Clune v. Barry, Jr. et al

Filing 164

OPINION & ORDER: For the reasons stated above, Magistrate Judge McCarthy's Report and Recommendation is REJECTED in accordance with this Opinion and Order. Plaintiffs' Motion for Leave to Amend is GRANTED. Plaintiffs shall file their Sec ond Amended Complaint on or before October 7, 2024. The Defendants are directed to answer, seek leave to move, or otherwise respond to the Second Amended Complaint on or before October 28, 2024. SO ORDERED (Signed by Judge Nelson Stephen Roman on 9/23/2024) Desmond T. Barry, Jr. answer due 10/28/2024; John Does answer due 10/28/2024; Gail G. Garcia answer due 10/28/2024; John D. Gillespie answer due 10/28/2024; Daniel L. Mosley answer due 10/28/2024; Winged Foot Golf Club, Inc. answer due 10/28/2024.( Amended Pleadings due by 10/7/2024., Motions due by 10/28/2024.) (ks)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
:
KEVIN P. CLUNE, et al.,
:
:
Plaintiffs,
:
-against:
:
DESMOND T. BARRY, Jr., et al.,
:
Defendants.
:
---------------------------------------------------------------X

09/23/2024

16-cv-4441 (NSR) (JCM)
OPINION & ORDER

NELSON S. ROMÁN, United States District Judge:
Plaintiffs Kevin P. Clune, as Executor of the Estate of Barbara B. Clune, and James E.
Fisher (collectively, “Plaintiffs”) commenced this action on June 13, 2016 against Defendants
Desmond T. Barry, Jr., Winged Foot Golf Club, Inc. (“WFGC”), John Doe Nos. 1-10, Daniel L.
Mosley, Gail G. Garcia, and John D. Gillespie (all three as Executors of the Estate of George J.
Gillespie, III) (collectively, “Defendants”), alleging that Defendants committed violations of
federal securities law, common law fraud and breach of fiduciary duties in negotiating lease
renewals that destroyed the market value of Plaintiffs’ shares in the Winged Foot Holding
Corporation (“WFHC”).
On September 20, 2022, Plaintiffs filed a motion for leave to amend their complaint
pursuant to Rule 15 of the Federal Rules of Civil Procedure. (“Plaintiff’s Motion”, ECF Nos.
127-28.) On April 13, 2023, Magistrate Judge Judith McCarthy issued a Report and
Recommendation (“R&R”) that recommended the Court deny Plaintiff’s Motion. (See ECF No.
147.) Plaintiffs filed timely objections to Judge McCarthy’s R&R. (ECF No. 148.) For the
following reasons, this Court REJECTS the R&R and GRANTS Plaintiff’s Motion.

BACKGROUND
The facts are taken from the R&R, unless otherwise noted. The Court assumes familiarity
with the factual and procedural background of this case, as set forth in the R&R.
Defendant WFGC maintains and operates a 280-acre property in Westchester County,
New York, which includes two golf courses, a clubhouse, and other amenities. (R&R at 1). The
WFHC is the owner of the property. (Id.) The WFHC was incorporated in 1921 pursuant to the
New York State Business Corporations law, and issued 600 shares. (Id. at 2.) The WFHC used
the money raised from the sale of the 600 shares to buy 280 acres of land in Mamaroneck, New
York, where it constructed two golf courses and associated buildings. (Id.) Defendant WFGC
was organized as a membership corporation and was formed for the purpose of maintaining and
operating the property. (Id.) To fulfill that purpose, the WFHC leased the land to the WFGC
beginning in 1924 for a 21-year term, with provision for two 21-year term renewals. (Id.) In
1947, the lease was amended to require the WFGC to pay a $30,000 annual rent payment to the
WFHC. (Id.)
As alleged by Plaintiffs, originally, ownership of a share of the WFHC was a prerequisite
to use the WFGC's facilities, and membership was limited to 600 individuals. (Id.) However,
during the 1930s, when faced with financial strain caused by the Great Depression, the WFGC
began admitting temporary members, who paid yearly dues, that were not required to hold shares
in the WFHC to use the facilities. (Id.) Ultimately, the WFGC permanently removed its policy
requiring that full-time members own at least one share in WFHC in 1949. (Id.) This change
created a division of interests between the shareholders and non-shareholders; continuous
renewal of the lease to the WFGC at a below-market rate benefits the non-shareholders, while

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harming the WFHC shareholders, who are deprived of the opportunity to receive market rate or
sell the land, which would maximize the value of their shares. (Id.)
Around 1950, the WFGC amended its bylaws to allow the WFGC to acquire shares of the
WFHC owned by deceased or resigned members “at the prevailing price then fixed by the
[WFGC] Board.” (Id.) In 1961, in anticipation of another lease renewal, WFGC obtained a legal
memorandum from a law firm rendering advice about WFHC and its lease. (Id. at 3.) Thereafter,
Plaintiffs allege that the WFGC continued to buy shares of WFHC, and provided false and
misleading information about the value of WFHC shares to WFHC shareholders. (Id.) The
WFGC attained majority ownership of WFHC in 1983, and has continued to increase its majority
share since. (Id.) Moreover, the WFGC's lease has been renewed multiple times, each
maintaining the $30,000 annual rent payment. (Id.) The most recent renewal was executed in
2013 and extends the lease through 2071. (Id.)
Plaintiff Clune filed the instant action on June 13, 2016. (See ECF No. 1.) In 2017, Clune
amended his complaint to add Plaintiff Fisher and additional factual allegations. (See ECF No.
62.) Plaintiffs subsequently moved for class certification (ECF No. 99), which the Court denied
on June 26, 2019 (ECF No. 110). The Second Circuit denied Plaintiffs' request for leave to
appeal the denial of class certification pursuant to Rule 23(f) on November 7, 2019. (ECF No.
114.)
On September 20, 2022, Plaintiffs filed the instant motion for leave to amend their
complaint. (ECF No. 127.) On April 13, 2023, after considering the parties’ submissions, Judge
McCarthy issued the R&R recommending that this Court deny Plaintiff’s Motion. (ECF No.
147.) On April 27, 2023, Plaintiffs filed written objections to the R&R. (“Ptfs.’ Obj.”, ECF No.
148.)

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STANDARD OF REVIEW
The Federal Rules of Civil Procedure provide that a magistrate judge may “hear a pretrial
matter [that is] dispositive of a claim or defense” if so designated by a district court. Fed. R. Civ.
P. 72(b)(1). In such a case, the magistrate judge “must enter a recommended disposition,
including, if appropriate, proposed findings of fact.” Id.; accord 28 U.S.C. § 636(b)(1).
When reviewing a Report and Recommendation, 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). A district court may also “adopt those portions of the [Report and
Recommendation] to which no objections have been made and which are not facially erroneous.”
West v. Sheahan, No. 12-CV-08270, 2016 WL 67789, at *1 (S.D.N.Y. Jan. 4, 2016) (quoting
Wilds v. United Parcel Serv., Inc., 262 F. Supp. 2d 163, 170 (S.D.N.Y. 2003)); see also 28
U.S.C. § 636(b)(1)(A) (“[T]he court may reconsider any pretrial matter under this subparagraph .
. . where it has been shown that the magistrate judge’s order is clearly erroneous or contrary to
law.”)
However, when a specific objection is made, the district court must review the contested
sections de novo. See 28 U.S.C. § 636(b)(1) (“A judge of the court shall make a de novo
determination of those portions of the report or specified proposed findings or recommendations
to which objection is made.”); Fed. R. Civ. P. 72(b) (“The district judge to whom the case is
assigned shall make a de novo determination upon the record, or after additional evidence, of any
portion of the magistrate judge’s disposition to which specific written objection has been made in
accordance with this rule.”); see, e.g., Pizarro v. Bartlett, 776 F. Supp. 815, 817 (S.D.N.Y.
1991). In a de novo review, a district court must consider the “[r]eport, the record, applicable
legal authorities, along with Plaintiff’s and Defendant’s objections and replies.” Diaz v. Girdich,

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No. 04-CV-5061(RJH), 2007 WL 187677, at *1 (S.D.N.Y. Jan. 23, 2007) (internal quotation
marks and citations omitted). Objections must be “specific and clearly aimed at particular
findings” in the Report and Recommendation. Molefe v. KLM Royal Dutch Airlines, 602 F.
Supp. 2d 485, 487 (S.D.N.Y. 2009).
DISCUSSION
I. The RICO Amendment Bar
Plaintiffs seek leave to file the proposed Second Amended Complaint (“PSAC”, ECF No.
129-1), which adds alternative claims for relief under the Racketeer Influenced and Corrupt
Organizations (“RICO”) Act, 18 U.S.C. §§1961 et seq., based on the same course of conduct that
is already alleged in the present complaint. Plaintiffs argue that they can plead RICO claims in
the alternative based on the same conduct as their securities fraud claims because there is a
dispute between the parties about whether WFHC shares qualify as securities under federal law.
(Pltfs.’ Obj. at 8.) Judge McCarthy, however, found that Plaintiffs were merely “recasting”
alleged actionable securities fraud conduct as mail and wire fraud in contravention of the Private
Securities Litigation Reform Act of 1995 (“PSLRA”). (R&R at 16.) Because such recast claims
would ultimately be futile, given they are statutorily prohibited under the PSLRA, Judge
McCarthy denied the Plaintiffs’ Motion. (Id. at 19.) The Court disagrees with the R&R’s
conclusion that Plaintiffs’ RICO claims are futile under the PSLRA.
Section 107 of the PSLRA amended the RICO statutes to provide that “no person may
rely upon any conduct that would have been actionable as fraud in the purchase or sale of
securities to establish a violation of section 1962.” 18 U.S.C. § 1964(c). In other words, Section
107 (the “RICO Amendment”) “bar[s] civil RICO claims based on allegations of securities
fraud.” MLSMK Inv. Co. v. JP Morgan Chase & Co., 651 F.3d 268, 274 (2d Cir. 2011). “[T]he

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purpose of the bar [i]s to prevent litigants from using artful pleading to boot-strap securities
fraud cases into RICO cases, with their threat of treble damages.” Id. (internal quotation marks
omitted). The RICO Amendment “was intended not simply ‘to eliminate securities fraud as a
predicate offense in a civil RICO action,’ but also to prevent a plaintiff from ‘plead[ing] other
specified offenses, such as mail or wire fraud, as predicate acts under civil RICO if such offenses
are based on conduct that would have been actionable as securities fraud.’” Monterey Bay Mil.
Hous., LLC v. Ambac Assurance Corp., 2021 WL 1226984, at *27 (S.D.N.Y. Mar. 31, 2021)
(alteration in original) (quoting Bald Eagle Area Sch. Dist. v. Keystone Fin., Inc., 189 F.3d 321,
327 (3d Cir. 1999)); see also MLSMK Inv. Co., 651 F.3d at 278-79 (same); Fezzani v. Bear,
Stearns & Co., 2005 WL 500377, at *3 (S.D.N.Y. Mar. 2, 2005) (“The amendment also bars
recasting conduct that would be actionable securities fraud as mail or wire fraud.”).
Judge McCarthy rejected Plaintiffs’ attempt to plead the RICO claims in the alternative
by citing a line of RICO Amendment cases where courts “rejected similar attempts to circumvent
the PSLRA bar and dismissed RICO claims brought in the alternative.” (R&R at 16.) As
Plaintiffs note, however, these cases did not involve disputes about the basic issue—present
here—of whether the financial instruments in question are securities in the first place. (Pltfs.’
Obj. at 10.) Rather, the plaintiffs in those cases argued that, because federal securities fraud
regulations did not provide a private right of action for aiding and abetting liability, the securities
fraud alleged by their complaints might not ultimately be actionable by them and, therefore,
alternative pleading was permissible. See Thomas H. Lee Equity Fund V, L.P. v. Mayer Brown,
Rowe & Maw LLP, 612 F.Supp.2d 267, 280-281 (S.D.N.Y. 2009); Fezzani, 2005 WL 500377, at
*4. The Second Circuit rejected these arguments and held that “the PSLRA bars civil RICO
claims alleging predicate acts of securities fraud even where a plaintiff cannot itself pursue a

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securities fraud action against the defendant.” MLSMK Inv. Co., 651 F.3d at 277-278. By
contrast, “there are no ‘predicate acts of securities fraud’ in the instant action—actionable by or
against anyone—if WFHC shares do not qualify as securities in the first place.” (Pltfs.’ Obj. at
11.) In other words, the relevant dispute here is not whether Plaintiffs can pursue a securities
fraud action against Defendants, but, rather, whether the financial instruments at issue qualify as
securities at all. This was not the case in the precedent that Judge McCarthy relied upon, in
which there was “no argument before the Court that the equity interests [at issue] were not
securities,” Thomas H. Lee Equity Fund V, 612 F. Supp. 2d at 280, and no dispute that the
conduct at issue was “actionable as securities fraud,” Fezzani, 2005 WL 500377, at *4.
By contrast, if there is a dispute over whether the instruments in question qualify as
securities, this Court has attempted to resolve said dispute before ruling on the applicability of
the RICO Amendment bar. For example, where a plaintiff has failed to “plead[] additional facts
sufficient to rebut the presumption that the…promissory notes underlying their RICO claim are
securities,” the Court dismissed RICO claims pursuant to the RICO Amendment bar. See
Bongiorno v. Baquet, 2021 WL 4311169, at *16 (S.D.N.Y. Sept. 20, 2021). Conversely, where
the Court has determined that the financial instruments in question are definitively not securities,
this Court has permitted RICO claims concerning these instruments to move forward, precisely
because such claims do not (and, indeed, cannot) concern allegations of securities fraud. See
Monterey Bay Mil. Hous., 531 F. Supp. 3d at 721–22 (barring RICO claims against “Guaranteed
Investment Contracts” that qualified as securities, but sustaining RICO claims concerning fraud
in the setting of contractual interest rates on private loans because the latter financial instruments
were not securities). Finally, if unable to determine whether the instruments at issue are
securities, this Court has held that “the inquiry should continue to determine whether the stock

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[at issue]…constitute securities,” and reserved judgment. See Ling v. Deutsche Bank, No. 04 CV
4566(HB), 2005 WL 1244689, at *6 (S.D.N.Y. May 26, 2005).
“[T]o determine whether an alleged predicate act in a civil RICO claim is in connection
with the purchase or sale of securities and is therefore barred by the RICO Amendment, the
Court must focus its analysis on whether the conduct pled as the predicate offenses is actionable
as securities fraud.” Bongiorno, 2021 WL 4311169, at *14 (internal quotation marks and citation
omitted) (emphasis added).
[B]ecause it is not clear based on the current record whether the transactions at issue here
involved ‘securities,’ it consequently is unclear whether [D]efendants’ alleged conduct is
‘actionable' under the securities laws. Therefore, the Court is unable to determine at this
stage of the litigation—i.e., prior to a jury's determination on the question of whether the
[WFHC shares] here were [securities]—whether the PSLRA bar applies to preclude
[P]laintiffs' civil RICO claims.
See Marini v. Adamo, 812 F. Supp. 2d 243, 261 (E.D.N.Y. 2011), aff’d 644 F. App'x 33, 36 (2d
Cir. 2016) (summary order). If the scheme alleged by Plaintiffs turns out ultimately to “not
involve[e] securities at all,…[s]uch a scheme (assuming it satisfie[s] the other elements of a civil
RICO claim) would not be barred by the RICO Amendment.” See In re Platinum-Beechwood
Litig., No. 18-CV-10936 (JSR), 2019 WL 2569653, at *5 (S.D.N.Y. June 21, 2019).
Accordingly, at this stage, the Court will permit Plaintiffs to plead, in the alternative, RICO
claims based on the Defendants’ alleged misconduct. Ultimately, the question of whether the
WFHC shares constitute securities will be resolved, and Plaintiffs will only be able to seek relief
based on one of their claims—either securities fraud or RICO, but not both.
The Court accordingly rejects the R&R’s finding that Plaintiffs’ proposed RICO claims
are barred by the RICO Amendment and grants Plaintiffs leave to include such claims in their
Second Amended Complaint.

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II.

Separate Accrual Rule

Plaintiffs contend that their proposed RICO claims are timely under the Second Circuit’s
“separate accrual” rule, which provides that “a new claim accrues, triggering a new four-year
limitations period, each time plaintiff discovers, or should have discovered, a new injury caused
by the predicate RICO violations.” (Ptlfs.’ Obj. at 12 (quoting Bingham v. Zolt, 66 F.3d 553,
559-560 (2d Cir. 1995).) Judge McCarthy, however, found that the separate accrual rule was
“inapplicable” to Plaintiffs’ RICO claims because Plaintiffs’ injuries flow from the same “single
alleged scheme” that forms the basis of their securities fraud claims. (R&R at 21-22.) The Court
disagrees with the R&R’s conclusion that the separate accrual rule is inapplicable to Plaintiffs’
proposed RICO claims.
RICO claims are governed by a four-year statute of limitations which “begins to run
when the plaintiff discovers or should have discovered the RICO injury.” In re Merrill Lynch
Ltd. P'ships Litig., 154 F.3d 56, 58 (2d Cir. 1998). Under the separate accrual rule, the RICO
limitations period begins “afresh with each new injury.” Id. at 59. For the separate rule to apply,
the injury for which relief is sought must be “new and independent.” Bingham, 66 F.3d at 56061. For example, where a defendant employs a variety of schemes to defraud a plaintiff, each
scheme can give rise to a new civil RICO cause of action with a corresponding four-year
limitation period. See id. at 559-61. By contrast, where a party alleges a single scheme and said
“scheme was fraudulent at the outset, …continuing efforts to conceal the initial fraud [are] not
separate and distinct fraudulent acts resulting in new and independent injuries.” In re Merrill
Lynch, 154 F.3d at 59–60; see also Lorber v. Winston, 962 F. Supp. 2d 419, 447–48 (E.D.N.Y.
2013) (holding that separate accrual rule was inapplicable where plaintiff “allege[d] one singular

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scheme…which was fraudulent at the outset,” and any further injuries “simply followed from the
execution of that scheme”).
Here, Plaintiffs’ RICO claims allege an injury distinct from “the ongoing derivative
injuries that occurred throughout Defendants’ longstanding scheme—i.e., injuries to WFHC,
which affected shareholders only indirectly and collectively,” which is “the direct injury inflicted
on Plaintiffs personally when Defendants transacted with each Plaintiff individually to defraud
him of his WFHC share.” (Pltfs.’ Obj. at 13.) The direct injury Plaintiffs suffered stems from a
scheme distinct from the scheme aimed at WFHC. This case is therefore distinguishable from In
re Merrill Lynch Partnerships Litigation, which Judge McCarthy relied upon (R&R at 21), in
which the plaintiffs suffered a single injury when defendant, through a single scheme,
fraudulently sold investments to them and then continued to make a number of false statements
to plaintiffs as “continuing efforts to conceal the initial fraud.” Merrill Lynch Partnerships, 154
F.3d at 59–60. In other words, in Merrill Lynch, the plaintiffs' injury was complete from the
moment that they purchased the fraudulent investment. Id. at 59 (explaining that at the time of
purchase, “the amount of damages was clear and definite, and the injury was ripe”) (internal
quotation marks omitted). In this case, however, Plaintiffs each suffered a distinct loss through
personally transacting with the Defendants regarding their WFHC shares. See Republic of
Colombia v. Diageo N. Am. Inc., 531 F. Supp. 2d 365, 449 (E.D.N.Y. 2007). Their alleged
additional financial losses are independent from the original injury stemming from Defendants’
perpetual extension of the sweetheart lease. As a result, the Court disagrees with the R&R’s
conclusion that the separate accrual rule is inapplicable to Plaintiffs’ RICO claims and instead
applies the rule to hold that Plaintiffs direct RICO claims accrued when each Plaintiff sold his
individual share—in 2012 (Clune) and 2016 (Fisher). (See PSAC ¶¶ 265, 267.)

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III.

Timeliness of Plaintiff Clune’s RICO Claim

Having determined that the separate accrual rule applies to Plaintiffs’ proposed RICO
claims, the Court next addresses the timeliness of Plaintiff Clune’s RICO claims. Clune sold his
inherited share around January 2012 (id. ¶ 265)—just over four years before he filed the original
complaint—which means that the timeliness of his RICO claims (unlike Plaintiff Fisher’s
claims) depends on when he should have discovered his resulting injury. The RICO limitations
“period begins to run when the plaintiff has ‘actual or inquiry notice of the injury.’” Yien-Koo
King v. Wang, No. 14 CIV. 7694 (JFK), 2018 WL 1478044, at *6 (S.D.N.Y. Mar. 26, 2018)
(internal citation omitted). A plaintiff is charged with inquiry notice when “a reasonable person
should have discovered the RICO injury.” In re Integrated Res. Real Estate Ltd. P'ships Sec.
Litig., 850 F. Supp. 1105, 1118 (S.D.N.Y. 1993). Reassuring statements by a fiduciary or
advisor, however, “will prevent the emergence of a duty to inquire or dissipate such a duty.”
Sedona Corp. v. Ladenburg Thalmann & Co., No. 03CIV.3120(LTS)(THK), 2005 WL 1902780,
at *8 (S.D.N.Y. Aug. 9, 2005) (quoting LC Cap. Partners, LP v. Frontier Ins. Grp., Inc., 318
F.3d 148, 155 (2d Cir. 2003)).
Here, Clune filed the original complaint on June 13, 2016. (See ECF No. 1.) Thus, if
Clune had actual or inquiry notice of his alleged injuries before June 13, 2012, his RICO claims
are time-barred unless an exception to the limitations period applies. See Yien-Koo King, 2018
WL 1478044, at *6. Judge McCarthy found that Clune, who inherited his WFHC share from his
mother, was on inquiry notice of any RICO claims no later than 1983, when Defendants’ alleged
fraud directed at WFHC began. (R&R at 22.) But “a disclosure cannot trigger inquiry notice
unless it relates directly to the fraudulent misrepresentations or omissions at issue.” Fisher v.
Reich, No. 92 CIV. 4158 (MBM), 1995 WL 23966, at *5 (S.D.N.Y. Jan. 10, 1995) (emphasis

11

added); see also Morin v. Trupin, 809 F.Supp. 1081, 1097 (S.D.N.Y.1993) (“[t]he triggering
financial data must be such that it relates directly to the misrepresentations and omissions the
Plaintiffs later allege in their action against the defendants”) (emphasis in original). Clune’s
RICO claims concern misrepresentations from Defendant Barry that WFHC “shares could only
be sold or transferred back to the Club” and “transfer… to any outsider was simply prohibited.”
(See PSAC ¶ 265.) Any disclosures on behalf of the Defendants from decades prior concerning
their fraud directed at WFHC are distinct from the misrepresentations Barry specifically gave to
Clune in and around January 2012. Even if Clune was on inquiry notice of Defendants’ fraud
aimed at WFHC, it does not follow that he was on inquiry notice that he himself was being
defrauded in other ways, including regarding the transferability of his WFHC share. See, e.g.,
Fisher, 1995 WL 23966, at *5 (declining to hold that a RICO claim was time-barred where
defendant’s disclosures “refer[ed] to the general risks inherent in any investment, not to the
alleged improper relationship which generate[d] plaintiffs' complaint”). Such an argument
“would allow a defendant to use the statute of limitations as a sword to immunize a second fraud
(which might be more difficult to detect).” See CSI Inv. Partners II, L.P. v. Cendant Corp., 2002
WL 925044, at *5 (S.D.N.Y. Feb. 28, 2002).
Moreover, Defendant Barry’s personal misrepresentations to Clune were reassuring
statements by a fiduciary that prevented Clune from being on inquiry notice of his injuries.
Clune, an inheritor with no prior knowledge about WFHC, was entitled to rely on Barry’s
“reliable words of comfort” as a corporate fiduciary. See LC Capital Partners, 318 F.3d at 155.
Barry’s allegedly false and misleading statements regarding the nature and value of WFHC
shares, in turn, could have led Clune astray, thereby preventing the emergence of any duty to
inquire. See In re Pronetlink Sec. Litig., 403 F. Supp. 2d 330, 334–35 (S.D.N.Y. 2005) (“red

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flags” were “contravened by several allegedly false and misleading statements that could have
caused a reasonable shareholder to think all was well”). In other words, Clune’s “failure” to
inquire further about the fairness of the offer price for his shares “was the intended result of
[D]efendants’ advice upon which []he had a right to depend.” See McCoy v. Goldberg, 748 F.
Supp. 146, 158–59 (S.D.N.Y. 1990). Therefore, it cannot be said as a matter of law that Clune
had sufficient facts to place him on inquiry notice prior to June 13, 2012 and, therefore, that his
RICO claims are futile. As a result, he “is entitled to litigate the question of timeliness of the
[RICO] action.” See Sedona Corp, 2005 WL 1902780, at *9. Accordingly, the Court rejects the
R&R’s conclusion that Plaintiffs’ RICO claims would be time-barred and grants the Plaintiffs
leave to amend their complaint to add RICO claims.
IV.

Failure to Cure Deficiencies

Judge McCarthy did not reach Defendants’ argument that the PSAC fails to cure
deficiencies in prior complaints. (See R&R at 23.) The Court finds such argument to be plainly
deficient. In making their argument, Defendants rely upon cases where courts disallowed further
attempts to replead claims which had been previously dismissed several times on substantive
grounds. See, e.g., Anderson v. Greene, 2017 WL 3503686, at *14 (S.D.N.Y. Aug. 16, 2017)
(denying motion to amend on other, substantive grounds, then denying leave to amend further);
Coal. for a Level Playing Field, L.L.C. v. Autozone, Inc., 813 F.Supp.2d 557, 565 (S.D.N.Y.
2011) (same); Warren v. Stop & Shop Supermarket, LLC, No. 20 Civ. 8718 (NSR), 2022 WL
815300, at *13–14 (S.D.N.Y. Mar. 16, 2022) (granting motion to dismiss some claims, then
denying leave to amend further in relation to those claims). But Plaintiffs have not previously
pleaded RICO claims. As such, Defendants’ cited authority is inapposite.

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To the extent Defendants take issue with non-substantive issues in the PSAC—for
example, that the PSAC styles itself as the “Second Amended Class Action Complaint” even
though this Court has denied class certification—such amendments can easily be applied to the
operative complaint. The inclusion of non-operational text in a proposed amended complaint is
not the same as a failure to cure deficiencies.
CONCLUSION
For the reasons stated above, Magistrate Judge McCarthy’s Report and Recommendation
is REJECTED in accordance with this Opinion and Order. Plaintiffs’ Motion for Leave to
Amend is GRANTED. Plaintiffs shall file their Second Amended Complaint on or before
October 7, 2024. The Defendants are directed to answer, seek leave to move, or otherwise
respond to the Second Amended Complaint on or before October 28, 2024.
Dated: September 23, 2024
White Plains, New York

SO ORDERED:
________________________________
NELSON S. ROMÁN
United States District Judge

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