Lange et al v. Massachusetts Mutual Life Insurance Company et al

Filing 862

OPINION re: 46 in 1:11-cv-01687-TPG) MOTION to Dismiss the Second Amended Complaint dated 10/18/12. filed by Tremont Opportunity Fund III, L.P., Tremont International Insurance Fund LP.Accordingly, the court declines to dismiss this claim on the basis of the plaintiffs alleged sophistication. Therefore, the motion to dismiss plaintiffs negligent misrepresentation claim is denied. Defendants' motion to dismiss is denied in its entirety. (Signed by Judge Thomas P. Griesa on 5/23/2013) Filed In Associated Cases: 1:08-cv-11117-TPG, 1:11-cv-01687-TPG(ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

IN RE TREMONT SECURITIES LAW, STATE LAW,
AND INSURANCE LITIGATION

Master File No.
08 Civ. 11117

CAYMAN NATIONAL TRUST COMPANY,
LTD., as trustee of THE INTERNATIONAL
DAD TRUST,
Plaintiff,

11 Civ. 1687

v.

OPINION

TREMONT OPPORTUNITY FUND III, L.P.,
ET AL.,
Defendants.

This is an action brought by the Cayman National Trust Company in its capacity as
trustee of the International DAD Trust. The Trust alleges that, through various
misrepresentations about the due diligence performed by Tremont on its fund managers,
defendants induced it to invest in excess of $4 million in two Tremont funds — Tremont
Opportunity and Tremont International. Of this $4 million, approximately $1.5 million
was lost when it was revealed that the ultimate manager of these assets, Bernard Madoff,
was using the assets to fund his Ponzi scheme instead of investing them.
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The complaint frequently uses the term “Tremont” and defines it to refer
collectively to Tremont Opportunity Fund III, L.P.; Tremont International Insurance
Fund L.P.; Tremont Partners, Inc.; Tremont Group Holdings, Inc.; and Rye Investment
Management. The court will adopt this terminology as well. Certain allegations in the
complaint are only plausible to the extent that they refer to a subset of these entities. But,
for the purpose of this motion, it is not the court’s prerogative to gainsay plaintiff’s
allegations. The court anticipates, however, that further proceedings will serve to clarify
which allegations and claims are truly relevant to each particular defendant.
The action was originally brought in Texas state court. It was removed to federal
court in the Northern District of Texas and then transferred to this court as a part of the
multidistrict case In re Tremont Group Holdings, Inc., 09 M.D. 2052, for pretrial case
management. Here, it was consolidated with the case In re Tremont Securities Law, State
Law, and Insurance Litigation, 08 Civ. 11117.
Defendant moves to dismiss the complaint, which is the second amended complaint
filed in this action. The motion is denied.

The Complaint
The Trust is the policyholder of a variable universal life insurance policy, or “VUL,”
issued by Scottish Annuity & Life Insurance Company (Bermuda) Ltd. A VUL is a type of
life insurance that, in essence, permits the policyholder to engage in some degree of
investment activity while enjoying the tax advantages afforded a life insurance policy. On
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one hand, this policy allows the policyholder to direct, among the options provided by the
insurance carrier, how the funds paid into that account are to be invested. The proceeds
from those investments are paid out through the policy’s eventual death benefit and also, in
the meantime, may be borrowed against and used to fund the policy premiums and other
ongoing policy expenses. On the other hand, however, this arrangement is structured such
that the assets held in the policy are considered to be those of the insurance carrier and not
of the policyholder. This ensures that the transactions carried on within the VUL benefit
from the relatively generous tax advantages afforded life insurance benefits.
In deciding how to invest these VUL assets, representatives of the Trust’s “protector”
took certain steps. The protector of a Cayman Islands trust serves a role similar and
parallel to that of the trustee under Cayman Islands and United States law. A trust’s
protector is typically tasked with overseeing or approving the actions of the trustee. The
protector’s representatives met with representatives of Tremont in Dallas, Texas. At that
meeting, the Tremont representatives stated that, if the Trust invested with Tremont, the
Trust’s assets would be invested in a multi-manager “fund of funds.” They stated that
Tremont conducted extensive “specialist” due diligence on the “market and credit risk
management” and “operating and business risk management” of any fund in which
Tremont invested. Based upon these representations, the complaint alleges, the Trust
directed that a portion of its VUL assets be invested with Tremont. These investments
occurred in February and November of 2005.

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Subsequently, the complaint alleges, Tremont representatives met with representatives
of the Trust’s protector in Dallas, Texas on an annual basis. At these meetings, Tremont
representatives continued to make representations about the due diligence that it
performed on the funds in which it invested. They represented that Tremont had a
dedicated “Manager Research Group” focused specifically on ensuring the “operational
integrity” of the funds’ managers. This allowed Tremont, it claimed, to “uniquely
understand how manager returns are generated.” Tremont also provided written materials
which contained additional details about Tremont’s due diligence practices. The materials
stated that Tremont also conducted “initial operational risk due diligence” which focused
on, among other things, an investment’s cash controls, trade execution and settlement, and
its third-party service providers.
In reliance on these representations, the complaint alleges, the Trust made additional
investments with Tremont in 2006.
On December 12, 2008, however, the day after Madoff was charged with securities
fraud in connection with his ponzi scheme, Tremont sent a letter to the Trust informing it
that a substantial portion of its investment had been managed by Madoff. Prior to this
communication, however, the Trust alleges that a great deal of information had become
available that would have caused a reasonable and prudent investment advisor —
particularly one that conducted all of the due diligence that Tremont represented it would
conduct — to become suspicious of Madoff’s operation and avoid financial exposure to it.
That Tremont did not identify or heed these red flags, the complaint alleges, suggests that
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Tremont’s representations about its due diligence practices were false and that, in fact,
Tremont did not conduct the due diligence that should have been conducted.

Discussion
To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, a complaint must plead sufficient facts to state a claim for relief that is plausible
on its face. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). In deciding a motion under Rule 12(b)(6), a court must accept
as true the facts alleged in the complaint, drawing all reasonable inferences in the plaintiff's
favor, and may consider legally required public disclosures as well as documents attached
to the complaint, incorporated by reference into the complaint, or known to and relied on
by the plaintiff in bringing the suit. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d
87, 98 (2d Cir. 2007).
In this connection, Tremont contends that its Private Placement Memorandum,
Limited Partnership Agreement, and other documents should be considered by the court.
These documents purport to prohibit Tremont from communicating with insurance
policyholders such as the Trust, emphasize that policyholders were not limited partners in
the fund, and provide that defendants owed no duties to policyholders. But the present
motion is addressed to the complaint, and these documents are not referred to in the
complaint. The court declines to turn the motion into one for summary judgment dealing,
in part, with these documents.
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It is far from established, however, that plaintiff relied on or even was aware of these
documents in preparing its complaint. Indeed, defendants only appear to contend that the
documents were provided to Scottish Annuity and Life, not plaintiff. Therefore, these
documents can have no bearing on the resolution of this motion.

C HOICE OF L A W
This court, as the transferee court of a diversity action commenced out of state, but
transferred here for pre-trial purposes, applies the substantive law of the state in which the
action was originally filed. This includes that state’s choice-of-law rules. Menowitz v.
Brown, 991 F.2d 36, 40 (2d Cir. 1993). In this case, therefore, the court applies the choice
of law rules and the other substantive law of Texas.
In deciding which jurisdiction’s laws govern a given issue, Texas courts apply the “most
significant relationship” test articulated in the Restatement (Second) of Conflicts of Laws.
Texas courts focus their examination on which state has the most meaningful
connections with and interests in the parties and the transactions. The
various contacts are to be evaluated according to their relative importance
with respect to the particular issue at hand. This Restatement methodology
requires a separate conflict-of-laws analysis for each issue in a case.
Greenberg Traurig of New York, P.C. v. Moody, 161 S.W.3d 56, 70 (Tex. App. 2004).

B REACH OF F IDUCIARY D UTY
The Trust claims that, under the circumstances alleged, defendants had a fiduciary
duty to plaintiffs which Tremont breached. Defendants contend that this can only be
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brought as a derivative claim, which the Trust would lack standing to bring, and that, in any
case, the defendants were not the Trust’s fiduciaries.
Texas, like many other states, follows the “internal affairs” doctrine. See Tex. Bus.
Orgs. Code Ann. § 1.102. Thus, because the defendant funds are were organized in
Delaware, Delaware law applies in determining whether a claim must be brought
derivatively on an organization’s behalf. See Alenia Spazio, S.p.A. v. Reid, 130 S.W.3d
201, 211 (Tex. App. 2003). A claim brought against a limited partnership must be brought
derivatively if the harm alleged was inflicted upon the plaintiff qua partner such that, along
with every other partner, it could only recover its pro rata share of the harm done to the
organization itself. Feldman v. Cutaia, 951 A.2d 727, 733 (Del. 2008).
The derivative action contended for by defendants would be a derivative action on
behalf of the Tremont funds arising from their loss in value. However, this is not the kind
of claim which the Trust is making in this case. The Trust seeks to recover for its own loss
resulting, as alleged in the complaint, from its own inquiries of Tremont, and
misrepresentations made by Tremont to the Trust specifically. This is surely a direct
claim. However, there is the substantive issue as to whether the defendants actually owed a
fiduciary duty to the Trust.
It is true that this court has, on other occasions, held that an action for breach of
fiduciary duty could not be brought against Tremont by a VUL policyholder. Prickett v.
New York Life Ins. Co., 896 F. Supp. 2d 236, 2012 WL 4053810, at *11 (S.D.N.Y. 2012).
But in Prickett, the plaintiff sought to sue for breach of fiduciary duties that Tremont
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allegedly owed simply by virtue of the plaintiff’s investment in the fund. But in this case,
the Trust’s claim is based upon duties of a different origin. The duties at issue here arose
as a result of representations made by Tremont directly to the Trust and, thus, the claim
pertains to a fiduciary relationship between Tremont and the Trust only, not between
Tremont and the fund. Moreover, Prickett was decided under New York. In this case, by
contrast, the Trust contends that Texas law applies and that, under Texas law, defendants’
direct representations to the Trust made them the Trust’s fiduciary.
Defendants’ argue that, on the contrary, there is “no relationship of any kind” between
the Trust and defendants. But this is clearly inconsistent with the complaint which alleges
that Tremont representatives met repeatedly with representatives of the Trust.
It should be noted that Texas, not Delaware law applies to this theory of fiduciary
liability. While Delaware law applies in determining what duties defendants owe investors
in their capacities as limited partners in the fund, this second theory is based upon
Tremont’s external conduct and representations, not upon the entities’ internal affairs. In
determining, under Texas law, which jurisdiction’s laws govern the potential formation of a
fiduciary relationship, the court applies the “most significant relationship” test laid out in
Restatement (Second) of Conflict of Laws §§ 6 and 145. Section 145 of the Restatement
explains that, in applying § 6, the court should consider the place where the injury
occurred, the place where the injury-causing conduct occurred, where the parties are
located, and the place where the relationship between them is centered. See also Red Roof
Inns, Inc. v. Murat Holdings, L.L.C., 223 S.W.3d 676, 685 (Tex. App. 2007).
8

Here, these factors compel the conclusion that Texas law applies to the question
whether Tremont’s representations and other acts gave rise to fiduciary duties to the Trust.
In particular, the alleged representations by defendants to the Trust were made in Texas
and, all in all, the relationship between the parties was clearly centered there. While the
parties were spread across several jurisdictions — the Cayman Islands, Delaware, New York
— they came together in Texas to form their business relationship. Furthermore, though
the Trust is a Cayman Islands entity, its Protector is domiciled in Texas. Thus, Texas is
the state with the most significant relationship to this issue.
And under Texas law, the course of dealings alleged by the Trust is sufficient to give
rise to fiduciary duties. Under Texas law, while not every relationship of trust gives rise to
fiduciary duties, if one party acts such that the other would be justified in relying upon it
then the law correspondingly recognizes the creation a fiduciary relationship. Stephanz v.
Laird, 846 S.W.2d 895, 901-02 (Tex. App. 1993). It is illustrative that, under Texas law, a
financial advisor owes fiduciary duties to his clients. W. Reserve Life Assur. Co. of Ohio v.
Graben, 233 S.W.3d 360, 373 (Tex. App. 2007).
In this case, the complaint alleges that Tremont representatives met with
representatives of the Trust and represented to them that Tremont was a “fund of funds”
and that Tremont would, in its discretion, select the best investments for the Trust’s assets
on the basis of Tremont’s exceptional industry expertise and due diligence. This, in short,
is precisely the role of an investment advisor — a fiduciary under Texas law. Indeed,
Tremont concedes that it served as an investment advisor but insists that it was an
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investment advisor to the Tremont funds — and thus its limited partners — and not the
Trust itself. But this ignores the fact that, though the assets invested with Tremont were
technically owned by Scottish Annuity and Life for the Trust’s benefit, it was Tremont’s
representations to the Trust, in connection with the investment of these assets, that gives
rise to its fiduciary duties in this case.

T EXAS S ECURITIES A CT
The Trust contends that defendants violated § 33A(2) of the Texas Securities Act
which creates a cause of action that may be brought by a “person buying [a] security”
against the seller of the security, if the sale was made by means of a material omission or
misrepresentation. Vernon's Ann. Tex. Civ. St. Art. 581-33A(2).
As an initial matter, the court concludes that the Trust’s complaint adequately alleges
that misrepresentations were made in Tremont’s meetings with the Trust, although the
complaint is hardly a model of clarity in this regard. On one hand, the complaint includes
several concrete allegations about the representations made, and the reasons to suspect that
they may have been false. In particular, the complaint alleges many specific measures that
Tremont representatives claimed that Tremont took to scrutinize and monitor the
performance of its investment managers. It then alleges that a fund that was actually
performing the due diligence that Tremont represented it would, would have discovered
the many red flags that suggested that Madoff’s operation was a fraud.

10

But it contains very little to take these allegations to their logical conclusion, that these
representations were actually false. Instead of a straightforward allegations that the
representations were false, the complaint relies upon the circuitous allegation that “had
Tremont conducted the due diligence required of them, and which they affirmatively
represented they were doing, they would have discovered many, if not all of these red
flags.” A court — to say nothing of defendants in a multi-year, multi-million dollar lawsuit —
might reasonably expect something more from a second amended complaint.
Nonetheless, however, the court concludes that this allegation, in combination with the
conclusory allegation that Tremont is liable to the Trust “by reason of misrepresentations
and omissions,” and the clear implications arising from the complaint taken as a whole, is
sufficient to allege misrepresentation.
Contrary to defendants’ contentions, these allegations are not subject to the heightened
pleading requirements of Fed. R. Civ. P. 9(b). That rule imposes heightened requirements
only on allegations of fraud or mistake. But the Trust’s complaint does not present such a
theory of liability.
The authority cited by defendants, Bagby v. Rydex Inv., 06 Civ. 0648-G, 2007 WL
507042 (N.D. Tex. Feb. 16, 2007), is not to the contrary. The Bagby court applied Rule
9(b) to the Texas Securities Act claim in that case because the plaintiff in that case brought
a claim under §33(F) of the act, which is a securities fraud claim, not just because, as
defendants misleadingly suggest, the Rule 9(b) requirements “apply to TSA claims.”

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Freed of this requirement, the Trust’s complaint meets the much less exacting “short
and plain statement” standard of Rule 8 and the “plausibility” requirement of Iqbal and
Twombly. Not only does the complaint allege that Tremont did not perform the due
diligence it said it performed — arguably an adequate allegation standing alone — but it goes
on to explain the Trust’s basis for making the allegation. Namely, while Tremont made
specific representations about its robust due diligence practices, numerous red flags were
there to be seen by anyone who investigated with the level of diligence that Tremont
claimed. Tremont’s failure to observe or heed these warning signs supports the inference
(though, of course, it hardly proves) that Tremont did not conduct the due diligence it said
that it would. This is enough for the Trust to state a claim under Rule 8.
But there is a more difficult question. The Texas Securities Act provides a cause of
action for a “buyer” against a “seller” of securities. But, in this case, it is not clear that the
Trust qualifies as a “buyer” of securities because, instead of investing directly in the
Tremont funds, the Trust paid premiums into VUL and directed that Scottish Annuity and
Life invest VUL assets with Tremont. Indeed, to enjoy the tax advantages that a VUL
typically conveys, it is apparently important that the actual partnership shares purchased
with these assets be held in the insurer’s name and that the funds used to purchase the
shares come from the insurer and not directly from the policyholder.
Defendants argue that the court need only follow the “plain language” of the statute in
resolving this question. Defendants evidently are of the view that the categories erected by
tax law — in particular, its designation of Scottish Annuity and Life as the “owner” of the
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purchased partnership shares — are conclusive in evaluating the extension of the term
“buyer” under Texas law. But the reality is far less certain.
The courts and legislature of Texas appear never to have answered the question
whether the policyholder of a VUL counts as a “buyer” of the securities in which the VUL
assets are invested. And, indeed, Texas law appears to provide no comprehensive
definition of “buyer” at all in relation to the sale of securities.
However, a number of cases do exist from around the country that elaborate on the
term “person purchasing” in federal Securities Act of 1933 § 12(2), which the Texas
Securities Act was apparently designed to parallel, and the word “purchaser” in the
Securities Exchange Act of 1934 § 10(b). In the broadest of strokes, these cases disclose
that there are circumstances under which courts are willing to conclude that the “person
purchasing” can be a separate entity from the one that technically holds the purchased
security. Typically this is done when to hold otherwise would frustrate the remedial
purposes of the securities laws, when the technical purchaser of the securities is a shell
corporation, and when the seller directly solicited the putative, de-facto buyer. Courts
frequently ask whether a party was the “actual party at risk” in the transaction in
determining it was a “purchaser.” See, e.g., Grubb v. Fed. Deposit Ins. Corp., 868 F.2d
1151, 1161 (10th Cir. 1989); Walther v. Maricopa Int'l Inv., Corp., 97 Civ. 4816, 1999 WL
64280 (S.D.N.Y. Feb. 9, 1999); HB Holdings Corp. v. Scovill, Inc., 88 Civ. 7983 , 1990
WL 37869 (S.D.N.Y. Mar. 26, 1990); Prudential Ins. Co. of America v. BMC Industries,
655 F.Supp. 710, 711 (S.D.N.Y.1987). The Second Circuit has also helpfully instructed, in
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the federal securities context, that the purchase-sale requirement must be interpreted so as
to ensure that the remedial purpose of the statute “is not frustrated by the use of novel or
atypical transactions.” Crane Co. v. Westinghouse Air Brake Co., 419 F.2d 787, 798 (2d
Cir. 1969)
These cases, of course, are not controlling, dealing as they do with different statutes
under the laws of other jurisdictions. They are nonetheless relevant because it is likely that
a Texas court would regard them as instructive in developing Texas’s own definition of
“buyer.”
Under Texas law itself, the guidance most useful to the court in predicting the law that
would be developed by a Texas court, is simply this: according to the Supreme Court of
Texas, § 33 of the Texas Securities Act “should be given the widest possible scope”
because it is remedial in nature. Flowers v. Dempsey-Tegeler & Co., 472 S.W.2d 112, 115
(Tex. 1971). 1
Here, to properly respect the remedial purpose of § 33A, the court concludes that,
under Texas law, the holder of a VUL policy is a “buyer” under the Texas Securities Act.
It is the policyholder who is exposed to risk of loss should the VUL investments lose value
and it is the policyholder’s premium payments that fund the insurer’s transactions — even
if, in a certain technical sense, the funds belong to the insurer at the time the transaction is
1

The court is keenly aware that its duty in this case is to model the jurisprudential behavior of the Texas courts as
closely as it can and, thus, proceeds with caution in reaching any conclusion that does not clearly follow from
established Texas law. Given the somewhat thin guidance provided by Texas law on the meaning of the term “buyer”
in this context — and, to a lesser extent, the breach of fiduciary duty issue discussed above, see supra p.6 — this
question presents an excellent candidate for certification to the Texas Supreme Court. Texas law, however, only
permits the certification of questions from federal courts of appeals, not federal district courts. Tex. R. App. P. 58.1.
Thus, the only course available to this court is to attempt as faithful an interpretation of Texas law as possible.
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made. To prevent VUL policyholders from bringing actions under the Texas Securities
Act misaligns the harm with its legal remedy — the injured party would not be able to sue
and the party that could sue would not be injured. This would create a real danger that the
Texas Securities Act will exert very little regulative and remedial power for the benefit of
those who choose to invest through VULs. It is doubtful that the Texas legislature would
desire such a gap in its securities regulations.
Thus, the Trust has adequately pleaded violation of §33(A) of the Texas Securities
Act.

N EGLIGENT M ISREPRESENTATION
The Trust also brings a negligent misrepresentation claim based upon the alleged
misrepresentations described above. As the court has already explained, supra p. 10, the
Trust has adequately alleged that defendants misrepresented material facts. However,
there is an issue about whether the negligent misrepresentation claim is governed by Texas
or New York law.
New York negligent misrepresentation law requires that a plaintiff allege that a “special
relationship” existed between plaintiff and defendant, see Hydro Investors, Inc. v. Trafalgar
Power, Inc., 227 F.3d 8, 20 (2d Cir.2000). It also permits a court to dismiss a case at the
pleading stage, that is brought by a sophisticated party with the means to conduct its own
due diligence, because such a party cannot be said to have reasonably relied upon the

15

defendants’ misrepresentations. See Emergent Capital Inv. Mgmt., LLC v. Stonepath
Grp., Inc., 343 F.3d 189, 195 (2d Cir. 2003).
Texas negligent misrepresentation law has neither of these features. It does not
require a special relationship between the plaintiff and defendant. See McCamish, Martin,
Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 792 (Tex. 1999),
Restatement (Second) of Torts § 552. And it appears to discourage courts from holding
that, as a matter of law, a sophisticated plaintiff could not have reasonably relied on
defendants’ misrepresentations. Rather, the plaintiff’s sophistication is regarded as a factual
consideration more appropriately left to the jury in determining whether the plaintiff
reasonably relied on defendants’ misrepresentations. See, e.g., Lutheran Bhd. v. Kidder
Peabody & Co., Inc., 829 S.W.2d 300, 308 (Tex. App. 1992); Hall v. Harris Cnty. Water
Control & Imp. Dist. No. 50, 683 S.W.2d 863, 868 (Tex. App. 1984).
The court has already concluded that defendants owed fiduciary duties to the Trust.
Therefore, the “special relationship” element of negligent misrepresentation is satisfied
even under New York law. The difference between New York and Texas law on the
question of reasonable reliance, however, is of considerable significance. The court
concludes, however, that Texas law governs the claim.
As the court has already explained, in choosing which jurisdiction’s laws govern an
alleged tort, Texas courts apply the “most significant relationship” test laid out in
Restatement (Second) of Conflict of Laws §§ 6 and 145. Section 6 lays out a number of
quite general factors to be considered which, for tort claims, are supplemented and
16

clarified in § 145 by four more specific considerations: the place where the injury occurred,
the place where the injury-causing conduct occurred, where the parties are located, and the
place where the relationship between them is centered.
The Restatement also, however, contains specific choice of law rules for claims of
fraud and misrepresentation. When the plaintiff’s actions in reliance on the alleged
misrepresentation occurred in the same state as the misrepresentations themselves, that
state’s law typically controls. There is good reason to conclude that this is such a case. It is
clear that the misrepresentations occurred in Texas, it appears that the protector’s decision
to invest in Tremont occurred there, and there is no other state with a more significant
relationship to the claim. Restatement (Second) of Conflict of Laws § 148(1).
But even if, for the sake of argument, the court were to conclude that the plaintiff’s
actions in reliance on the misrepresentations occurred outside of Texas, perhaps in the
Cayman Islands, Texas law would still control. Under such a circumstance, Texas courts
look to the six factors laid on in § 148(2) of the Restatement.
(a) the place, or places, where the plaintiff acted in reliance upon the
defendant's representations,
(b) the place where the plaintiff received the representations,
(c) the place where the defendant made the representations,
(d) the domicil, residence, nationality, place of incorporation and place of
business of the parties,
(e) the place where a tangible thing which is the subject of the transaction
between the parties was situated at the time, and
(f) the place where the plaintiff is to render performance under a contract
which he has been induced to enter by the false representations of the
defendant.

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If more than twu of these factors - other than (d) - point to a single forum, Texas courts
typically apply the law of that forum. Grant Thornton LLP v. Suntrust Bank, 133 S.W.3d
342,358 (Tex. App. 2004); Greenberg Traurig, 161 S.W.3d at71 (Tex. App. 2004). In
this case, it is clear that the misrepresentations were both made by defendant and received
by plaintiff in Dallas, Texas. 11lUS, Texas choice-of-Iaw principles direct that the court
should apply Texas negligent misrepresentation law. Accordingly, the court declines to
dismiss this claim on the basis of the plaintiffs alleged sophistication.
Therefore, the motion to dismiss plaintiffs negligent misrepresentation claim is
denied.

Conclusion

Defendants' motion to dismiss is denied in its entirety.

Dated: New York, New York
May 23,2013

~1~() .
- ----------~~-=~------------­
Thomas P. Griesa
United States Districtludge

USDCSDNY

DOCUMENT
ELEcrRONICALLY FILED

J)OC #: _-~--­
DATE FU..ED: MIS 1'~B

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