In re Lifetrade Litigation

Filing 751

OPINION & ORDER ADOPTING REPORT AND RECOMMENDATION for 542 Motion to Amend/Correct, filed by Fundacion Fiorenzo, Roberto Jose Materia, Jose Luis Patrignani, Dario Osmar Ascune, Jorge Luis Germino, Ricardo Osvaldo Bluthgen, Alehandro Jose La borde, Marcelo Mario De Angelis, Silvano Luis Arnaldi, Luis Felipe Lopez Blanco, Juan Jose Etala, Pablo Maccarone, Delmo Francisco Cadario, Jorge Alfredo Elias, Matias Luis Coll, Gustavo Canil, Sabino Alvarez Salgueiro, Marcelo Herman Loffreda, Magdalena Maria Becu, Francisco Alberto Di Maio, Adrian Roberto Materia, Francisco Miguel, Vicente Di Loreto, Alejandro Jose Laborde, Matias Juan Mendy, Tafina Establishment, Liliana Noemi Stellato, Hortensia Dominga Teresa Gutierrez Posse, Fred erico Alvarez, Haisan Samman, Emilio Enrique Martinez Granados, Flint Consultant Ltd., Anna Maria Jorgelina Noguerol, Maria Cristina Rodriguez, Jorge Esteves, Patricia Boorman De Solari Loudet, Eduardo Sogno, Susana Mariel Alonso, Guillermo Ar iel Pereyra, Concepcion Marta Grillo, Antonio Emilio Pergomet, Guillermo Walter Benelli, Gustavo Materia, Jorge Goyes, Silvana Montefiore, Martin Rodolfo Castro, Maria De La Caridad Gurnbaum, Marta Susana Cadario, Oscar Alberto Varde, KP Ventur es S.A., Maria Balsano, Ulises Daniel Varela Damboriana, Carlos Adrian Rodriguez, Luis Sebastian Mogno, Rafael Leonardo De La Torre Mendoza, Natalia LOYATO, Fraida Kahan, Alejandro Enrique Julio Berger, Nancy Carlota Bain, Pablo Gabriel Potokski, Miguel Carlos Blanco, Marcelo De Leo, Gabriel Manuel Fernandez, Roberto Omar Ricci, Carlos A. Menendez, Jose Maria Cabrera, Jorge Enrique Gilardi, Laura Cecilia Wrobel, Leonardo Juan Ionfrida, Maria Concepcion Teresa Muller, Narja Investments Corp., Oscar Alberto Frei, Maria Teresa Del Carmen Correa Avila, Cristian Iturralde, Zulema Noemi Ramona Romano, Javier Jorge Oscar Silva, Felix Luis LEBORGNE,, Horacio Nestor Acebedo, Christine Alice Marie Marcelle Verse, Melburne S.A., Santos Di Giambattista, Gabriel Alejandro Del Campo, Diego Cuesta Silva, Jelifl Corp., Juan Pablo Perez Candreva, Jose Luis Ghiggia, Nelida I. Vazquez, Maria Ines Ernestina Bossisio Verdaguer, Raul Daniel Fernandez, Luis Miguel Girardotti, Ana Maria Kri eger, Jorge A. Moyana, Ana Cecilia Materia, Sabino Javier Alvarez, Juan Jesus Gil Juncal, Adriana Cappone, Victor Miguel Jamui, Daniel Nicolas Juansaras, Martin Miranda, Daniel Alberto Aramburu, Ulan Bator Project Ltd, Julio Ariel Martinez, Maria Beatriz Marquinez, Luis Ramiro Aviles, Alfredo Federico Rossi, Eva Friedman, Tomas Del Carril, Gonzalo Sanchez Puppulo, Marcello Luis De Leo, Celia Maria Perez, Plaza Asset Management Co., LTD, Pablo Leonardo Sacco, Distribuidora De Productos Quimicos S.A., Marta Graciela Cecati, Horacio Daniel HOLCMAN, Eduardo Dario Avruj, Jorge Anselmo Fernandez, Susana Carmen Carniglia, Ricardo Szily, Ricardo Luis Gentile, Carlos Jorge Campioni, Guillermo Castillo, Silvio Roberto Donato, Gustavo Ca chiarelli, Sonia Benvenuto, Alejandra Graciela Paturau, Raquel Iris Robustelli, Graciela Silva Siguenza, Marcelo Sugier, Olga Ines Muro de Nadal, Emiliano RODRIGUEZ, Tomas Victoriano Herrero, Diana Ana Maria Severin, Francisco Javier Gomez Ronco, Mariano Pablo Caillot Bois, Carlos Alfredo Grimaldi, Juan Carlos Soldano, Gerardo Collardin, Southern Services Company Corp., Luis Maria Games, Jorge Carlos Macellaro, Jorge Perez Jureidini, Claudio Bruno Bartoli, Milda Beatriz Maseras, Diego E steban Chami, Raul Alberto Genchi, Federico Bersaiz, Benjamin Alberto Bystrowicz, San Goal, Christine A Verse, Osvaldo J. Barrionuevo, Maria Steinnekker, Lucas Gustavo De Feo, Alberto M. Pomato, Luis Leborgne, Juan Enrique Roberts, Victor Roberto Poggi, Rodrigo Hernan Meyer, Foxtom Assets Inc., Ernesto Fernandez LLorente, Ana Maria Nora Krieger, Matias Rodolfo Meyer, Rut Veronica Ladanyi, CBM Agente de Valores S.A.,, Alfonso Eduardo Espino Paz, Daniel Floreal Fognini, Maria Victoria Mi randa, Elsa Beatrice Ledesma, Alicia Bonastro, Alfredo Gregorio Rodriguez, Silvana Perez, Manuel Juan Herrera Grazioli, Cesar Emilio Zucchino, Lucila Atucha, Marco Alberto Panettieri, Carlos Alfredo Oliva, Paz Veronica Chartier Campagne, Emiliano Chaud, Ruth Naomi Ladner, Rafael Mendoza de la Torre, Jose Maria Pena Fernandez, Norma Beatriz Cianciarulo, Clide Esther Martinez, Manuel Cuesta Silva, Mario Rafael De Dona, Adrien Vicente Aspromonte, Maria Rosa LaPlacette, Hugo Baquerin, Maria Lucila Rodriguez Carniglia, Patricia Noemi Delistovich, Caja Municipal De Jubilaciones Y Pensiones De Nogoya, Sonia Maricel Baravalle, Marcelo Hernan Loffreda, Patricio Devoto, Jose Julio Mansilla Lami, Daniel Gomez Cusco, Gabriel Erkekdjian, C arlos Alberto Gimenez Hutton, Martin Ricardo Miranda, Pablo Codevilla, Carlos Alberto Nicolas Johanson, Monica Huisman, Hugo Leonardo Carlini, Martin Juan LANG, LENTAUN S.A., Lucilla Elena Paillard Polero, Mariano Jorge Miranda, Maria DeMiguel, Maria Elena Gonzalez, Aldo Bertolozzi, Juan Carlos Guaita, Esteban Alberto Materia, Ricardo Pujals, Roberto Raul Sanjuro, Claudio Daniel Husain, Fernando R. Freixas Pintos, Monica Urresti, Francisco Alberto Ruete, Ramon Hector Abrigador, Dieg o Salvadore Di Maggio, Norberto Vicente Rodriguez, Hugo Omar Barca, Flowyard Overseas Ltd., Susana INees Herrera, Daniel Alberto Passaro, Diego Luis Rios, Norberto Rene Serenelli, Enrique Pedro Coscia, Cesar R Zucchino, Jorge Daniel Diz, Carlos Al berto Gimenez Huttorn, Alejandro Saul Kordon, Cecelia Elsa Pizzini, Paula Radizzani Helguera, Matias Sebastian Mena, Monica Gallegos, Juan Carlos SACCO, Daniela Iris Rossen, Diana Materia, Ricardo Roberto Eduardo Pujals, Graciela Stella Maris Ma gliano, Ricardo Manuel Gutierrez, Alex Adolfo Sraier, Marcelo Redlich, Maria Rosa Irma Materia, Silvia Del Rosal, Jose Luis Villanueva Ahumada, Fernando Enrique Granda, Gustavo Pittalugu, Hector Ruben Bircz, Juan Martin De la Serna, Maria Cec ilia Brigante, Luciano Herrera Grazioli, Enrique Horacio Mirkin, Esteban Mazzuco, Maria Irma Gonzalez, Maximiliano Calp, Lucila Elena Paillard Polero, Julio Garcia Garcia, Julian Ariel Martinez, Fernando Antonio Garabato, Hugo Basilotta, Veroni ca Micaela Barbera, Diana Irene Alvarez, Josue Maximiliano Bauerberg, Blambus Group Inc., Pedro Charquia Aguirre, Maria Elisa Salerno, Mario Alejandro Speroni, Miguel Barton, Norberto Fermani, Guillermo Schleicher, Juan Antonio Virag, Rafael Argul, Miguel Fernandez Moores, Bernardo Romeo, Osvaldo H. Scandola, Alicia S. Negreira, Diego Di Maggio, Juan Jose Acoglani, Fernando Lucas Luis Garcia Urrutia, Eva M.V. Berkes de Kolb, Warne Financial Corp., Fernando Raul Benedetto, Monica Patricia Morena, Magdalena Guzman, Romulo Bernadino Mena, Martin Furlong, Juan Carlos Affif, Felipe Fiorellino, Enrique Gualterio Negus, Maria Rita Lopez Provera, Vanina Laura Coluccio, Eduardo Tuzzio, Juan Horacio Busanello, Ernesto Miguel Torr e, Elsa Maria Elvira Zarlenga, Eduardo Rodriguez, Estaban Alberto MATERIA, Alberto Lamm, Roque Manuel Oliver, Maria Cristina Fabricant, Pedro Vigneau, Bryant Line Corp., Leonardo Rodriguez, Juan Manuel Vaquer, Conaiss Holding S.A., Torcuato Luis Battaglia, Jorge Aidar Bestene, Juana Monica Wehmeyer, Guido Emilio Degano, Congrats Networking Corp., Rodolfo Centeno, Martina Galli, Miguel Angel Lopez, Juan Jose Comerio, Susana Ines Herrera, Graciela Cassutti, Martin Saenz Valiente, E duardo Jorge Gnecco, Jose Antonio Garcia, E-Sense Ltd., Alejandra Maria Bossetti, DAniel Oscar De Giorgio, Rafael Leonardo Mendoza De La Torre, Pablo Jose Rodriguez Falcon, Cristian Horacio Ernst, Hector Jorge Gonzalez, Carlos Alberto Wehbi, Fronto sa Limited, Gullermo Benelli, Tomas Guiraldes, Claudio Steudle, Ricardo Juan Garbarino, Walter Alfredo Jakob, Veronica Balbiani, Gustavo Armando Figuerola, Beatriz Julia Megy, Renato Salvador Materia, Maximiliano Costa, Ana Maria Steinnekker, Ana Ines Wilson, Alan Jose Horwitz, Enrique ZANIN, Eugenia Agustina Cerda, Maria Alicia Delfa Craviotto, Norberto Oscar Tonanti, Jalid Alberto Del Azar, Aldo Antonio Materia, Pablo Rodriguez Falcon, Miguel Sanchez De Bustamante, Adrian Marcelo Ma teria, IJECT, INC., Ruben Angel Valsagna, Jurge Luis Fernandez, Beatriz Edith De La Torre, Maria Candela D'Angelo, Nicolas Eduardo Bowen, Hugo A Untersander, David Fabian Huberman, Fernando Matarazzo, Christine ALice MArie Mar Verse, Pabl o Fabian Gomez, Pablo Caride, Jorge Alberto Forlano, Jose Tedesco, Sergio Daniel Fermani, Mauro Giacometti, Carlos Adrian Ferreti, Arnaldo Manuel Gomez, Maria Isabel Jankowski de Sym Smith, Maria Cristina Villanueva, Ferdenas Holding LTD., Ana Ester Giordani, Ricardo Jose Hermida, Manual Atilio Iturralde, Alejandro Graciela Paturau, Fabian Eduardo Angelilli, Miriam Beatriz Fratini, Edgardo Alfredo LOMBI, York Venture Capital, Ricardo Hector Valls, Jose Mesropian, Carlos Jose Benassi, Ro berto Teobaldo Biagioni, Victor Angel Di Buccio, Nora San Juan, Humberto Nebar Bellocchio, Ines Maria Iturraldo, Gustavo Alberto Urrutia, Alberto Martinez, Estaban Mazzuco, Jose Elias Gondolo, Florencia Maria Murray, Eduardo Escudero, Blanca Be atrice Maria Kinbaum, Cecilia Inchausti, Carlos Alberto Brignone, Jose Antonio Garcia Garcia, Vera Dorotea Baylon, Juan Sebastian Salaber, Jorge Norberto Garcia Cozzi, Maria Lucila Rodriguea Carniglia, Enrique Hector Pagliettini, Marcelo Alejandr o Sugier, Camilo Patrignani, Maria Laura Travella, Fernando Nicolas Serra Rojas, Estela Susana Elena, Elizabeth Boote, Miguel Angel Calgaro, Sergio Roman Morgenstern, Alfredo Eduardo Terzano, Adriana Mabel Nieto, Teresa Moschini, Maria Teresa Bo rrell Fortuny, Alfredo M. De Baisio, Maria Paola Geranio, Gonzalo Blaquier, Marta Alicia Happar, Jose Luis Gonzalez, Carlos Armando Donino, Eduardo Maximo Del Torto, Enrique Horacio Picado, Fernando Juan Fernandez, Hugo Alberto Untersander, Aldo Ped ro Duscher, Miguel Angel Cirio, Basic Fly Ltd., GracielaSiguenza, Diego Grimaldi, Don Satur Srl, Maria Pia Saure, Moises Luis Kotler, Daniel Enrique De Cabo, Giselle Erkekdjian, Edmundo Humberto Kindsvater, Anibel Ratibel, Elena Celina Rosa M arun, Erika Bienek, Dora N. Escribano, Moises Luis Cotler, Ramon Enrique REQUESENS PAZ,, Hector Jorge Areco, Sebastian Gil Gilgarro, Domingo Pittaluga, Lucas Matias Licht, Mirta Edit Longhini, Guillermo Jose Campos, Alejandro Berger, Raul Oscar Ferrari, Alberto Armoni, Manuel Herrera, Fabricio Terzano, Silvio Roberto Damian Donato, Roberto Raul Zapata, Sergio Lucero, Jose Antonio Gonzalez, Fafal Corp., Sebastian Gil Garro, Carlos Gurmendi, Enrique Alberto Fuertes, Claudio Doller, Carlos Gabriel Miyagi, Prenton Industry Ltd, Maria Clotilde Josefi Lami Hernandez, Maria Fabiana Zanelli, Enrique Jose Goldaracena, Mario Luis Gimenez, Dante Leone, Saul Raznoszczyk, Jorge Luis Speroni, Alejo Gonzalez Garano, Martin Arturo Carmo na, Gabriel Marino, Salvador Toscano, Jose Rispau Vinas, Beatriz Gladys Gualdoni, Enrique Matias Hayzus, Mirta Garcia De La Fuente, Guilermo Omar Iribarren, Maria Cristina Frova, Maria Elba Oleaga, Domingo Mazzitelli, Kim Dai San, Diego Rodolfo Angelo Pape, Carlos Daniel Gandulfo, Romina Fermani, Alejandro Molina Carranza, Joaquin Martinez Tenreiro, Claudio Javier Glazman, Estaban Alberto Materia, Vincenzo Aspromonte, Roxana Catalano. Accordingly, the Report and Recommendation is h ereby ADOPTED in full, the parties' objections are OVERRULED, and Plaintiffs' motion for leave to amend the complaint is DENIED. The Clerk of Court is directed to close the motion at Docket Number 542. (Signed by Judge J. Paul Oetken on 5/9/2022) (ate)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
17-CV-2987 (JPO)

IN RE LIFETRADE LITIGATION:

OPINION & ORDER ADOPTING
REPORT AND RECOMMENDATION

This Document Relates to: ALL ACTIONS

J. PAUL OETKEN, District Judge:
Plaintiffs moved to amend their complaint to add new factual allegations and claims
against Defendant S&P Global, Inc. (“S&P”), pursuant to Federal Rules of Civil Procedure 15
and 16. Magistrate Judge Katharine H. Parker subsequently conducted a thorough and careful
review and issued a Report and Recommendation (the “Report”) recommending that this Court
deny Plaintiffs’ motion. Plaintiffs and S&P both object to the Report. For the reasons that
follow, the Court adopts the Report in its entirety and denies Plaintiff’s motion for leave to
amend the complaint.
I.

Legal Standard 1
When reviewing a report and recommendation by a magistrate judge, a district court

“may accept, reject, or modify, in whole or in part, the findings or recommendations made by the
magistrate judge.” 28 U.S.C. § 636(b)(1)(C). Pursuant to Federal Rule of Civil Procedure 72(a)
and the Federal Magistrates Act, 28 U.S.C. § 636(b)(1), “[t]he scope of review by the district
court on appeal from an order of a magistrate judge depends on whether the order is dispositive
or non-dispositive.” Securitas Elec. Sec., Inc. v. DeBon, No. 20 Civ. 5323, 2022 WL 633874, at

1

The Court presumes familiarity with the facts and procedural history of the case, as set forth in
Aviles v. S&P Glob., Inc., 380 F. Supp. 3d 221, 247–55 (S.D.N.Y. 2019), and the Report (see
Dkt. No. 665 at 2–10). For the purposes of this Opinion and Order, the Court accepts as true the
facts alleged in the Fourth Amended Complaint (Dkt. No. 290) and Plaintiffs’ proposed amended
complaint (Dkt. No. 544-1).
1

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*1 (S.D.N.Y. Mar. 4, 2022). A district court’s review of a magistrate judge’s order on a
dispositive matter must be reviewed de novo in the face of objection. In reviewing a magistrate
judge’s order on a non-dipositive matter in the face of an objection, however, a district court may
modify or set aside only any portion of the order that is clearly erroneous or contrary to law. Id.
“The Second Circuit has suggested that a denial of a motion for leave to amend warrants the
‘clearly erroneous’ standard.” Levy v. Young Adult Inst., Inc., No. 13 Civ. 2861, 2016 WL
4402038, at *1 (S.D.N.Y. Aug. 18, 2016) (citing Fielding v. Tollaksen, 510 F.3d 175, 178 (2d
Cir. 2007)); see also Morgan Art Found. Ltd. v. McKenzie, No. 18 Civ. 4438, 2021 WL 863264,
at *1, n.1 (S.D.N.Y. Jan. 22, 2021) (“Since Fielding, many courts in this District have applied
the clearly erroneous standard to evaluate the denial of leave to amend by a magistrate judge
regardless of the grounds for the denial.” (internal quotation marks omitted)). But some courts in
this district have nonetheless treated motions to amend as dispositive. See, e.g., Covington v.
Kid, No. 94 Civ. 4234, 1999 WL 9835, at *2 (S.D.N.Y. Jan. 7, 1999) (finding that because a
magistrate judge’s denial of leave to amend the complaint foreclosed potential claims against
defendants, it was dispositive).
II.

Discussion
Because Plaintiffs moved to amend their complaint after the deadline set in the

scheduling order, Judge Parker balanced Rule 15(a)’s lenient standard for amending pleadings,
Fed. R. Civ. P. 15(a), against Rule 16(b)’s prescription that scheduling orders may be modified
only upon a showing of good cause, Fed. R. Civ. P. 16(b). Under Rule 15, leave to amend
should be given “absent evidence of undue delay, bad faith or dilatory motive on the part of the
movant, undue prejudice to the opposing party, or futility.” Monahan v. N.Y.C. Dep’t of Corrs.,
214 F.3d 275, 283 (2d Cir. 2000). And good cause under Rule 16(b) largely turns on the
diligence of the moving party. Holmes v. Grubman, 568 F.3d 329, 334 (2d Cir. 2009). Judge
2

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Parker determined that Plaintiffs had good cause under Rule 16, and that Plaintiffs’ proposed
amendments would not unduly prejudice S&P and were not the result of undue delay under Rule
15. The Report still recommends denying Plaintiffs leave to amend under Rule 15, however,
because Plaintiffs’ proposed amendments would be futile. (See Dkt. No. 665 at 11–13.)
Plaintiffs object to the Report with respect to its conclusion that Plaintiffs’ proposed
amendments would be futile. S&P objects to the Report with respect to its conclusion that good
cause for amendment exists under Rule 16, as well as its conclusion that Plaintiffs’ proposed
amendments were not the result of undue delay and would not unduly prejudice S&P. The Court
first address Plaintiffs’ objections and then turns to S&P’s objections.
A.

Plaintiffs’ Objections

Plaintiffs’ proposed amendments would add individual claims of fraud and conspiracy
against S&P, and derivative claims of conspiracy and aiding and abetting a breach of fiduciary
duty against S&P. The proposed amendments also include a derivative claim of
unconscionability against S&P. The Report concludes that granting Plaintiffs leave to amend the
complaint would be futile for failure to state a claim under Rule 12(b)(6). See IBEW Local
Union No. 58 Pension Tr. Fund & Annuity Fund v. Royal Bank of Scotland Grp., PLC, 783 F.3d
383, 389 (2d Cir. 2015) (“[T]he standard for denying leave to amend based on futility is the same
as the standard for granting a motion to dismiss.”). Plaintiffs object that each of their proposed
new causes of action, with the exception of the derivative claim of unconscionability, are
sufficiently pleaded and state a claim under Rule 12(b)(6).
Reviewed under a “clear error” standard, Judge Parker’s ruling stands. “A magistrate
judge’s decision is ‘clearly erroneous’ only if the district court is left with the definite and firm
conviction that a mistake has been committed.” Indergit v. Rite Aid Corp., No. 08 Civ. 9361,
2016 WL 236248, at *1 (S.D.N.Y. Jan. 20, 2016) (internal quotation marks omitted). A decision
3

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is contrary to law if it “fails to apply . . . or misapplies relevant statutes, case law, or rules of
procedure.” Golden Horn Shipping Co. Ltd. v. Volans Shipping Co. Ltd., No. 14 Civ. 2168, 2015
WL 6684518, at *1 (S.D.N.Y. June 30, 2015). This standard of review is “highly deferential . . .
and reversal is appropriate only if [the magistrate judge’s] discretion is abused.” Advanced
Analytics, Inc. v. Citigroup Glob. Mkts. Inc., 301 F.R.D. 47, 50 (S.D.N.Y. 2014).
Having reviewed the parties’ filings and Judge Parker’s ruling, the Court is left without a
“definite and firm conviction that a mistake has been committed.” Indergit, 2016 WL 236248, at
*1. Magistrate Judge Parker considered both parties’ arguments and, in a well-reasoned report
and recommendation, determined that “S&P . . . demonstrated [that Plaintiffs’] amendments,
even assuming the truth of the facts pleaded, would be futile.” (Dkt. No. 665 at 13.) There is no
reason to depart from this determination, particularly under the “clear error” standard for relief.
It is true, however, that some courts in this district have treated a magistrate judge’s
denial of leave to amend a complaint as dispositive, requiring the district court to review the
magistrate judge’s decision de novo. See, e.g., Covington, 1999 WL 9835, at *2. Plaintiffs
assert that the Court should do the same here. In the alternative, for the reasons that follow, the
Court determines that Plaintiffs should be denied leave to amend their complaint under a de novo
standard. 2
1.

Fraud

Under New York law, the elements of a cause of action for fraud include a material
misrepresentation or omission of a material fact, knowledge of its falsity, an intent to induce
reliance, justifiable reliance by the plaintiff, and damages. Eurycleia Partners, LP v. Seward &
Kissel, LLP, 12 N.Y.3d 553, 559 (2009). For the scienter element, Plaintiffs’ proposed amended
2

The Court does not review the Report’s analysis of Plaintiffs’ derivative claim of
unconscionability de novo because Plaintiffs do not object to this portion of the Report.
4

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complaint is subject to the heightened pleading standards of Rule 9(b). “Rule 9(b) requires a
complaint raising a common-law fraud claim to allege facts that create not just a plausible
inference, but a strong inference, of scienter.” Aviles, 380 F. Supp. 3d at 281 (internal quotation
marks omitted).
An inference of scienter is strong if it is “cogent and at least as compelling as any
opposing inference one could draw from the facts alleged.” Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 324 (2007). To adequately plead scienter, a plaintiff must allege facts
showing motive and opportunity, including specific allegations of how defendants benefitted
from the alleged fraud in a concrete way. Novak v. Kasaks, 216 F.3d 300, 307–08 (2d Cir.
2000). Alternatively, a plaintiff can satisfy the pleading standard for scienter through evidence
of conscious misbehavior or recklessness. For fraud claims based on an alleged material
omission, however, a plaintiff must also plead facts showing a clear duty to disclose to establish
conscious misbehavior or recklessness. Kalnit v. Eichler, 264 F.3d 131, 144 (2d Cir. 2001).
Plaintiffs’ proposed amendments do not create a strong inference of scienter for their
fraud claim. S&P purportedly benefitted from its alleged fraudulent withdrawal notice by
avoiding legal liability and reputational harm, benefits that the Second Circuit have
acknowledged as too general to support a strong inference of scienter. See Kalnit, 264 F.3d at
139–42 (2d Cir. 2001) (discussing cases). Because Plaintiffs do not sufficiently allege motive,
Plaintiffs must instead allege facts supporting an inference of conscious misbehavior or
recklessness. Their proposed amendments fall short here too. To the extent that Plaintiffs allege
that the withdrawal notice omitted material information, such as an accurate rating of Lifetrade
or a disclosure of the risks of investing in Lifetrade, they fail to establish that S&P had a duty to
disclose this information. See Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 114–15 (2d

5

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Cir. 2012) (holding that no special relationship exists between a ratings agency and plaintiffs that
lose money after investing in securities that the agency rated favorably absent allegations of
direct contract between the agency and plaintiffs).
Nor do Plaintiffs plausibly allege that any of the statements S&P made in the withdrawal
notice were misrepresentations and a product of conscious misbehavior or recklessness on S&P’s
part. The withdrawal notice stated that S&P was withdrawing its fund credit quality rating of
Lifetrade, without offering any specific facts or opinions about Lifetrade. S&P attributed its
withdrawal decision to “continuing legal and regulatory uncertainty regarding the validity of life
policies.” (Dkt. No. 705-1.) Plaintiffs assert that S&P did not believe this proffered reason for
withdrawing Lifetrade’s rating and that S&P’s true reason for withdrawal was that it knew
Lifetrade never met S&P’s rating criteria. Yet none of Plaintiffs’ amended factual allegations
makes either of these assertions plausible. In support of their contention that S&P did not
believe that there were uncertainties about the validity of life policies, Plaintiffs allege that S&P
failed to provide case support for this view in response to a letter from the Life Insurance
Settlement Association. Plaintiffs further allege that an S&P witness testified that he could not
recall reading any cases supporting the existence of legal and regulatory concerns over life
policies. (Dkt. No. 544-1 ¶¶ 401–06.) These factual allegations do not create a strong inference
that S&P did not perceive of legal and regulatory risks for life policies. Indeed, S&P cited
concerns about these risks well before it withdrew its rating of Lifetrade. (Dkt. No. 544-1
¶¶ 399, 402, 407–08.) And with the exception of conclusory allegations, nothing in the proposed
amended complaint supports the claim that S&P withdrew its rating of Lifetrade because it knew
it had improperly rated Lifetrade, as opposed to S&P’s proffered reason of legal and regulatory
concerns.

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Despite these deficiencies in their proposed amended complaint, Plaintiffs assert that they
still adequately plead scienter because a less stringent pleading standard should apply here. It is
true that “mental states may be pleaded ‘generally,’” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells
Fargo Secs., LLC, 797 F.3d 160, 171 (2d Cir. 2015), and that Plaintiffs did so by alleging that
S&P acted consciously and/or recklessly when issuing its withdrawal notice (Dkt. No. 544-1
¶ 486). “Plaintiffs must nonetheless allege facts that give rise to a strong inference of fraudulent
intent.” Loreley, 797 F.3d at 171. Because Plaintiffs fail to allege a strong inference of scienter,
for the reasons discussed above, the Court denies Plaintiffs leave to amend their complaint to add
a fraud claim. 3
2.

Conspiracy

Under New York law, a plaintiff must allege an underlying actionable tort that was the
subject of the conspiracy. Rusyniak v. Gensini, 629 F. Supp. 2d 203, 226 (N.D.N.Y. 2009). The
alleged underlying tort for Plaintiffs’ conspiracy claim is S&P’s publication of its withdrawal
notice. Having concluded that Plaintiffs fail to state a claim that the withdrawal notice was
fraudulent, the Court accordingly denies Plaintiffs leave to amend their complaint with a
conspiracy claim. 4

3

The Court declines to review de novo Judge Parker’s additional conclusions that Plaintiffs’
fraud claim was untimely for the “vast majority of Plaintiffs who invested in Lifetrade before
April 1, 2011” and that Plaintiffs failed to plead facts supporting a plausible inference of reliance
(Dkt. No. 665 at 13–17, 22–25). The Court overrules these objections as moot.

4

Judge Parker also determined that Plaintiffs’ conspiracy claim was futile because Plaintiffs
failed to allege a conspiratorial agreement and the doctrine of in pari delicto barred the claim.
(Dkt. No. 665 at 25–29.) Under the de novo standard of review, the Court overrules Plaintiffs’
objections to these determinations as moot.
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3.

Aiding and Abetting a Breach of Fiduciary Duty

“To state a claim for aiding and abetting a breach of fiduciary duty under New York law,
a plaintiff must allege (1) a breach by a fiduciary of obligations to another, (2) that the defendant
knowingly induced or participated in the breach, and (3) that [the] plaintiff suffered damage as a
result of the breach.” Aviles, 380 F. Supp. 3d at 306 (internal quotation marks omitted). A
plaintiff must also include “an allegation that [the] defendant had actual knowledge of the breach
of duty.” Kaufman v. Cohen, 760 N.Y.S.2d 157, 169 (1st Dep’t 2003) (citing S & K Sales Co. v.
Nike, Inc., 816 F.2d 843, 848 (2d Cir. 1987)). Constructive knowledge is “legally insufficient to
impose aiding and abetting liability.” Id. (citing Kolbeck v. LIT Am., Inc., 939 F. Supp. 240, 246
(S.D.N.Y. 1996)).
The proposed amended complaint establishes, at best, that S&P had constructive
knowledge of Lifetrade’s breaches of fiduciary duty. (Dkt. No. 544-1 ¶ 463 (alleging that S&P
was “on notice” of Lifetrade’s wrongdoing)). The proposed amended complaint does not contain
any facts from which it could be inferred that S&P had actual knowledge. Plaintiffs tacitly
acknowledge as much, noting in their objections to the Report that they “allege[d] that S&P was
aware or should have been aware” of Lifetrade’s misconduct. The only support that Plaintiffs
provide for their conclusory allegations that S&P had actual knowledge is the declaration of John
Marcum, who offers — “[u]pon information and belief” — that S&P knew of some of
Lifetrade’s wrongdoing. (Dkt. No. 544-2 ¶¶ 72–78.) But statements based on “information and
belief” are insufficient to show a defendant’s actual knowledge for an aiding and abetting claim.
Kaufman, 760 N.Y.S.2d at 157, 169–70 (affirming dismissal of an aiding and abetting claim
supported by conclusory allegations of knowledge based on “information and belief”). The

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Court thus denies Plaintiffs leave to amend the complaint with their proposed aiding and abetting
a breach of fiduciary duty claim. 5
B.

S&P’s Objections

S&P objects to the portion of the Report concluding that Plaintiffs satisfied Rules 15 and
16 (see Dkt. No. 665 at 12–13). S&P’s objections squarely concern a “pretrial matter not
dispositive of a claim or defense,” Fed. R. Civ. P. 72(a). Judge Parker’s well-reasoned analysis
on these points is neither clearly erroneous or contrary to law. The Court therefore adopts this
part of the Report.
III.

Conclusion
Accordingly, the Report and Recommendation is hereby ADOPTED in full, the parties’

objections are OVERRULED, and Plaintiffs’ motion for leave to amend the complaint is
DENIED.
The Clerk of Court is directed to close the motion at Docket Number 542.
SO ORDERED.
Dated: May 9, 2022
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

5

Under de novo review of the Report’s conclusion as to the aiding and abetting a breach of
fiduciary duty claim, the Court does not review Judge Parker’s additional conclusion that the in
pari delicto doctrine bars this claim. The Court overrules Plaintiffs’ objection to this conclusion
as moot.
9