Anwar et al v. Fairfield Greenwich Limited et al

Filing 650

RESPONSE in Opposition re: (621 in 1:09-cv-00118-VM -THK, 37 in 1:10-cv-06186-VM, 36 in 1:10-cv-06187-VM) MOTION to Dismiss Operative Complaints in Almiron, Carrillo and Lou-Martinez.. Document filed by Carlos Carrillo, Ricardo Almiron. Filed In Associated Cases: 1:09-cv-00118-VM -THK, 1:10-cv-06186-VM, 1:10-cv-06187-VM(Jones, Matthew)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Master File No. 09-CV-118 (VM) (THK)
PASHA S. ANWAR, et al.,
Plaintiffs,
v.
FAIRFIELD GREENWICH LIMITED, et al.,
Defendants.

This Document Relates To: Ricardo Almiron v.
Standard Chartered Bank International (Americas)
Ltd., et al., No. 10-CV-6186; and Carlos Carrillo v.
Standard Chartered Bank International (Americas)
Ltd., et al., No. 10-CV-6187
______________________________________________/
PLAINTIFFS CARRILLO’S AND ALMIRON’S RESPONSE IN
OPPOSITION TO STANDARD CHARTERED’S MOTION TO DISMISS
Plaintiffs Carlos Carillo (“Carrillo”) and Ricardo Almiron (“Almiron”) (collectively,
“Plaintiffs”) respectfully submit this memorandum in opposition to the motion to dismiss their
respective Complaints1 filed by Standard Chartered International (Americas) Limited (“SCBI”),
Standard

Chartered

PLC,

and

StanChart

Securities

International,

Inc.

(collectively

“Defendants”).

I.

INTRODUCTION
Plaintiffs Carrillo and Almiron have asserted claims for violations of Chapter 517 of the

Florida Statutes, Florida’s blue-sky law, breach of fiduciary duty, negligence, negligent
misrepresentation, and unjust enrichment and constructive trust against SCBI. Defendants move
1

For purposes of this memorandum, the Complaint in Case No. 10-CV-6187 is referred to as “Carrillo
Complaint.” The Complaint in Case No. 10-CV-6186 is referred to as “Almiron Complaint.”

to dismiss all of Carrillo and Almiron’s claims. However, Defendants’ arguments are legally
flawed and necessarily fail.
First, to the extent that any of the claims advanced by Carrillo and Almiron “sound in
fraud,” all claims, including elements of scienter where applicable, have been pled with a
sufficient level of particularity that comports with the requirements of Federal Rule of Procedure
9(b). Second, the economic loss rule is simply inapplicable to Plaintiffs’ claims and does not bar
Almiron and Carrillo’s negligence claims. Third, not the nondiscretionary broker relationship or
a written agreement can vitiate the Defendants’ duty as fiduciaries and brokers to conduct due
diligence on the investments it recommended or to inform their clients of material information
that could impact their investments.
For the reasons discussed below, Plaintiffs have properly asserted their claims, and
Defendants’ motion should be denied in its entirety.
II.

MOTION TO DISMISS STANDARD
On a Rule 12(b)(6) motion to dismiss for failure to state a claim, the Supreme Court has

held that
Federal Rule of Civil Procedure 8(a)(2) requires only a short and plain statement
of the claim showing that the pleader is entitled to relief, in order to give the
defendant fair notice of what the claim is and the grounds upon which it rests.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff's obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do. Factual allegations
must be enough to raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even if doubtful in
fact).
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Factual allegations are to be taken as true,
while legal conclusions are not. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). “When there
are well-pleaded factual allegations, a court should assume their veracity and then determine

2

whether they plausibly give rise to an entitlement to relief.” Id. In evaluating claims in the
context of a 12(b)(6) motion, the district court is normally required to look only to the allegations
on the face of the complaint. See, e.g., Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007).
III.

PLAINTIFFS STATE A CLAIM UNDER SECTION 517.301 OF THE
FLORIDA STATUTES
In order to state a claim under Section 517.301 of the Florida Statutes, a plaintiff must

allege: (1) a misrepresentation; (2) of a material fact; (3) on which the investor justifiably relied;
and (4) scienter.2 See Durden v. Citicorp Trust Bank, No. 3:07-cv-974-J-34JRK, 2009 WL
6499365, at *5 (M.D. Fla. Aug. 21, 2009); Grippo v. Perazzo, 357 F.3d 1218, 1222 (11th Cir.
2004).

With regard to the first element, a court may consider omissions as well as

misrepresentations. FLA. STAT. § 517.301(1)(a). With respect to the fourth element, the scienter
requirement, it is satisfied by a showing of mere negligence when bringing a claim pursuant to
Section 517.301. See Grippo, 357 F.3d at 1222.
Additionally, to state a claim for a violation of Section 517.301 a plaintiff must establish
that the defendant falls within the class of individuals identified in Section 517.211. Finally,
because the basis of a Section 517.301 claim is fraud, it is subject to the requirements of Federal
Rule of Civil Procedure 9(b). See Great Fla. Bank v. Countrywide Home Loans, Inc., No. 1022124-CIV, 2011 WL 382588, *3 (S.D. Fla. Feb. 3, 2011); see also FED. R. CIV. P. 9(b). Count I
of the Complaint satisfies each of the abovementioned requirements; therefore, Plaintiffs
adequately allege a claim under Section 517.301 of Florida Statutes.
A. Plaintiffs allege misrepresentations and omissions of material fact.
In order to state a claim under Section 517.301, Plaintiffs must allege a misrepresentation

2

Proof of loss causation is not required in a civil securities proceeding under Section 517.301. Rousseff
v. E.F. Hutton, Co., Inc., 867 F.2d 1281, 1281–82 (11th Cir. 1989) (adopting the Florida Supreme Court’s
answer to a certified question of law)

3

or omission of a material fact by Defendants. See Durden, 2009 WL 6499365, at *5. “[T]he test
of whether an omitted or misrepresented fact is material is whether a reasonable investor would
have considered the fact important in deciding whether to invest.” Alna Capital Assocs. v.
Wagner, 532 F. Supp. 591, 599 (S.D. Fla. 1982). Defendants contend Count I should be
dismissed because the misrepresentations or omissions identified by Plaintiffs are neither false
nor material.

Notwithstanding Defendants’ arguments, a careful review of the Complaint

demonstrates Plaintiffs identify representations that were false when made, and both
representations and omissions that are material.
1. The alleged misrepresentations and omissions of Defendants are material.
Florida courts have held that misrepresentations and omissions made by a defendant
concerning the advisability of an investment are material for purposes of analyzing a claim
brought under Section 517.301. See Azar v. Richardson Greenshields Secs., Inc., 528 So. 2d
1266, 1269 (Fla. 2d DCA 1988); Carran v. Morgan, 510 F. Supp. 2d 1053, 1060 (S.D. Fla.
2007). For example, in Azar, the complaint alleged that the defendant recommended the plaintiff
make a particular investment, made representations about the circumstances surrounding the
investment that were not true, and claimed to have conducted research regarding the investment
(when no research had in fact been undertaken). See Azar, 528 So. 2d at 1269. These allegations
were found to constitute material misrepresentations and omissions for purposes of Section
517.301. See id. Similarly, in Carran, the court found the amended complaint adequately stated
facts of materially false statements and/or omissions where the plaintiff alleged that the
defendant held himself out as an expert investment advisor who could invest plaintiff’s money in
“safe investments,” when those investments did not exist or were not what the defendant
represented. See Carran, 510 F. Supp. 2d at 1060.

4

Likewise, here, Plaintiffs make similar allegations regarding misrepresentations and
omissions made by Defendants concerning the advisability of an investment. In particular,
Plaintiffs allege:
•

Standard Chartered Americas did not disclose the structure [that
Fairfield Sentry Ltd. acquiesced to an unusual relationship with
Madoff and BLMIS, where BLMIS served as both the sub-custodian
of the assets and the executing broker] of Fairfield Sentry Ltd. or the
inherent risks in such a structure to its customers. (Almiron ¶ 39,
36; Carrillo Compl. ¶¶ 39, 41).

•

Had Plaintiff[s] known that Fairfield Sentry Ltd. was structured
such that its subcustodian and executing broker were one and the
same, and the inherent risks of this structure explained as its brokers
should have done, Plaintiff[s] would not have allowed Standard
Chartered Americas to invest his funds with Fairfield Sentry Ltd.
(Almiron Compl. ¶ 40; Carrillo Compl. ¶ 42).

•

Plaintiff invested $350,000 with Fairfield Sentry Ltd. based on
Standard Chartered Americas’ misrepresentations that it had chosen,
after performing its extensive due diligence, a safe investment
product for its customers to invest in. Rather, Standard Chartered
Americas merely passed on and/or actively recommended, verbally
and through documents, the misrepresentations being made by
Fairfield Sentry Ltd. and related Fairfield entities, that Fairfield
Sentry Ltd. was a low-risk, long-term investment that could
generate steady returns. (Carrillo Compl. ¶ 43).

•

Plaintiff invested $100,000 with Fairfield Sentry Ltd. based on
Standard Chartered Americas’ misrepresentations that it had chosen,
after performing its extensive due diligence, a safe investment
product for its customers to invest in. Rather, Standard Chartered
Americas merely passed on and/or actively recommended, verbally
and through documents, the misrepresentations being made by
Fairfield Sentry Ltd. and related Fairfield entities, that Fairfield
Sentry Ltd. was a low-risk, long-term investment that could
generate steady returns. (Almiron Compl. ¶ 41).

•

Plaintiff[s] and other investors in Fairfield Sentry Ltd. did not find
out that BLMIS had been managing FSL’s assets until after
December 11, 2008. Standard Chartered Americas never informed
the Plaintiff[s] or any other investors in FSL, nor did the Plaintiff[s]
or these other investors ever know that the funds invested in FSL
were being turned over to BLMIS. (Id. ¶ 49; Carrillo Compl. ¶ 51).

5

•

Defendants omitted to advise Plaintiff[s] that [Defendants’]
recommendations that [Plaintiffs’] remain invested with Fairfield
Sentry Ltd. were made without any investigation, or due diligence,
and by relying solely on propaganda received from Fairfield Sentry
Ltd. and the related Fairfield entities and the funds’ inflated returns.
(Almiron Compl. ¶ 57; Carrillo Compl. ¶ 59).

•

BLMIS’s identity and role in the investment management of FSL is
a fact that Plaintiff[s] and other investors in FSL would have
considered material, as Plaintiff[s] would have not invested in FSL
had it known that when they purchased FSL shares through
[Defendants], the funds FSL received from Plaintiff[s] were merely
shuffled to BLMIS. (Almiron Compl. 95; Carrillo Compl. ¶ 96).

These allegations identify specific misrepresentations and omissions concerning the advisability
of an investment, upon which Plaintiffs relied.
Nevertheless, Defendants contend these allegations are insufficient.

For instance,

Defendants point to Plaintiffs’ allegation that: “BLMIS’s identity and role in the investment
management of FSL is a fact that Plaintiff[s] and other investors in FSL would have considered
material, as Plaintiff[s] would have not invested in FSL had it known that when they purchased
FSL shares through [Defendants], the funds FSL received from Plaintiff[s] were merely shuffled
to BLMIS,” (Almiron Compl. ¶ 95; Carrillo Compl. ¶ 96), and maintain that such allegation
represents a bare and conclusory allegation. (Mot. at p. 27). In support of their contention,
Defendants cite to Kalil v. Blue Heron Beach Resort Developer, LLC, 720 F. Supp. 2d 1335,
1345 (M.D. Fla. 2010). However, Kalil is inapposite.
In Kalil, the court addressed alleged misrepresentations and omissions concerning the
sale of a condominium unit to the plaintiff by the defendant. The court found the defendants’
failure to inform the plaintiff of a previous contract to purchase the same condominium unit was
not material. See Id. In doing so, the Kalil court emphasized that the presence of the previous
contract had no effect on the value of the plaintiff’s condominium unit, and therefore, had no

6

effect on the nature and substance of the property purchased. In contrast, here, Defendants’
omission concealed the exact nature and substance of the security Plaintiffs were purchasing. In
particular, Plaintiffs allege Defendants concealed pivotal facts regarding where and how
Plaintiffs’ money was going to be invested. Unlike in Kalil, these allegations constitute material
misrepresentations and omissions.
2. Defendants’ misrepresentations were false when made.
Plaintiffs sufficiently allege that Defendants’ representations were false at the time they
were made. For instance, Plaintiffs allege that Defendants represented they had chosen Fairfield
Sentry Ltd. after extensive research, when in fact no research had been performed; they
misrepresented the fact that the information Defendants gave to Plaintiffs about Fairfield Sentry
Ltd. was based solely on propaganda received from Fairfield Sentry Ltd. and not Defendants’
own research; and Defendants misrepresented that the funds Plaintiffs thought were being
controlled by Fairfield Sentry Ltd., were in fact turned over to BLMIS.

Each of these

representations was not true, as evidenced by Defendants’ executive’s own admissions that
“[Defendants] had done none of their own due diligence or investigations with respect to
Fairfield Sentry Ltd., but instead had relied wholly upon representations made by promoters of
Fairfield Sentry Ltd.” (Almiron Compl. ¶ 62; Carrillo Compl. ¶ 60). As a result, Defendants’
argument that the representations were not false necessarily fails.
In sum, Plaintiffs’ Complaint sufficiently alleges misrepresentations and omissions that
are both material and false, and consequently, Plaintiffs’ allegations survive a motion to dismiss.
B.

Plaintiffs allege justifiable reliance on Defendants’ misrepresentations and
omissions of a material fact.

In order to state a claim under Section 517.301, Plaintiffs must allege facts in the
complaint showing justifiable reliance on Defendants’ misrepresentations or omissions of

7

material fact. See Durden, 2009 WL 6499365, at *5. The allegations in the Complaint, when
viewed in the light most favorable to Plaintiffs, sufficiently establish justifiable reliance.
1.

The allegations demonstrate justifiable reliance.

The Eleventh Circuit, interpreting Florida law, has held that:
Determinations of whether an investor’s reliance was justified
requires the consideration of all relevant factors, including: (1) the
sophistication and expertise of the plaintiff in financial and security
matters; (2) the existence of long standing business or personal
relationships between the plaintiff and the defendant; (3) the
plaintiff’s access to relevant information; (4) the existence of a
fiduciary relationship owed by the defendant to the plaintiff, (5)
concealment of fraud by the defendant; (6) whether the plaintiff
initiated the stock transaction or sought to expedite the transaction;
and (8) the generality or specificity of the misrepresentations.
Bruschi v. Brown, 876 F.2d 1526, 1529 (11th Cir. 1989). Applying these factors to the instant
Complaints, it is clear Plaintiffs have adequately pleaded justifiable reliance.
With regard to the first factor, Plaintiffs allege they “lacked the expertise to evaluate
investment strategies for [themselves], and justifiably relied on the expertise of [Defendants and
their] investment specialists to provide guidance and advice as to [their] investments.” (Almiron
Compl. ¶ 28; Carrillo Compl. ¶ 29). Plaintiffs also allege a long-standing business relationship
existed between Plaintiffs and Defendants because they entered into a business relationship with
Defendants approximately two years prior to investing in Fairfield Sentry Ltd. (See Almiron
Compl. ¶¶ 22, 25; Carrillo ¶¶ 23,26).

Additionally, Plaintiffs allege, with specificity, the

misrepresentations made by Defendants.

For instance, Plaintiffs state: “Defendants

recommended FSL to Plaintiff[s] as being in line with [their] investment preferences and as
having a purported history of stable and steady returns, and advised the Plaintiff[s] that extensive
due diligence had been done on Fairfield Sentry Ltd. before recommending it to Plaintiff[s] and
other STANDARD CHARTERED AMERICAS clients.”

8

(Almiron Compl. ¶ 29; Carrillo

Compl. ¶ 31). Finally, Plaintiffs indicate that due to their “ignorance of the false and misleading
statements set forth above and the deceptive and manipulative devices and contrivances
employed by the Defendants, [Plaintiffs] relied to [their] detriment on such misleading
statements and omissions by investing in Fairfield Sentry Ltd. (Almiron Compl. ¶ 67; Carrillo
Compl. ¶ 69). After careful review of the relevant factors, it is clear Plaintiffs have made
sufficient allegations to support a finding that their reliance was justified under the
circumstances.
Defendants assert that the reasonable person test proclaimed by the Florida Supreme
Court counsels against a finding of justifiable reliance in the instant case. See Mot. at 28 (citing
Butler v. Yusem, 44 So. 3d 102, 105 (Fla. 2010) (“plaintiffs are responsible for ‘investigating
information that a reasonable person in the[ir] position . . . would be expected to investigate’”)).
However, Butler actually supports Plaintiffs’ position and allegations. Plaintiffs allege they
lacked the expertise to evaluate and select investments and thus relied on the representations of
Defendants. (Almiron Compl. ¶ 28; Carrillo Compl. ¶ 29). The allegations in the Complaints
illustrate a course of conduct consistent with the “reasonable person” test set forth by the Florida
Supreme Court. This is because a reasonable person, who lacks expertise and knowledge on
investment matters, would reasonably rely on the representations of “investment experts” in
making their investment decisions. Id.
2.

Written agreements cannot preclude Plaintiffs’ justifiable reliance.

Defendants also contend Plaintiffs cannot establish justifiable reliance because contracts
between the parties state that Plaintiffs cannot rely on Defendants’ representations. In support of
this contention, Defendants cite cases which discuss the general proposition that a plaintiff
cannot claim reliance on prior representations where a contract expressly precludes them from

9

doing so.3 Based on that general rule, Defendants argue that as a matter of law, Plaintiffs could
not have justifiably relied on any prior agreements or representations. Yet this is merely another
attempt by Defendants to confuse the facts and law at issue, as the facts underlying the holdings
in the cases cited by Defendants are fundamentally different than the facts in the instant case.
Those cases involved real estate transactions where the contracts expressly stated that any prior
representations made by the parties were supplanted and controlled by the provisions in the
respective contracts. See Garcia, 528 F. Supp. 2d at 1295; Weaver, 2008 WL 4145520, at *4-5;
Adrianne Roggenbuck Trust, AH v. Dev. Res. Grp., LLC, 2010 WL 3824215, at *3. Ultimately,
none of the courts in those cases could find justifiable reliance because the alleged
misrepresentations were in direct conflict with provisions in the purchase contract, and as such,
the written purchase contract supplanted the alleged oral representations. The courts in those
cases emphasized that the plaintiffs could not assert reliance on an oral statement when that oral
statement was directly contradicted by the subsequent contract between the parties.
In contrast, here, the representations on which Plaintiffs relied do not contradict the
express terms of the contract. In fact, the representations themselves are supported by the
contract. For example, Plaintiffs contend Defendants misrepresented the fact that they would
conduct due diligence with regard to the entities in which they would invest Plaintiffs’ funds.
This representation is not contradicted by any express term of the contract. In fact, the contract
actually contemplates Defendants will conduct this sort of due diligence. This is because the
contract establishes a non-discretionary broker-investor relationship between the parties.

3

See Garcia v. Santa Maria Resort, Inc., 528 F. Supp. 2d 1283, 1295 (S.D. Fla. 2007); Weaver v. Opera
Tower, LLC, No. 07-CV-23332, 2008 WL 4145520, at *4-5 (S.D. Fla. Aug. 1, 2008); Adrianne
Roggenbuck Trust, AH v. Dev. Res. Grp., LLC, no. 09-CV-2158, 2010 WL 3824215, at *3 (M.D. Fla.
Sept. 27, 2010).

10

Embedded in that relationship, is an understanding that the parties will perform the obligations
placed on them as broker or investor.
Performing due diligence and becoming informed regarding the investments into which a
broker is placing his investors’ funds is a duty imposed on all brokers. Indeed, the Eleventh
Circuit has expressly identified the various duties imposed in a nondiscretionary investment
advising relationship:
(1) the duty to recommend [investments] only after studying it
sufficiently to become informed as to its nature, price, and financial
prognosis; (2) the duty to perform the customer's orders promptly in a
manner best suited to serve the customer's interests; (3) the duty to
inform the customer of the risks involved in purchasing or selling a
particular security; (4) the duty to refrain from self-dealing ...; (5) the
duty not to misrepresent any material fact to the transaction; and (6)
the duty to transact business only after receiving approval from the
customer.
Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1049 (11th Cir. 1987); see also Leib v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 461 F. Supp. 951 (D.C. Mich. 1978).
The contract, by establishing a broker-investor relationship between the parties, reaffirms
Defendants’ obligation to conduct due diligence. Moreover, Defendants cannot disclaim the
fundamental duties imposed on them as a non-discretionary broker merely by inserting simple
boilerplate disclaimer language into the contract.
Based on the foregoing reasons, Plaintiffs have sufficiently alleged justifiable reliance.
C.

Plaintiffs adequately allege the scienter requirement of Florida securities
fraud statute Section 517.301.

Courts interpreting Florida law have consistently held the scienter requirement of Section
517.301 is satisfied by a showing of mere negligence. See Grippo, 357 F.3d at 1222; Rousseff v.
E.F. Hutton, Co., Inc., 867 F.2d 1281, 1281-82 (11th Cir. 1989); see Gochnauer, 810 F.2d at
1046; Merrill Lynch, Pierce, Fenner & Smith v. Byrne, 320 So. 2d 436 (Fla. 3d DCA 1975).

11

Negligence under Florida law requires a plaintiff to “establish that the defendant owed a duty,
that the defendant breached that duty, and that this breach caused the plaintiff damages.” Fla.
Dept. of Corrections v. Abril, 969 So. 2d 201, 204 (Fla. 2007). Plaintiffs’ allegations satisfy all
of those elements.
First, the allegations support the finding that Defendants owed Plaintiffs a duty. In fact,
as stated above, the Eleventh Circuit has identified various duties present in a nondiscretionary
investment advising position. See Gochnauer, 810 F.2d at 1049, supra at p.11.
Second, as Plaintiffs discussed previously, Defendants made material misrepresentations
and omissions in direct contravention of their duties as investment advisors. See Section I.A.,
supra. Finally, Plaintiffs allege they relied on these material misrepresentations and omissions,
and ultimately suffered damages because of them. Id. Accordingly, Plaintiffs’ allegations in
their respective complaints support a finding of scienter necessary to bring a cause of action
based on Section 517.301.
D.

Plaintiffs allege facts to bring their relationship with Defendants within the
purview of Section 517.211.

Section 517.301 operates in conjunction with section 517.211. Fla. Stat. § 517.211(2);
see Rousseff, 867 F.2d at 1283.

In particular, Section 517.211 provides the remedy for the

violation of Section 517.301 and a plaintiff must allege the defendant falls within the class of
individuals identified in Section 517.211. In relevant part, Section 517.211 provides:
Any person purchasing or selling a security in violation of s. 517.301,
and every director, officer, partner, or agent of or for the purchaser or
seller, if the director, officer, partner, or agent has personally
participated or aided in making the sale or purchase, is jointly and
severally liable to the person selling the security to or purchasing the
security from such person in an action for rescission, if the plaintiff
still owns the security, or for damages, if the plaintiff has sold the
security.

12

Fla. Stat. § 517.211(2).
Defendants assert they do not fall within the class of individuals identified in that section
because they were not the seller of the securities, nor were they an agent of the seller, whom they
contend was Fairfield Sentry Limited. Essentially, they contend strict buyer/seller privity is
necessary for the remedies of Section 517.211 to apply. Defendants explain “a defendant is in
buyer/seller privity with the plaintiff when he is the seller of the securities or the ‘agent of such a
seller who has solicited the sale of the securities on his own behalf or on behalf of the seller.’”
(Mot. 30). Thus, Defendants’ theory is that a buyer can only bring an action under 517.211
against the entity that sold him the securities. This is plainly wrong.
Courts interpreting Section 517.211 have held that a broker serving as an agent for
investors in the sale and purchase of securities falls within designated class of individuals that
can be held liable for violation of Section 517.211. See First Union Discount Brokerage
Services, Inc., 744 F. Supp. at 1155 (collecting cases); see also Rubin v. Gabay, 979 So. 2d 988,
990 (Fla. 4th DCA 2008).

In order for investors to recover from a broker for alleged

misrepresentations under Section 517.301, investors are only required to prove agency between
themselves and broker; strict buyer/seller privity is not required. See First Union, 744 F. Supp.
at 1155.
In light of this standard, Plaintiffs have made sufficient allegations in their Complaints to
bring their relationship with Defendants within the purview of Section 517.211. First, Plaintiffs
allege they entered into a business relationship as a customer of Standard Chartered Americas, a
wholly-owned SEC-registered broker-dealer, on or about November 2006, and purchased and
sold securities at their recommendation. (See Almiron Compl. ¶ 26; Carrillo Compl. ¶ 26).
Second, Plaintiffs allege they lacked the expertise necessary to evaluate investment strategies for

13

themselves, and as such, relied on the expertise of Mr. Garcia-Adanaz and Standard Chartered
Americas’ investment specialists to provide guidance and advice as to his investments. (See
Almiron Compl. ¶¶ 29, 30, 32; Carrillo Compl. ¶¶ 29-31). Finally, during this time of reliance
on Standard Chartered Americas, Standard Chartered Americas’ investment specialists, Mr.
Garcia-Adanez, and the aforementioned individuals made various material misrepresentations
and omissions resulting in substantial losses to Plaintiff. (See Almiron Compl. ¶¶ 35-48; Carrillo
Compl. ¶¶ 37-50).
These allegations establish Defendants were brokers serving as agents for Plaintiffs in the
purchase of securities, thus placing them within the class of individuals to whom Section
517.211 applies. Moreover, the question of whether an agency relationship exists is usually a
question of fact that should not be decided on a motion to dismiss. See Serefex Corp. v. Hickman
Holdings, LP, 695 F. Supp. 2d 1331, 1343 (M.D. Fla. 2010); see also Rubin, 979 So. 2d at 990.
Therefore, Count I should not be dismissed.
E.

Count I meets the pleading standards required by Section 9(b) of the Federal
Rules of Civil Procedure.

Finally, to state a claim for the violation of Section 517.301, Plaintiffs must meet the
pleading requirements set forth in Rule 9(b). Pursuant to Rule 9(b), “[i]n alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud or mistake.
Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.”
Fed. R. Civ. P. 9(b). To satisfy 9(b), a securities fraud complaint based on misstatements must:
(1) specify the statements the plaintiff contends were fraudulent, (2) identify the speaker, (3)
state where and when the statements were made, and (4) explain why the statements were
fraudulent. See ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007).
Allegations that are conclusory or unsupported by factual assertions are insufficient. Id.

14

Essentially, Plaintiffs are required to plead securities fraud claims with particularity in
order to “provide a defendant in a securities fraud case with fair notice of a plaintiff’s claim,
safeguard his reputation from improvident charges of wrongdoing, and protect him against strike
suits.” In re Bristol Myers Squibb Co. Sec. Litig., 586 F. Supp. 2d 148, 158 (S.D.N.Y. 2008)
(quoting ATSI Commc’ns, Inc., 493 F.3d at 99). This is in accord with the primary purpose of
Rule 9(b), which “is to afford defendant fair notice of the plaintiff's claim and the factual ground
upon which it is based.” Ross, 904 F.2d at 823 (2d Cir. 1990).
Plaintiffs’ allegations provide Defendants with fair notice of the nature and factual
grounds upon which the claim is based. First, Plaintiffs expressly identify the statements they
contend are fraudulent. For example, Plaintiffs allege Defendants misrepresented extensive due
diligence had been done on Fairfield Sentry Ltd. before Defendants recommended it to Plaintiffs,
when in fact none had been done. (See Almiron Compl. ¶ 43; Carrillo Compl. ¶ 43). Indeed, as
Plaintiffs point out, a high-ranking executive in the employment of Defendants admitted,
“[Defendants] in recommending Fairfield Sentry Ltd. as an investment, had done none of [their]
own due diligence or investigations with respect to Fairfield Sentry Ltd., but instead had relied
wholly upon representations made by promoters of Fairfield Sentry Ltd.” (Almiron Compl. ¶ 58;
Carrillo Compl. ¶ 60). Plaintiffs also allege Defendants “did not disclose the structure of
Fairfield Sentry Ltd. or the inherent risks in such a structure to its customers.” (Almiron Compl.
¶ 39; Carrillo Compl. ¶ 41).
Second, Plaintiffs identify the speaker of these statements. For instance, Plaintiffs allege
“[a]t all relevant times, the account was managed by [Defendants] through it’s designated
relationship manager, Mr. Antonio Garcia-Adanez, through it Miami office.” (Almiron Compl. ¶
26; Carrillo Compl. ¶ 27). Then, Plaintiffs’ Complaint includes references to representations

15

made by Mr. Garcia-Adanez and the other Defendants to Plaintiffs about Fairfield Sentry Ltd.
(See Almiron Compl. ¶¶ 27, 29, 32, 33; Carrillo Compl. ¶¶ 28, 30, 34, 35).
Third, Plaintiffs identify when the statements were made. For example, Carrillo alleges
“[i]n approximately September 2008, STANDARD CHARTERED AMERICAS through its
designated relationship manager and investment specialists, recommended purchasing shares in
the Fairfield Sentry Ltd. to Plaintiff. STANDARD CHATERED AMERICAS and Mr. GarciaAdanez represented that FSL was a bona fide investment product.” (Carrillo Compl. ¶ 30).
Similarly, Almiron alleges “[i]n approximately late-November or early-December 2008,
STANDARD CHARTERED AMERICAS through its designated relationship manager and
investment specialists, recommended purchasing shares in the Fairfield Sentry Ltd. to Plaintiff.4
Lastly, Plaintiffs indicate how the Defendants’ allegations are fraudulent. Specifically,
Plaintiffs identify misrepresentations and omissions made by Defendants that were clearly false
and misleading. See Section I.A., supra. Plaintiffs state that “in ignorance of the false and
misleading statements set forth above and the deceptive and manipulative devices and
contrivances employed by the Defendants, [Plaintiffs] relied to his detriment on such misleading
statements and omissions by investing in Fidelity Sentry Ltd.” (Almiron ¶ 67; Carrillo Compl. ¶
69).
In sum, Plaintiffs do not merely plead a haphazard set of allegations meant to launch fullscale discovery in the hope of uncovering a “smoking-gun” or a strike suit. To the contrary,
Plaintiffs’ Complaints are clear and concise, and consistent with the purpose of Rule 9(b).
Accordingly, Defendants are fully aware of the nature of the allegations, the parties involved,
4

Shockingly, “the ‘Trade Date’ of this transaction that appears on the [Almiron’s] account
statement is December 12, 2008, one day after Bernard L. Madoff was charged with securities fraud by
both the SEC and the U.S. District Attorney’s Office.” (Id.)

16

and the time frame implicated. There are no improvident charges of wrongdoing.. Thus,
Plaintiffs’ allegations are consistent with the intent of Rule 9(b).
As previously stated, the requisite scienter requirement for a cause of action brought
under Section 517.301 is mere negligence. Plaintiffs have sufficiently met this threshold in
pleading this scienter requirement, and satisfy the requirements of Rule 9(b).
II.

PLAINTIFFS STATE A CLAIM FOR BREACH OF FIDUCIARY DUTY

Plaintiffs have adequately alleged a breach of fiduciary duty in their Complaints. Under
Florida law, “[t]he elements of a claim for breach of fiduciary duty are: the existence of a
fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff’s
damage.” Gracy v. Eaker, 837 So. 2d 348, 353 (Fla. 2002). A fiduciary relationship arises
where “a relation of trust and confidence exists between the parties (that is to say, where
confidence is reposed by one party and a trust accepted by the other, or where confidence has
been acquired and abused), that is sufficient as a predicate for relief.

The origin of the

confidence is immaterial.” Doe v. Egans, 814 So. 2d 370, 374 (Fla. 2002) (quoting Quinn v.
Phipps, 113 So. 419, 421 (Fla. 1927)) (emphasis removed).

Additionally, a fiduciary

relationship may be implied by law. See id. When fiduciary relationships are implied in law,
they are premised upon the specific factual situation surrounding the transaction and the
relationship of the parties. See id.; Capital Bank v. MVB, Inc., 644 So. 2d 515, 518 (Fla. 3d DCA
1994); Susan Fixel, Inc. v. Rosenthal & Rosenthal, Inc., 842 So. 2d 204, 207-08 (Fla. 3d DCA
2003).
Furthermore, Florida has adopted section 874 of the Restatement (Second) of Torts,
which provides that a breach of a fiduciary relationship “‘is not dependent solely upon an
agreement or contractual relation between the fiduciary and the beneficiary but results from the

17

relation.’” Id. (quoting Restatement (Second) of Torts § 874 cmt. B (1979)). Succinctly, “[t]he
term ‘fiduciary or confidential relation’ is a very broad one. It exists . . . in all cases in which
influence has been acquired and abused, and all in which confidence has been reposed and
betrayed.” Atl. Nat’l Bank of Fla. v. Vest, 480 So. 2d 1332, 1332 (Fla. 2d DCA1985).
Defendants contend that because Plaintiffs’ accounts were nondiscretionary — meaning
Plaintiffs had the final word on what investments to make — Defendants owed only a limited set
of duties to Plaintiffs.

(Mot. 32).

However, as this Court held previously, “even

nondiscretionary broker-dealers have a duty to ‘recommend [investments] only after studying
[them] sufficiently to become informed as to [their] nature, price, and financial prognosis.’”
Anwar v. Fairfield Greenwich Ltd., 745 F. Supp. 2d 360, 376 (S.D.N.Y 2010) (Case 1:09-cv00118-VM-THK, ECF Doc. No. 543) (quoting Ward v. Atl. Sec. Bank, 777 So. 2d 1144, 1147
(Fla. 3d DCA 2001)) (first alteration in original).
Moreover, in Florida, “if the relationship between the parties develops beyond a
nondiscretionary one — if, for example, one party begins giving investment advice — the duties
increase. Id. For example, in Ward, the Third District Court of Appeals of Florida held the
defendant owed the plaintiff a general fiduciary duty of loyalty and care where defendant was
giving the plaintiff investment advice. Ward, 777 So. 2d 1144, 1147. In particular, the court
concluded that once the defendant bank contacted the plaintiff stockholder on its own initiative
and advised the stockholder not to sell his shares those duties were invoked. Id.
In the instant case, Plaintiffs have sufficiently alleged both the existence and breach of
fiduciary duties. Indeed, in a recent order issued by this Court, very similar factual allegations
were analyzed and this Court found the allegations regarding breach of fiduciary duty were
sufficient to withstand a motion to dismiss. See Anwar, 745 F. Supp. 2d at 376-77 (ECF Doc.

18

No. 543). In sum, the pleadings considered alleged, as here, (1) that Standard Chartered’s
recommendation that they invest in the Fairfield Funds without conducting proper diligence was
a breach of fiduciary duty; (2) that a high ranking Standard Chartered executive admitted that no
diligence had been done on the Fairfield Funds; and (3) that no diligence was actually performed.
Id. at 377 (ECF Doc. No. 543).
Here, Plaintiffs make very similar, if not identical, allegations to those made by the
Anwar plaintiffs. See, e.g. Almiron Compl. ¶ 35, 41, and 58; Carrillo Compl. ¶ 37, 43, and 60.
Accordingly, here, as in Anwar, “Standard Chartered had a duty to [study the investment] before
recommending Fairfield Sentry [to the plaintiff],” Anwar, 745 F. Supp. 2d at 377 (ECF Doc. No.
543), and the Plaintiffs’ allegations are sufficient to set forth a claim for breach of fiduciary duty.
III.

PLAINTIFFS STATE A CLAIM FOR NEGLIGENCE
To maintain a negligence action under Florida law, a plaintiff must “establish that the

defendant owed a duty, that the defendant breached that duty, and that this breach caused the
plaintiff damages.”

Abril, 969 So. 2d at 204.

Plaintiffs have presented sufficient factual

allegations to support each of these elements.
A. Existence and Breach of Duty
The law is clear that a broker owes a fiduciary duty of care and loyalty to a securities
investor. See Thompson v. Smith Barney, Harris Upham & Co., Inc., 709 F.2d 1413, 1418 (11th
Cir. 1983); Dupuy v. Dupuy, 551 F.2d 1005, 1015 (5th Cir. 1977)5; Abril, 969 So. 2d at 204; see
also Rest. (2d) of Agency § 425 (agents employed to make, manage, or advise on investments
have fiduciary obligation). Furthermore, the Eleventh Circuit has held that an investment broker

5

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit
adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of
business on September 30, 1981.

19

owes certain duties when in a nondiscretionary investment advising position. See Gochnauer,
810 F.2d at 1049, supra.
It is undisputed that Plaintiffs and Defendants entered into an investor-broker
relationship. As a result, Defendants owed Plaintiffs the abovementioned duties. Additionally,
Plaintiffs make various allegations in the Complaint regarding Defendants’ breach of those
duties, cited herein. See Almiron Compl. ¶ 35, 39, 41, and 87; Carrillo Compl. ¶ 37, 41, 43, and
88. Therefore, Plaintiffs adequately allege Defendants breached the duties of care and loyalty
owed to Plaintiffs.
Moreover, Plaintiffs also allege sufficient facts to give rise to a fiduciary duty to monitor.
Although Plaintiffs’ Complaint emphasizes Defendants’ breach of their duty of care in
recommending investments to Plaintiffs, Defendants’ Motion focuses solely on Plaintiffs’
additional allegation that “Defendants had a duty to monitor and manage the investments with
reasonable care.” (Almiron Compl. ¶ 81, 85; Carrillo Compl. ¶¶ 83, 86). Defendants assert, “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.” (Mot. 32) (citing De Kwiatkowski v. Bear
Stearns & Co., 306 F.3d 1293, 1302 (2d Cir. 2002). Despite Defendants’ assertion, ongoing
duties, such as a duty to monitor accounts, may arise for a nondiscretionary broker if the broker,
“notwithstanding its limited contractual duties, undertook a substantial and comprehensive
advisory role.” Id. at 1307.
In fact, this Court found that certain allegations similar to those in the instant case,
sufficiently alleged facts that could give rise to a duty to continue monitoring the investment.
See Anwar 745 F. Supp. 2d at 377.

Specifically, the court found the plaintiffs’ claim of

negligence for breach of the duty to monitor was sufficiently alleged by the following assertions:

20

[Plaintiff] alleges she was ‘assured … that [Standard Chartered was] in the
business of advising and protecting investors” and that Standard Chartered
became her “investment guide for making investments in the United
States.” (Valladolid Complaint ¶ 9.) Such assurances came in the form of
Valladolid’s “relationship manager” “boast[ing]…of the care [Standard
Chartered] took in evaluating investments for its customers…[and]
boast[ing] about the performance of various investment funds, singling out
[Fairfield Sentry] as particularly impressive given its long term success.’
(Id. ¶ 41.)
Id. The court emphasized that the allegations that defendant had marketed an investment and
represented it was in the business of advising as to such investments could support a claim that
the broker had taken on “more than a passive role taking orders.” Id. As a result, the Court
found the allegations sufficiently alleged facts that could give rise to a duty to monitor.
Likewise, here, Plaintiffs have plead facts that could give rise to a duty to monitor.
Plaintiffs Almiron and Carrillo’s allegations that they “relied on representations” and
“lacked the expertise to evaluate investment strategies” (Almiron Compl. ¶¶ 32, 33, and 35;
Carrillo Compl. ¶¶ 34, 35, and 37) are very similar to those where this Court previously found a
duty to monitor could arise. See Anwar, 745 F. Supp. 2d at 377.

Consequently, Plaintiffs’

pleadings contain sufficient factual allegations to give rise to a duty to monitor.
B. Florida’s economic loss rule
Defendants contend Plaintiffs’ negligence claim should be dismissed under Florida’s
economic loss rule because the claim relates to matters governed by a related contract. However,
the economic loss rule is not an applicable bar to Plaintiffs’ negligence claim.
“The Florida Supreme Court has ‘clearly stated’ that Florida’s economic loss rule is
limited to two situations: ‘(1) where the parties are in contractual privity and one party seeks to
recover damages in tort for matters arising out of the contract, or (2) where the defendant is a
manufacturer or distributor of a defective product which damages itself but does not cause

21

personal injury or damage to any other property.’” Anwar, 745 F. Supp. 2d at 374 (quoting Curd
v. Mosaic Fertilizer, LLC, 39 So. 2d 1216, 1223 (Fla. 2010)). This learned Court previously
presented a thorough explanation of the applicability and limitations of Florida’s economic loss
rule, stating:
The Florida Supreme Court’s most recent examination of the
economic loss rule is found in Indemnity Insurance Company of
North America v. American Aviation, Inc., 891 So. 2d 532 (Fla.
2004) (“American Aviation”). Prior to American Aviation and
another case, Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999),
the rule had been “subject to some debate” and “ill-defined”
“application and parameters.” Moransais, 744 So. 2d at 979. Indeed,
the Florida Supreme Court’s own “pronouncements on the rule have
not always been clear” and, in the past, the court’s “holdings have
appeared to expand the application of the rule beyond its principled
origins and have contributed to applications of the rule by trial and
appellate courts to situations well beyond [the court’s] original
intent.” Id. at 980.
Given the conflicting interpretations of the economic loss rule in
Florida’s lower courts, the Florida Supreme Court “expressly limited”
it in American Aviation, 891 So. 2d. at 542 . . . As part of its limiting
doctrine, the Florida Supreme Court [] listed exceptions to the newlynarrowed rule that applied even to parties to a contract, including
“professional malpractice, fraudulent inducement, and negligent
misrepresentations, or freestanding statutory causes of action.” Id. at
543. The court also noted, without either obvious approval or
disapproval, that some courts in Florida recognized other exceptions
to the rule, namely “causes of action for breach of fiduciary duty,
even if there was an underlying oral or written contract.” Id. at 542
(citing Invo Fla., Inc. v. Somerset Venturer, Inc., 751 So. 2d 1263,
1266 (Fla. 4th D.C.A. 2000); Performance Paint Yacht Refinishing,
Inc. v. Haines, 190 F.R.D. 699, 701 (S.D. Fla. 1999).
Anwar, 745 F. Supp. 2d at 375 (ECF Doc. No. 543).
One of the exceptions to the economic loss rule recognized by the Florida Supreme Court
involves “neglect in providing professional services.”
Moransais, the Florida Supreme Court emphasized

22

Moransais, 744 So. 2d at 983.

In

that by recognizing that the economic loss rule may have some
genuine, but limited, value in our damages law, we never intended to
bar well-established common law causes of action, such as those for
neglect in providing professional services. Rather, the rule was
primarily intended to limit actions in the product liability context, and
its application should generally be limited to those contexts or
situations where the policy considerations are substantially identical
to those underlying the product liability-type analysis. We hesitate to
speculate further on situations not actually before us. The rule, in any
case, should not be invoked to bar well-established causes of actions
in tort, such as professional malpractice.
Id. The exception described by the court in Moransais is applicable to Plaintiffs’ negligence
claim in the instant case. This is because Plaintiffs present factual allegations asserting they
entered into a professional relationship with Defendants.

Specifically, Plaintiffs allege

Defendants functioned as an investment advisor. See Almiron Compl. ¶ 28; Carrillo Compl. ¶
30. In their capacity as investment advisor, Defendants made numerous misrepresentations and
omissions, and as a result of Defendants’ misrepresentations and omissions, Plaintiffs suffered
damages. (See Almiron Compl. ¶ 41; Carrillo Compl. ¶ 43). These allegations clearly relate to
Defendants’ neglect in providing professional investment services, in a manner akin to
professional malpractice. Consequently, the negligence claim falls into one of the recognized
exceptions to the economic loss rule.
III.

PLAINTIFFS STATE A CLAIM FOR NEGLIGENT
MISREPRESENTATION

To state a cause of action for negligent misrepresentation, a plaintiff must allege the
following: (1) the defendant made a misrepresentation of material fact that he believed to be true
but which was in fact false; (2) the defendant was negligent in making the statement because he
should have known the representation was false; (3) the defendant intended to induce the
plaintiff to rely . . . on the misrepresentation; and (4) injury resulted to the plaintiff acting in
justifiable reliance upon the misrepresentation. See Romo v. Amedex Ins. Co., 930 So. 2d 643,

23

652 (Fla. 3d DCA 2006); Simon v. Celebration Co., 883 So. 2d 826, 832 (Fla. 5th DCA 2004)
(citing Johnson v. Davis, 480 So. 2d 625 (Fla.1985)); see also Gilchrist Timber Co. v. ITT
Rayonier, Inc., 696 So. 2d 334, 337–38 (Fla.1997); Ragsdale v. Mount Sinai Med. Ctr. of Miami,
770 So. 2d 167, 169 (Fla. 3d DCA 2000).
As evinced by the facts and law already discussed in this Response, Plaintiffs have
properly identified misrepresentations of material fact made by Defendants, which Defendants
knew to be false, and upon which Plaintiffs relied to their detriment. As a result, Plaintiffs have
properly pleaded a cause of action for negligent misrepresentation.
IV.

PLAINTIFFS STATE A CLAIM FOR UNJUST ENRICHMENT AND
CONSTRUCTIVE TRUST

Plaintiffs also adequately allege a claim for unjust enrichment. To state a claim for unjust
enrichment, “a plaintiff must plead the following elements: 1) the plaintiff has conferred a
benefit on the defendant; 2) the defendant has knowledge of the benefit; 3) the defendant has
accepted or retained the benefit conferred; and 4) the circumstances are such that it would be
inequitable for the defendant to retain the benefit without paying fair value for it.” Della Ratta v.
Della Ratta, 927 So. 2d 1055, 1059 (Fla. 4th DCA 2006). Plaintiffs establish each of these
elements. In particular, Plaintiffs conferred a benefit on Defendants by using their investment
services and paying them fees and commissions for these services, Defendants had knowledge of
and accepted these benefits, and in light of Defendants conduct, it would be inequitable for
Defendants to retain the benefit. See Almiron Compl., Count V; Carrillo Compl., Count V.
Nevertheless, Defendants contend that because there is an adequate legal remedy the
Court should dismiss Count V of the Complaint. Essentially, Defendants assert that because
reference has been made, either directly or indirectly, in the Complaint to a contract, Plaintiffs
cannot bring an equitable claim for unjust enrichment. However, under Florida law, a plaintiff is

24

not barred from asserting an unjust enrichment claim, even in cases where a breach of contract
has been plead.
Under Florida law, the doctrine cited by Defendant — that if the complaint on its face
shows that adequate legal remedies exist, equitable remedies are not available –– does not apply
to claims for unjust enrichment. See Mobil Corp. v. Dade Cnty. Esoil Mgmt Co., Inc., 982 F.
Supp. 873, 880 (S.D. Fla. 1997). In fact, Florida courts have consistently held that, “until an
express contract is proven, a motion to dismiss a claim for . . . unjust enrichment on these
grounds is premature.” Sierra Equity Grp, Inc. v. White Oak Equity Partners, LLC, 650 F. Supp.
2d 1213, 1229 (S.D. Fla. 2009) (quoting Williams v. Bear Stearns & Co., 725 So. 2d 397, 400
(Fla. 5th DCA 1998)).
Moreover, dismissing a claim for unjust enrichment at this stage is premature when a
defendant has not conceded a plaintiff is entitled to recovery under the contract, because it is
possible that, if the contractual claim fails, the plaintiff may still be entitled to recovery under an
unjust enrichment theory. See Tracfone Wireless, Inc. v. Access Telecom, Inc., 642 F. Supp. 2d
1354, 1366 (S.D. Fla. 2009) (“Although plaintiff has alleged a breach of contract claim which I
have concluded can proceed, it would be premature to dismiss plaintiff’s count for unjust
enrichment in this case.”); Manicini Enters. v. Am. Express Co., 236 F.R.D. 695, 699 (S.D. Fla.
2006) (“[T]he court finds that plaintiff should be permitted to plead alternative equitable claims
for relief as the existence of express contracts between the Parties has yet to be proven.”); Mobil
Oil Corp. v. Dade Cnty. Esoil Mgmt. Co., 982 F. Supp. 873, 880 (S.D. Fla. 1997) (“Until an
express contract is proven, a motion to dismiss a claim for promissory estoppel or unjust
enrichment on these grounds is premature.”).
For these reasons, Count V should not be dismissed.

25

V.

COUNT II, III, IV, and V ARE NOT PREDICATED ON FRAUD AND
THEREFORE NOT SUBJECT TO RULE 9(b) PLEADING
REQUIREMENTS.

Defendants assert that, because Plaintiffs allege one count of fraud in the Complaint ––
Count I –– all of the other counts should be treated as fraud claims as well, and are subject to the
pleading requirements of Federal Rule of Civil Procedure 9(b). While it is true that Rule 9(b)
pleading requirements will apply to any claim that sounds in fraud, the court must review each
count individually, and treat each count differently if it has been meaningfully distinguished. See
Matsumura v. Benihana Nat’l Corp., 543 F. Supp. 2d 245, 254 (S.D.N.Y. 2008).
For example, in In re Alstom SA, the court held that where the allegations in the
complaint are “permeated with allegations of fraudulent conduct on the part of the defendants”
each of the claims are subject to the requirements of Rule 9(b). 406 F. Supp. 2d 402, 410
(S.D.N.Y. 2005). After a thorough analysis of the allegations, the Alstom court concluded that
because the plaintiffs, “made . . . broad averments portraying a pervasive and overarching
scheme of fraud, one that apparently imbues all of the their specific causes of action and
attendant claims of losses,” the plaintiffs could not “then attempt to retreat, apparently to escape
the particularity requirement of [Rule 9(b).” Id. at 410 (emphasis added). In the instant case,
Plaintiffs have made no such broad and overarching allegations of fraud. Indeed, careful review
of the Complaint reveals that Plaintiffs do not allege broad averments portraying a pervasive and
overarching scheme of fraud. With the exception of Count I, which satisfies the Rule 9(b)
standards, Plaintiffs’ Complaint does not allege fraud or fraudulent conduct.
Defendants’ sole support for their argument that each of Plaintiffs’ claims are
interconnected with fraud is that Plaintiffs mention the word “fraud” twice in the Complaint.
Specifically, Defendants rely on the following two allegations: (1) “Almiron and Carrillo allege

26

that SCBI ‘engaged in a common plan, scheme, and unlawful course of conduct to defraud them
into investing in Sentry” (Almiron Compl. ¶¶ 63-69; Carrillo Compl ¶¶ 65-71); and (2) “alleging
SCBI failed to discover Madoff’s fraud through conduct that was ‘akin to fraud.’ (Almiron
Compl. ¶¶70-80; Carrillo Compl. ¶¶ 72-81). (Mot. 13). Yet that reliance is unfounded. Unlike
the Alstom defendant, Defendants in the instant case offer no in-depth analysis or factual support
for their contention. See Alstom, 406 F. Supp. 2d at 410. The Court should not allow the
Defendants to dismiss sufficiently pleaded common-law claims merely because the Complaint
contains an additional claim for fraud or mentions the word “fraud.” Defendants do not make
any arguments in their Motion that the substance of the Complaint is tainted with fraud; instead,
they merely ask the Court to dismiss all claims because one claim “sounds in fraud.” This is not
a sufficient reason to subject the claims to the pleading requirements of Rule 9(b).6
VI.

CONCLUSION

For the reasons set forth herein, Plaintiffs Ricardo Almiron and Carlos Carrillo have
properly stated a claim upon which relief can be granted as to every count in their Complaints,
and accordingly, the Defendants’ motion to dismiss should be dismissed entirely.

6

Notably, even if all claims were subject to the pleading requirements of Rule 9(b), they are sufficiently detailed to
survive a motion to dismiss even under the heightened standard. As explained in Section I above, the allegations,
which are incorporated into each count of the Complaint, identify all relevant facts with regard to misrepresentations
made by Defendants.

27

Dated: May 6, 2011
Miami, Florida
_____/s/ Matthew L. Jones___________
Matthew L. Jones
JONES & ADAMS, P.A.
9155 South Dadeland Boulevard,
Suite 1506
Miami, Florida 33156
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Attorneys for Plaintiffs Ricardo Almiron and
Carlos Carrillo

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I caused a true and correct copy of the foregoing to be served
by email, in PDF format, upon the persons on the attached service list, this 6th day of May 2011.

_____/s/ Matthew L. Jones___________
Matthew L. Jones

28

SERVICE LIST FOR STANDARD CHARTERED CASES
Sullivan & Cromwell LLP
New York, New York
Attorneys for Standard Chartered Defendants

Simpson Thacher & Bartlett LLP
New York, New York
Attorneys for FGG Defendants

Sharon L. Nelles - [e-mail]

Peter E. Kazanoff - [e-mail]

Greenberg Traurig, P.A.
Miami, Florida
Attorneys for Individual FGG Defendants

Brown & Heller
Miami, Florida
Attorneys for CITCO Fund Services (Europe) B.V.

Ricardo Alejandro Gonzalez - [e-mail]

Amanda McGovern - [e-mail]

Rivero Mestre LLP
Coral Gables, Florida
Attorneys for Headway

The Brodsky Law Firm
Miami Florida, Florida
Attorneys for Maridom Ltd., Caribetrans, S.A.,
And Abbot Capital, Inc.

Jorge Mestre – [e-mail]
Richard E. Brodsky –
[e-mail]
Curran & Associates
Miami, Florida
Attorneys for Lopez, Lou-Martinez, Triple R Holdings,
The Five Stars Financial Group Ltd., New Horizon
Development, Inc., Continental Rainbow Group, Inc.,
Salcar Limited, Ruiz, Iston Holdings Limited, Nemagus
Ltd., Rendiles, Perez, Auburn Overseas Corp., Interland
Investments Corp., Vilebens, S.L., Velvor, S.A., 5C
Investments Ltd., Asencio, Prionas Shipping Company
Limited, Leonardos

Dimond Kaplan & Rothstein, P.A.
Miami, Florida
Attorneys for Pujals
Robert Linkin - [e-mail]

Laurence E. Curran III - [e-mail]
de la O Marko Magolnick & Leyton PA
Miami, Florida
Attorneys for Gerico, de Rivera

Kachroo Legal Services, P.C.
Cambrudge, Massachusetts
Attorneys for Caso

Joel S. Magolnick - [e-mail]

Gaytri D. Kachroo - [e-mail]

Levine Kellogg Lehman Schneider + Grossman LLP
Miami, Florida
Attorneys for DaSilva Ferreira

Aguirre, Morris & Severson, LLP
San Diego California
Attorneys for Valladolid

Amanda Star Frazer - [e-mail]

Maria Severson – [e-mail]
Michael [e-mail]

29

I hereby certify that on May 27, 2011. I electronically filed the foregoing
document with the Clerk of the Court for the United States District Court for the
Southern District of New York by using the CM/ECF.

Dated: New York, New York
May 27, 2011

Respectfully submitted,
/s/ Matthew L. Jones_______
Matthew L. Jones
(Admitted Pro Hac Vice)
JONES & ADAMS, P.A.
9155 South Dadeland Boulevard,
Suite 1506
Miami, Florida 33156
Tel.: [phone]
Fax: [phone]
Email: [e-mail]
Attorneys for Plaintiffs Ricardo Almiron
and Carlos Carrillo

30