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FOLKMAN v. ROSTER FINANCIAL LLC

August 16, 2005.

CHARLES H. FOLKMAN, et al., Plaintiffs,
v.
ROSTER FINANCIAL LLC, et al., Defendants. ROBERT FISHER, et al., Plaintiffs, v. ROSTER FINANCIAL LLC, et al., Defendants. EDWARD LATACZ, et al., Plaintiffs, v. ROSTER FINANCIAL LLC, et al., Defendants. JAMIE LEAFEY, et al., Plaintiffs, v. ROSTER FINANCIAL LLC, et al., Defendants. GARY SAUNDERS, et al., Plaintiffs, v. ROSTER FINANCIAL LLC, et al., Defendants.



The opinion of the court was delivered by: ROBERT KUGLER, Magistrate Judge

OPINION

This Opinion will address five identical motions to dismiss that Defendants ING Financial Partners and Locust Street Securities filed in five separate cases. The five Complaints and the current motions, including the briefs in support of and in opposition to the motions, are all identical. Thus, it is appropriate to address the motions and the Complaints collectively in this single Opinion. For the reasons that follow, the Court will not dismiss the Complaints. Rather, Plaintiffs will be ordered to replead their Complaints in a manner that conforms to this Opinion and the Federal Rules of Civil Procedure, under pain of dismissal.

I. INTRODUCTION

  Plaintiffs in this case are the Folkmans (Charles and MaryLou), the Fishers (Robert and Christine), the Lataczes (Edward and Patricia), the Leafeys (Joanne, and John Jr. along with their children Jacqueline, John III, and Jamie), and the Saunderses (Gary and Nancy). Each family filed separate but identical Complaints in the Superior Court of New Jersey, Law Division, Camden County against Roster Financial LLC, Christopher John Malmstrom, Metropolitan Life Insurance Co., MetLife Securities, Inc., ING Financial Partners, Inc., Locust Street Securities, Inc., and USAllianz Securities, Inc. The Complaints center almost entirely on the alleged fraudulent acts, statements, and omissions of Gary S. Tunnicliffe, now a convicted felon.*fn1 Defendants removed each case to federal court based on the existence of a federal question created by the allegations in each Complaint that Defendants violated several federal securities laws.

  According to the Complaints, Tunnicliffe began working for MetLife in 1996, after being terminated from the West Deptford Township Police Department. While employed by MetLife, Tunnicliffe obtained a license to sell insurance and a Series 6 license, which permits one to sell a limited group of securities products. In March of 2000, Tunnicliffe left MetLife and began working for Roster Financial and Locust Street. His employment with Locust Street, but apparently not Roster Financial,*fn2 ended in January of 2001. About that time, but possibly as early as December of 2000, Tunnicliffe began working for USAllianz. Tunnicliffe remained with USAllianz through April or May of 2003.

  At some unspecified times, Tunnicliffe offered Plaintiffs the opportunity to invest in investment products that guaranteed a higher rate of return than Plaintiffs were earning. Apparently, however, these investment products did not exist. Tunnicliffe, it appears, kept the money himself, all the while providing Plaintiffs false account statements and other forged documents. The salient allegation in the Complaints, one that pervades most of the legal theories advanced by Plaintiffs, is that all of the named Defendants failed to properly supervise and monitor Tunnicliffe's activities while he was their employee. As is now clear from Plaintiffs' briefs in opposition to the current motions, Plaintiffs also intend to proceed on theories of vicarious liability. The more specific allegations in the Complaints will be incorporated into the discussion to follow, where appropriate.

  II. STANDARD FOR 12(b)(6) MOTION

  In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept Plaintiffs' allegations along with all reasonable inferences that may be drawn from them as true. Doe v. Delie, 257 F.3d 309, 313 (3d Cir. 2001) (citing Piecknick v. Commonwealth of Pennsylvania, 36 F.3d 1250, 1255 (3d Cir. 1994)). The Court may dismiss the Complaint only if Plaintiffs can prove no set of facts that would entitle them to relief. Burstein v. Retirement Account Plan for Employees of Allegheny Health Education and Research Foundation, 334 F.3d 365, 374 (3d Cir. 2003) (citation omitted).

  III. DISCUSSION

  ING and Locust Street advance several arguments in support of their motions to dismiss Plaintiffs' Complaints. The arguments are both general and specific. There are four specific arguments. First, ING and Locust Street argue that Counts I and II fail to meet the requirements of Federal Rule of Civil Procedure 9(b) — that allegations of fraud be pled with particularity. Second, they contend that Count III fails to meet both the pleading requirements of Rule 9(b) and the pleading requirements imposed by the Private Securities Litigation Reform Act ("PSLRA"), at 15 U.S.C. §§ 78u-4(b)(1) & (b)(2). Third, they argue that Count IV does not state a claim because the allegations in that Count are based on violations of the rules of private stock exchanges, which do not give rise to a cause of action. The last specific argument of ING and Locust Street is that Count XII fails to state a claim under the New Jersey Consumer Fraud Act because securities fraud is not actionable under that statute.

  Regarding the remaining Counts in Plaintiffs' Complaints, ING and Locust Street argue that the allegations in those Counts are overly ambiguous and are therefore insufficient to meet even the liberal pleading standards of Federal Rule of Civil Procedure 8(a). Though the Court will decline to address whether the Complaints in this matter satisfy Rule 8(a), this argument by ING and Locust Street has identified a major flaw in Plaintiffs' Complaints that needs to be corrected before these cases can proceed in a meaningful way. The Court's criticisms of Plaintiffs' Complaints that will follow apply to each Count in Plaintiffs' Complaints, including Counts I, II, III, IV, and XII, which also suffer their own specific defects.

  Accordingly, the Court will address the general pleading defects that permeate the entirety of Plaintiffs' Complaints before addressing the handful of specific problems presented in Counts I, II, III, IV, and XII.

  A. General Pleading Defects in Plaintiffs' Complaints

  At Counts Five through Eleven of Plaintiffs' Complaints, ING and Locust Street lob the general criticism that they are overly vague in light of the fact that there are several distinct Defendants in this case. The Court agrees. Indeed, each Count of Plaintiffs' Complaint suffers from this defect. Plaintiffs will need ...


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