As discussed previously, plaintiff has adequately alleged a primary securities fraud violation by Citizens. Thus, the first element is satisfied. The second element refers to the scienter issue. Again, scienter can be pleaded generally, so plaintiffs have satisfied this requirement. The third element is satisfied because plaintiff alleges that Coopers knowingly certified a fraudulent financial statement.
Thus, plaintiffs have stated a claim of securities fraud through aiding and abetting against Coopers.
I now turn to the state law claims.
C. State Law Claims
The Citizens do not raise any separatea arguments for why the state law claims should be dismissed. Coopers, however, does. Since I have determined that the federal claims should not be dismissed, Coopers' argument that there is no pendent jurisdiction over the state claims is simply wrong.
Coopers further argues that plaintiffs' state law claim of fraud should be dismissed for failure to specifically allege reliance on the Coopers audit; and plaintiffs' state law claim of negligent misrepresentation should be dismissed because public investors in the marketplace do not have standing to assert such a claim. I address these in turn.
Coopers is correct that plaintiffs do not allege specific reliance on the Coopers 1989 annual financial statements which Coopers audited. The whole tenor of the complaint, however, clearly implies that plaintiffs relied on the assurances in the financial statements. while I could dismiss this portion of the complaint without prejudice, it is wasteful and inefficient to engage in that formalistic practice, particularly when plaintiffs have stated that they are willing to amend the complaint to state specific reliance.
2. Negligent Misrepresentation
Coopers finally contends that under Rosenblum v. Adler, 93 N.J. 324, 461 A.2d 138 (1983), public investors in the marketplace do not have standing to sue under a common law negligent misrepresentation theory.
I disagree. As interpreted by the Third Circuit:
Rosenblum takes an expansive view of the range of permissible plaintiffs in a negligent misrepresentation action. It explicitly rejects the majority view that the plaintiff must be in privity, and adopts the more inclusive "reasonably foreseeable plaintiff" rule.
In the wake of such statements in Rosenblum, the Court of Appeals explicitly held that the state court decision did not limit foreseeable plaintiffs to those who invest for a "business purpose."
There is no dispute here that the average investor was a reasonably foreseeable recipient of defendants' statements . . . . Moreover, the court looked to the expansive liability under the federal securities laws as a model for New Jersey law . . . Therefore, it is not accurate to say that Rosenblum's "business purpose" requirement limits the cause of action to those who make "significant" investors.
Shapiro at 42.
Thus, I decline to dismiss plaintiffs state law complaints on either of the grounds offered by Coopers.
For the reasons detailed above, defendants' motions to dismiss the complaint are denied in their entirety.