CARMICHAEL v. CARMICHAEL et al, No. 2:2013cv02409 - Document 31 (D.N.J. 2014)
Court Description: OPINION. Signed by Judge Dennis M. Cavanaugh on 1/31/2014. (nr, )
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NOT FOR PUBLICATION UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY JOSEPH P. CARMICHAEL, Hon. Dennis M. Cavanaugh Plaintiff, OPINION V. Civil Action No. I 3-cv-2409 (DMC)(JBC) ROBERT CARMICHAEL, EQUITY RISING LP, CARMiCHAEL COUNTRY,: INC., and MER1LN SECURITIES, LLC, Defendants. DENNISM, CAVANAUGH,U.S.D.L This matter comes before the Court upon the Motion of Defendant Merlin Securities. LLC ( Defendant to dismiss the Complaint of Plaintiff Joseph P. Carmichael ( Plaintiffl. Pursuant to FED. R. Civ. P 78, no oral argument was heard. Based on the following and for the reasons expressed herein, Defendant s Motion to Dismiss is granted. L BACKGROUND Plaintiff states that Robert Carmichael ( Robert is the founder and President of Equity Rising LP ( Equity Rising ) and Carmichael Country, Inc. Plaintiff claims that Robert represented to him that he was an expert in the financial planning and securities industries and that he had the knowledge. experience, and ability to sa1guard and effectively oversee and manage Plaintiffs investments. Plaintiff also alleges that Robert told him that he would safeguard Plaintiffs retirement funds and maintain a careful, conservative investment strategy, The facts from this section are taken from the parties pleadings. 1 including minimum risk and steady growth. Plaintiff states that, based on Roherts representations. he transferred $429,505.49 from his securities retirement account into the care and custody of Robert to safeguard and invest prudently. Plaintiff claims that shortly after making the investment, Defendant began to send him regular account statements that reflected the transfer of his retirement investments into 416.571 shares in Equity Rising. Plaintiff alleges that the statements initially reflected a value of $416,571 for the Equity Rising shares. Plaintiff claims that on or about January 28, 2009 and January 29, 2010 he received account statements from Defendant indicating that the value of his ownership interest in Equity Rising was $41 6,57 1. In June 2012, Plaintiff alleges that he received a quarterly account statement that indicated that although the account had declined, it still had a value of almost $300,000. Plaintiff states that the next account statement that he received from Defendant, dated August 3, 2012. indicated that his investments net equity for the period ending August 3 1, 20 1 2 was Plaintiff claims that before Robert in receivinu zero. this statement, he had unsuccessfully attempted to contact order to gain information about his funds. Plaintiff alleges that after receiving the last statement, he contacted Defendant and was told that his account had no real value for months or longer. Plaintiff claims that Defendant could not explain the deceptive and false nature of its periodic statements and alleges that if the statements had been true, he would have been able to salvage some or most of his retirement funds. Plaintiff filed a ten count complaint on April 15, 2013 (ECF No. 1). Defendant tiled the instant Motion to Dismiss on July 22. 201 3 (ECF No. 1 8). Plaintiff IllecI an Opposition on October 11,2013 (ECF No. 27). Defendant filed a Reply on November 25. 2013 (ECF No. 30). II. STANDARD OF REVIEW 2 In deciding a motion under FED, R. Civ. P. 12(b)(6), the Distric t Court is required to accept as true all factual allegations in the complaint and draw all inferen ces in the facts alleged in the light most favorable to the [plaintifl. Phillips v. Cntyjf\lleghenv, 51 5 F.3d 224. 228 (3d Cir. 2008). [A] complaint attacked by a Rule I 2(b)(6) motion to dismis s does not need detailed factual allegations. Bell AtI. Corp. v. Twombly, 550 U.S. 544, 555 (2007) . However, the plaintifis obligation to provide the grounds of his entitle[rnent] to relief requires more than labels and conclusions and a formulaic recitation of the elements of a cause of action will not do. Id. On a motion to dismiss, courts are not bound to accept as true a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286 (1986). Plaintiffs complaint is subject to the heightened pleading standard set forth in Ashcroft v. Tqbal: To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Determining whether a complaint states a plausible claim for relief will be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged but it has not show[n] that the pleader is entitled to relief . . . . . . - - 556 U.S. 662, 678-679 (2009) (quoting Twombly, 550 U.S. at 557, 750). IL I)ISCUSSION A. Counts Two, Three, and Four Count two of the Complaint alleges common law fraud, count three alleges a violation of the New Jersey Uniform Securities Act ( NJUSA ), and count four alleges a violation of Section 10(b) of the Securities and Exchange Act of 1934 ( I0(b) ). Fraud claims are subject to the heightened pleading standard set forth in Federal Rule of Civil Proced ure 9(b), which provides that [i]n allegmg baud oi mistake a paitv must statt. with palticulailt) thc circumstanccs constituting fraud or mistake. Plaintiff s Complaint does not satisfy Rule 9(b). While Plaintiff claims that Defendant engaged in fraud by sending him false balance sheets, he provides no detail as to which balance sheets were inaccurate due to Defendant s alleged fraudulent conduc t. This Court is mindful that in cases of corporate fraud, plaintiffs cannot be expected to have person al knowledge of the details of corporate internal affairs. Craftmatic Sec. Litig. v. Kraftsow. 890 F.2d 628. 645 (3d Cir. 1989). However, the only inference in Plaintiffs Complaint that Defend ant acted fraudulently is the accusation that after receiving his last statement from Defendant, he contacted Defendant and was advised that the account had no real value for month s or longer (Pl. s Opp n at 6). Plaintiff does not provide the date of this conversation, nor any information about the person he spoke with. These are not details that he can claim are in the sole possession of Defendant. Further, Plaintiffs Complaint repeatedly groups all Defendants together as one ($ge. g,g., Camp!. ¶46 ( [B]y sending Plaintiff periodic statements that falsely rellected a significant value in Plaintiffs Account, when, in fact, the account and the shares...were worthless and non-existent, Defendants engaged in fraud and misrepresentation ); ¶57 (Defen dants are in violation of. . . NJUSAJ by . . . (1) defrauding Plaintiff, (ii) making untrue statements of material fact, and (iii) omitting statements of material fact ); 67 ( These defendants each ¶ employed devices, schemes, and artifices to defraud . . . . )). As this District has stated, [c]ollcctivized allegations that generally allege fraud as against multip le defendants, without informing each defendant as to the specific fraudulent acts he or she is alleged to have committed, do not satisfy Rule 9(b). Hale v. Stryker Orthopaedics, No. 08-336 7, 2009 WL 321 579, at *6 (D.NJ. Feb. 9, 2009). Accordingly, counts two through four are dismissed. 13. Counts One, Five, Eight, and Nine 4 Count nine of the Complaint alleges a breach of fiduciary duty. Count one alleges that Defendants, by virtue of. among other things, their fiduciary relationship with Plaintiff owe Plaintiff a duty to fully account for the funds that Plaintiff entrusted in Defend ants care and custody. (Compl, ¶ 37). Thus, counts one and nine require the existence of a fiduciary duty. Counts five and eight of the Complaint also require the existence of a duty. as they allege breach of special relationship and negligence. See Piscitelli v. Classic Reside 2 nce by Hyatt, 973 A.2d 948. 965 (N.J. Super. Ct. App. Div. 2009) (stating that a negligence claim requires a plaintiHto show 1) [a] duty of care; (2) a breach of that duty; (3) proximate cause: and (4) actual damages ). Counts one, five, eight, and nine fail because the Complaint does not allege the existence of any duty between Plaintiff and Defendant. Plaintiffs Opposition repeatedly alleges that Plaintiff was a customer of Defendant. Plaintiff also argues that Defendant was respo nsible for executing trades on Plaintiffs behalf (P1. s Opp n at 35). 1-lowever, the Complaint makes no allegation that Plaintiff was a customer of Defendant. nor does it allege that Defl2ndant made any trades on Plaintiffs behalf As such, the Complaint fails to establish a relationship between Plaintiff and Defendant, and counts one, five eight, and nine must be dismissed. C. Counts Six anti Seven Count six of the Complaint alleges conversion. Conversion is defined as an unauthorized assumption and exercise of the right of ownership over goods or person al chattels belonging to another, to the alteration of their condition or the exclusion of an owners rights. 548 A.2d 1161, 1164-65 (N.J. Super. Ct. App. Div. 1988). Here, the Complaint alleges that Robert, rather than Defendant, exercised ownership over 2 While it is unclear from Plaintiffs Complaint what that count five alleges negligence per Se. it is that count five alleges, Plaintiff clarifies in his Opposition Plaintifrs funds. Although Plaintiff claims in his Opposition that Defend ant had intimate access to his account (P1. s Opp n at 43). his Complaint makes no allegation that any funds were transferred to Defendant. Rather, the Complaint states that Plainti frs funds were rnisappropriated and taken by Robert (Compi. ¶ 33). Further, although Plaintiff argues that paragraph seventy-eight of the Complaint adequately alleges that Defend ant engaged in conversion, this paragraph simply states that Defendants have wrongfully converted the property of Plaintiff, specifically, the investment funds, to their own use (Id. ¶ 78). This single conciusory sentence does not state a claim for conversion against Defendant. especialI when the remainder of the Complaint makes it clear that PlaintifPs funds were controlled by Robert. Count seven of the Complaint alleges unjust enrichment. To state a claim for unjust enrichment, a plaintiff must show that defendant received a benefit and that retention of that benefit without payment would be unjust. VRG Corp. v. GKN Realty Corp., 641 A.2d 519, 526 (NJ. 1994). Further, the plaintiff must show that it expected remuneration from the defend ant at the time it performed or conferred a benefit on defendant and that the failure of remun eration enriched defendant beyond its contractual rights. j4, This claim fails for the same reason as Plaintiffs conversion claim, as Plaintiff has not alleged that Defendant received any of Plaintiffs funds. Accordingly, counts six and seven of the Complaint are dismis sed. D. Count Ten Count ten of the Complaint alleges failure to supervise. To state a claim for neglige nt supervision, a plaintiff must show that 1) the defendant employer knew or had reason to know of the particular unfitness, incompetence, or dangerous attributes of its employ ee; 2) the defendant could reasonably have foreseen that such qualities created a risk of harm to other persons; and 3) the defendant s negligence proximately caused the plaintiffs injuries. Smith v, 6 Harrah s Casino Resort of Ati. City, No. A-0855-12T2. 2013 WL 65084 06. at*3 (N.J. Super. Ct. App. Div. Dec. 13, 2013). Plaintiffs Complaint fails to state a claim for neglig ent supervision because it does not allege that Robert was the employee of Defendant, In his Opposit ion, Plaintiff asserts that his Complaint establishes control by [Defendant] over Robert Carmichael because [Defendant] is the only party alleged to be a registered broker-dealer in Plainti fPs Complaint and that therefore it is reasonable to conclude that Robert Carmichael is a representative of [Defendant] (P1. s Opp n at 46). This court fails to see how the fact that Defendant is the only broker-dealer named in the Complaint shows that Defend ant somehow had a duty to supervise Plaintiff Accordingly, count ten of the Complaint is dismissed. i CONCLUSION For the foregoing reasons, Defendant s Motion to Dismiss is granted. An appropriate order tollows this Opinion. s M. Cavanaugh, U. Date: Original: cc: January 3 1, 2014 Cierks Office Ron. James B. Clark U.S.M.J. All Counsel of Record File 7
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