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Peter Bruni, et al. v. Oceanview Electronics

March 23, 2012

PETER BRUNI, ET AL.
v.
OCEANVIEW ELECTRONICS, INC., ET AL.



The opinion of the court was delivered by: Ludwig, J.

MEMORANDUM

This is an action for recovery of compensatory and punitive damages arising from plaintiffs' failed investments. Jurisdiction is federal question. 28 U.S.C. § 1331. The complaint, as amended, alleges that in September 2004, plaintiffs opened a brokerage account with Ryan Beck & Co. - Michael Bader was their stockbroker.*fn1 With his encouragement, plaintiffs made investments from November 2004 to March 2008 of some $400,000 in Valhalla Enterprises VEI, Inc.; and from April to July 2007 of some $200,000 in OceanView Technologies.

The amended complaint alleges that, in August 2008, defendant Michael Thern "confessed" to plaintiff Peter Bruni that defendants had stolen plaintiffs' money. It avers that plaintiffs learned only later that, through a series of "shell games" and the use of "dummy corporations," their investments had become worthless.

The following claims are set forth in the amended complaint: violations of the Securities and Exchange Act of 1934 (Count I) and the Pennsylvania Unfair Trade Practices and Consumer Protection law (Count II); conversion (Count III); fraud (Count IV); civil conspiracy (Count V); unjust enrichment (Count VI); breach of fiduciary duty (Count VII). It also requests an accounting (Count VIII).

Defendants move to dismiss the amended complaint because (1) plaintiffs' claims are not sufficiently pleaded to survive under Twombly; (2) are time-barred in light of the August 2008 Thern "confession"; and (3) are barred by issue preclusion in light of the outcome of FINRA arbitration. Defendants' motion will be denied.

Additionally, plaintiffs move for a temporary restraining order enjoining defendants from transferring or conveying any monies or property in their possession, custody or control to third parties with the exception of routine living and business expenses. Plaintiffs also move for a preliminary injunction and expedited discovery. Defendants oppose these motions: (1) the the defenses raised in the motion to dismiss; and (2) the long delay between the 2008 Thern "confession" and 2009 FINRA proceedings and the 2011 request for a TRO -all establish that plaintiffs are not in immediate danger of irreparable harm. Plaintiffs' TRO motion and their request for expedited discovery will be denied.

Defendants' Motion to Dismiss

Twombly

In deciding a motion to dismiss, a court must "'accept all factual allegations [in the complaint] as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008), quoting Pinker v. Roche Holdings Ltd, 292 F.3d 361, 374 n.7 (3d Cir. 2002). Legal conclusions may be disregarded. Walthour v. Child & Youth Services, 728 F.Supp.2d 628, 635 (E.D. Pa. 2010, citing Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). In order to survive a dismissal motion, a complaint must give the defendant fair notice of what the claim is and the grounds upon which it rests, and must contain sufficient factual matter to state a claim that is plausible on its face. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009); Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007). A motion to dismiss should not be granted "if, in view of what is alleged, it can reasonably be conceived that the plaintiffs . . . could, upon a trial, establish a case which would entitle them to relief." Twombly, 550 U.S. at 563 n.8 (citations omitted).

Here, the amended complaint, as stated in Twombly, "contains either direct or inferential allegations regarding all the material elements necessary to sustain recovery under some viable legal theory." Id. Accordingly, defendants' motion to dismiss must be denied.

Statute of Limitations

Defendants' statute of limitations defense: According to the amended complaint, in August 2008, defendant Thern broke into tears, while advising plaintiffs that the money they had invested in OceanView (Thern said there were two OceanViews) had been stolen. Amended Complaint, 75-77. Subsequently, in October 2008, plaintiffs, through counsel, contacted defendants and Michael Bader demanding recovery of their investments and commission payments. October 17, 2008 letter from Gerald Chalpin to defendants, Exhibit A to defendants' motion for extension of time to respond to complaint (docket no. 6). In January 2009, plaintiffs filed a Statement of Claim in FINRA proceedings against Michael Bader, Ryan Beck and its successor, Stiffel, Nicholaus & Company, to recover their $600,000 investment, and alleging negligence, fraud, unjust enrichment, violations of federal and state securities regulations, and violations of Pennsylvania's statutes pertaining to deceptive and unfair trade practices. Amended complaint, 90-107, 124-131; Statement of Claim, Exhibit B to defendants' motion for extension of time to respond to complaint (docket no. 6).*fn2 In December, 2010, the FINRA panel awarded plaintiffs $39,000 against Michael Bader individually, together with various interest payments, and $13,182.87 against Bader and Stiffel jointly. It denied the other claims for relief. Amended complaint, 126; FINRA award, Exhibit C to defendants' motion for extension of time to respond to complaint (docket no. 6). This action followed.

According to defendants, plaintiffs' claims for securities violations are time-bared because plaintiffs were on notice no later than Thern's August 2008 confession and this action was filed more than two years later. See 28 U.S.C. § 1658(b) ("A claim for violations of §10b of the 1934 Act may be brought not later than the earlier of - (1) two years after the discovery of the facts constituting the violation; or (2) five years after such violation.). See also In re Merck & Co, Inc. Securities, Derivative and ERISA Litigation, 543 F.3d 150, 164 (3d Cir. 2008) ("whether the plaintiffs, in the exercise of reasonable diligence, should have known of the basis for their claims depends on whether they had sufficient information of possible wrongdoing to place them on inquiry notice or to excite storm warnings of culpable activity.").

Plaintiffs respond that the amended complaint also alleges that, following Thern's confession, plaintiffs directed inquiries to Michael Bader, who assured them that Thern's representations were inaccurate. Amended complaint, ΒΆ 79 ("Michael Bader told Mr. Bruni that Thern was a 'disgruntled employee' and that his claim that there were 'two Oceanviews' was untrue."). The deception with respect to OceanView and Valhalla ...


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