatkowski, 306 F.3d at 1302.
Plaintiffs, however, contend that they have alleged
sufficient facts to support their breach of fiduciary duty claims
based on special circumstances.
Under New York law3, “[a]
fiduciary relationship exists between two persons when one of
them is under a duty to act for or to give advice for the benefit
of another upon matters within the scope of the relation.”
v. Butt, 486 F. App’x 153, 155 (2d Cir. 2012) (quoting EBC I,
Inc. v. Goldman Sachs & Co., 832 N.E.2d 26 (N.Y. 2005)).
relationship, necessarily fact-specific, is grounded in a higher
level of trust than normally present in the marketplace between
those involved in arm’s length business transactions.”
a fiduciary relationship to exist, “a party must repose
confidence in another and reasonably rely on the other’s superior
DLA Defendants argue, and Plaintiffs do not dispute, that the court should
apply New York substantive law. (See DLA Defs.’ Mot. at 7.) Given that DLA is
a corporation organized under the laws of the state of New York with its
principal place of business in New York, two of the named Plaintiffs reside in
New York, and the facts supporting Plaintiffs’ tort claims are alleged to have
substantially occurred in New York, the court agrees that New York law governs
the Plaintiffs’ tort claims. See Granite Partners, L.P. v. Bear, Stearns &
Co. Inc., 17 F. Supp. 2d 275, 306 n.16 (S.D.N.Y. 1998) (finding that tort
claim is governed by New York substantive law, because the action was brought
in New York federal court by and against entities and individuals located in
New York and based on facts alleged to have occurred in New York).
BNP Paribas Mortgage Corp. v. Bank of Am.,
N.A., 866 F. Supp. 2d 257, 270 (S.D.N.Y. 2012).
To overcome the general rule that a broker does not owe
an investor a fiduciary duty with respect to a nondiscretionary
account, the plaintiff must adequately allege “special
circumstances that transformed the parties’ business relationship
to a fiduciary one.”
Legend Autorama, Ltd. v. Audi of Am., Inc.,
954 N.Y.S.2d 141, 144 (N.Y. App. Div. 2012).
‘special circumstances’ recognized in the cases are circumstances
that render the client dependent-a client who has impaired
faculties, or one who has a closer than arms-length relationship
with the broker, or one who is so lacking in sophistication that
de facto control of the account is deemed to rest in the broker.
The law thus imposes additional extra-contractual duties on
brokers who can take unfair advantage of their customers’
incapacity or simplicity.”
De Kwiatkowski, 306 F.3d at 1308.
“[I]n order to survive a motion to dismiss a claim for
breach of fiduciary duty, the plaintiff must set forth specific
facts constituting the alleged relationship with sufficient
particularity to enable the court to determine whether, if true,
such facts could give rise to a fiduciary relationship.”
Abercrombie v. Andrew Coll., 438 F. Supp. 2d 243, 274 (S.D.N.Y.
2006) (internal quotation and citation omitted).
duty is owed where explicit contractual disclaimers of fiduciary
See, e.g., Cooper v. Parsky, 140 F.3d 433, 439 (2d
Cir. 1998) (upholding disclaimer where contract stated “the
Voters shall not be held by this Agreement to any specified
standard of care on [sic] fiduciary responsibility”); LBBW
Luxemburg S.A. v. Wells Fargo Sec. LLC, 12-cv-7311, 2014 WL
1303133 (S.D.N.Y. Mar. 31, 2014) (“Simply put, effective
disclaimers must explicitly reference fiduciary duties.”)
As a threshold matter, the court has reviewed the
Acknowledgement of Risk documents signed by each Plaintiff in
connection with his or her investment in the Apple REITs and did
not find any explicit disclaimers of fiduciary duty.
No. 117-6, Decl. of Michael D. Blanchard Exh. F.)
Nor have the
defendants identified any contractual disclaimer of a fiduciary
Consequently, the court proceeds to analyze whether
plaintiffs have adequately alleged “special circumstances” to
overcome the general rule that in a broker-client relationship
involving a nondiscretionary account, the broker owes no
fiduciary duty to the customer beyond the duty of consummating
each individual transaction authorized by the customer.
e.g., De Kwiatkowski, 306 F.3d at 1302.
Here, Plaintiffs make general allegations that the DLA
Defendants used certain marketing techniques, including
conducting seminars at senior centers and retirement communities,
offering door prizes, and making personal visits to customers’
homes in order to solicit customers. (See Compl ¶ 85.)
Plaintiffs fail to set forth, with particularity, any factual
basis to plausibly allege that the named Plaintiffs shared a
fiduciary relationship with DLA Defendants.
Asset Mgmt. Corp. v. Tradescape Corp., No. 03 Civ. 4556, 2005 WL
497787, at *9 (S.D.N.Y. Mar. 2, 2005) (“[F]inding a breach of
fiduciary duty requires finding that a fiduciary relationship
existed between the parties.” (emphasis added)).
does not allege that the named Plaintiffs were so lacking in
sophistication, suffering from impaired faculties, or were
incapacitated, vulnerable, or in a close relationship with DLA,
such that DLA had de facto control over their accounts.
Complaint also does not specify whether the named Plaintiffs
attended DLA’s seminars, whether DLA representatives visited
Plaintiffs’ homes, or whether Plaintiffs read DLA’s
advertisements and promotional materials.
Even if Plaintiffs
alleged that they attended DLA’s seminars and read DLA’s
promotional materials, these allegations, alone, are insufficient
to allege a fiduciary relationship.
See, e.g., DeBlasio v.
Merrill Lynch & Co., No. 07 Civ. 318, 2009 WL 2242605, at *30
(S.D.N.Y. July 27, 2009) (“[N]o reasonable investor would expect
these vague and general advertisements created any sort of extracontractual relationship extending beyond the terms specified in
Plaintiffs’ account agreements.”); Stewart v. J.P. Morgan Chase &
Co., No. 02 Civ. 1936, 2004 WL 1823902, at *12 (S.D.N.Y. Aug. 16,
2004) (“[T]he fact that the broker offers advice to the client or
represents, as part of his sales pitch, that he is particularly
well qualified to do so does not alter the limited scope of the
broker’s legally enforceable obligations.”) (citing De
Kwiatkowski, 306 F.3d at 1302-03)).
The two cases to which Plaintiffs cite to support their
breach of fiduciary claim are easily distinguishable from the
facts before this court.
In Anwar v. Fairfield Greenwich Ltd.,
745 F. Supp. 2d 360, 376-77 (S.D.N.Y. 2010), the district court
applied Florida law and found that the plaintiffs adequately
alleged a breach of fiduciary claim against brokers when at least
one plaintiff claimed that his account was discretionary, unlike
the nondiscretionary accounts at issue here, and a high-ranking
executive admitted that no diligence had been performed on the
relevant fund, which invested in Bernard Madoff’s Ponzi scheme.
In Scott v. Dime Savings Bank of New York, FSB, 886 F. Supp.
1073, 1078 (S.D.N.Y. 1995), the district court, applying New York
law and ruling on post-trial motions, found that there was
sufficient evidence in the record to sustain a breach of
fiduciary duty claim, because the creditor bank “encouraged the
[plaintiffs] to borrow $100,000 when they only wanted to borrow
Here, Plaintiffs do not dispute that they had
nondiscretionary accounts with DLA and do not allege any specific
facts suggesting that special circumstances existed that induced
them to repose closer than arms-length trust in DLA.
Consequently, the court finds that, even accepting as
true all well-pleaded allegations and drawing all reasonable
inferences in Plaintiffs’ favor, Plaintiffs fail to allege
special circumstances creating a fiduciary relationship between
A claim for aiding and abetting a breach of
fiduciary duty must, as a matter of law, fail where no underlying
breach of fiduciary duty claim lies.
See Lerner v. Fleet Bank,
N.A., 459 F.3d 273, 292 (2d Cir. 2006); Schandler v. New York
Life Ins. Co., No. 09 Civ. 10463, 2011 WL 1642574 (S.D.N.Y. Apr.
Therefore, Plaintiffs’ claims against DLA Defendants
for breach of fiduciary duty and Apple Defendants for aiding and
abetting a breach of fiduciary duty are dismissed.
Claims Against All Defendants for Negligence
Plaintiffs pleaded, in the alternative, that DLA
Defendants negligently breached their duty of care when offering
and selling the Apple REIT shares to Plaintiffs.
Complaint alleges substantially the same duties for the
negligence claim as was alleged for the breach of fiduciary duty
claim, i.e., “[t]o perform a reasonable review and due diligence
of the Apple REITs; [t]o conduct further inquiry if any red flags
were present . . . .” (Compl. ¶ 253.)4
Plaintiffs also alleged
that the Apple REIT Defendants “are jointly and severally liable
for the DLA Defendants’ negligence because the DLA Defendants
were agents of and acting in the scope of their agency with the
Apple REIT Defendants when they offered and sold the Apple REITs
to plaintiffs and Class members.” (Compl. ¶ 255.)
“Under New York law, the elements of a negligence claim
are: (i) a duty owed to the plaintiff by the defendant; (ii)
breach of that duty; and (iii) substantially caused by that
Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209,
215 (2d Cir. 2002).
The court has already found that Plaintiffs
have failed to allege sufficient facts plausible to sustain their
claim that DLA Defendants owed Plaintiffs any fiduciary duties.
Instead, the DLA Defendants, as a nondiscretionary broker, owe
the ordinary duties of “diligence and competence in executing the
client’s trade orders, and [are] obliged to give honest and
complete information when recommending a purchase or sale.”
Kwiatkowski, 306 F.3d at 1302.
Here, Plaintiffs have not alleged
any breach of these duties of ordinary care.
court dismisses all negligence claims against the defendants.
Plaintiffs’ negligence claim asserts an additional duty “[t]o comply with
federal and state law, and applicable industry rules, regulations and
regulatory notices issued by FINRA or its predecessor, NASD, including FINRA
Rules 2010, 2020, 2710 and NASD 2210 and 2310.” (Compl. ¶ 253.)
III. Plaintiffs’ Request for Leave to Amend
“‘[I]t is within the sound discretion of the district
court to grant or deny leave to amend.’”
Wilson v. Merrill Lynch
& Co., 671 F.3d at 139 (quoting McCarthy v. Dun & Bradstreet
Corp., 482 F.3d 184, 200 (2d Cir. 2007)).
would be futile, denial of leave to amend is proper.”
(quotation marks omitted).
Id. at 140
The Second Circuit has affirmed this
court’s previous denial of Plaintiffs’ request for leave to
Berger v. Apple REIT Ten, Inc., 563 F. App’x. at 85; In
re Apple REITs Litig., 2013 WL 1386202, at *22.
request leave to amend on the ground that since the court’s
previous decision dismissing Plaintiffs’ claims, the Securities
and Exchange Commission (“SEC”) announced the institution of
cease-and-desist proceedings against certain Apple REITs and
Glade Knight and Bryan Peery.
(See Pls.’ Opp. at 20-21).5
Plaintiffs, however, have not explained how the SEC proceedings
have any bearing on the remaining common law breach of fiduciary
duty and negligence claims, nor have Plaintiffs explained why
despite the prior opportunities to allege sufficient claims they
have failed to do so.
In particular, Plaintiffs have not
explained how the SEC findings would cure Plaintiff’s failure to
In their request for leave to amend, Plaintiffs also raise, again, the
settlement between DLA Defendants and FINRA. (See Pls.’ Opp. at 21.) The
court previously declined to take judicial notice of this settlement, see In
re Apple REITs Litigation, 2013 WL 1386202, at *4, and also declines to
consider it in its present decision for the same reasons.
adequately plead special circumstances from which a fiduciary
relationship between DLA Defendants and Plaintiffs may arise.
“In the absence of any identification of how a further amendment
would improve upon the Complaint, leave to amend must be denied
Bd. of Trs. of Ft. Lauderdale Gen. Emps.’ Ret. Sys.
v. Mechel OAO, 811 F. Supp. 2d 853, 883 (S.D.N.Y. 2011).
Plaintiffs’ request for leave to amend the complaint is therefore
For the foregoing reasons, Defendants’ motions to
dismiss the remaining claims in their Amended Consolidated Class
Action Complaint with prejudice are granted in their entirety.
The Clerk of the Court is respectfully directed to enter judgment
in favor of defendants Apple REIT Six, Inc., Apple REIT Seven,
Inc., Apple REIT Eight, Inc., Apple REIT Nine, Inc., and Apple
REIT Ten, Inc., Glenn W. Bunting, Kent W. Colton, Michael S.
Waters, Robert M. Wiley, Bruce H. Matson, Garnett Hill, Jr.,
Anthony Francis “Chip” Keating, Ronald A. Rosenfeld, David J.
Adams, and Lisa B. Kern, Glade M. Knight, Bryan Peery, Apple Fund
Management, LLC, Apple Suites Realty Group Inc., Apple Eight
Advisors, Inc., Apple Nine Advisors, Inc., Apple Ten Advisors,
Inc., David Lerner, and David Lerner Associates, Inc., and to
close the case.
Brooklyn, New York
March 25, 2015
KIYO A. MATSUMOTO
United States District Judge
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