DocketNumber: 11 Civ. 7107; Master File No. 1:11-2275 (SAS)
Citation Numbers: 853 F. Supp. 2d 441
Judges: Scheindlin
Filed Date: 4/3/2012
Status: Precedential
Modified Date: 11/26/2022
OPINION AND ORDER
I. INTRODUCTION
This putative class action, which concerns both federal securities claims and state law claims, is part of a larger multidistrict litigation. It arises out of plaintiffs’ investments in the various Stillwater Funds
II. BACKGROUND
A. Plaintiffs
The proposed class consists of all investors in the SCP Funds, those who sought to redeem their investments in the SCP Funds, and those who received restricted, unregistered Gerova shares as part of the SCP/Gerova merger.
B. Defendants
There are ten named defendants in this action. Gerova was a “blank check company” formerly known as Asia Special Situation Acquisition Corporation (“ASSAC”), which was formed in March 2007.
SCP, DE is a limited liability company that is the general partner of the Delaware Funds.
Gary Hirst was a founding director of Gerova and was appointed its president in October 2007; he resigned in February 2011, but is currently serving as a Gerova director.
C. Stillwater Funds Management and the Gerova Merger
Plaintiffs were investors in the Stillwater Funds, many of whom were unable to redeem their investments due to the Funds’ liquidity problems.
D. Allegedly False and Misleading Statements
Gerova’s merger with SCP was part of a group of transactions including Gerova’s acquisition of an 81.5% interest in Amalphis and the assets and investments held by Wimbledon.
Plaintiffs claim that the Amalphis transaction was a related-party transaction because the party from which Gerova acquired Amalphis was Rineon, “an inactive holding company” that was acquired by the investment fund Intigy Absolute Return (“Intigy”).
Plaintiffs also claim that the Wimbledon transaction was a related-party transaction because Gerova acquired it from Weston Capital Asset Management, LLC (“Weston”), which was owned by Fund.com.
Finally, plaintiffs allege that the proxy statement failed to disclose three conflicts of interest: (1) that SCP, DE was owed $17 million in management fees; (2) that Gerova agreed to pay this obligation; and (3) that SCP, NY’s management contracts were “substantially better” than their premerger contracts, because the net asset value from which SCP’s performance fees would be measured was reset.
E. Gerova’s Collapse
Following the January 2010 transactions, Gerova’s “public float”
Even though Gerova’s ordinary share trading volume was low in the beginning of 2010, on June 25, 2010 share volume spiked to almost 1.4 million shares for the day, far in excess of the 300,000 shares outstanding in mid-February.
After the publication of the “Dalrymple Report” by a short-seller firm on January 10, 2011, which “detailed an array of related party transactions, ... insiders’ relationships ..., and questioned the valuation of Gerova’s assets,”
Between January 2010 and February 15, 2011, Gerova experienced high management turnover, including three different CEOs during that time.
III. LEGAL STANDARDS
A. Motion to Dismiss
In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court “accept[s] all factual allegations in the complaint as true, and draw[s] all reasonable inferences in the plaintiffs favor.”
“In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint.”
B. Choice of Law
Under New York choice-of-law rules, courts first determine whether there is a substantive conflict between the laws of the relevant choices.
1. Internal Affairs Doctrine
New York follows the internal affairs doctrine, which generally requires that “questions relating to the internal affairs of corporations are decided in accordance with the law of the place of incorporation.”
IV. APPLICABLE LAW
A. Service of Process
Federal Rule of Civil Procedure 4 sets forth the rules applicable to service of process. Rule 4(e) provides that, absent a waiver, an individual defendant must be served by:
(1) following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made; or
(2) doing any of the following:
(A) delivering a copy of the summons and of the complaint to the individual personally;
(B) leaving a copy of each at the individual’s dwelling or usual place of abode with someone of suitable age and discretion who resides there; or
(C) delivering a copy of each to an agent authorized by appointment or by law to receive service of process.77
“Where a defendant contests personal jurisdiction based on improper service of process, the plaintiff bears the burden of proving adequate service.”
B. Scope of Section 14(a)
Section 14(a) of the Exchange Act makes it “unlawful for any person, by use of the mails ... or otherwise ... to solicit or permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 12 of this title.”
However, not all issuers are subject to Section 14(a). For instance, 14(a) does not apply to foreign private issuers
any foreign issuer other than a foreign government except an issuer meeting the following conditions:
(1) More than 50 percent of the issuer’s outstanding voting securities are directly or indirectly held of record by residents of the United States; and
(2) Any of the following:
(i) The majority of the executive officers or directors are United States citizens or residents;
(ii) More than 50 percent of the assets of the issuer are located in the United States; or
(iii) The business of the issuer is administered principally in the United States.
C. Section 10(b) and Rule 10b-5 of the Securities Exchange Act
Section 10(b) of the Securities Exchange Act of 1934 makes it illegal to “use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe____”
1. Misstatements or Omissions of Material Fact
In order to satisfactorily allege misstatements or omissions of material fact, a complaint must “state with particularity the specific facts in support of [plaintiffs’] belief that [defendants’] statements were false when made.”
“ ‘[A] fact is to be considered material if there is a substantial likelihood that a reasonable person would consider it important
2. Scienter
A plaintiff may plead scienter by “alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness.”
“ ‘Where motive is not apparent, it is still possible to plead scienter by identifying circumstances indicating conscious behavior by the defendant, though the strength of the circumstantial allegations must be correspondingly greater.’ ”
3. Causation
“A securities fraud plaintiff is required to ‘prove both transaction causation (also known as reliance) and loss causation.’ ”
D. Control Person Liability Under Section 20(a) of the Exchange Act
“To establish a prima facie case of control person liability, a plaintiff must show (1) a primary violation by the controlled person, (2) control of the primary violator by the defendant, and (3) that the defendant was, in some meaningful sense, a culpable participant in the controlled person’s fraud.”
E. Breach of Fiduciary Duty Claims
Under New York law, “[t]he elements of a claim for breach of a fiduciary obligation are: (i) the existence of a fiduciary duty; (ii) a knowing breach of that duty; and (iii) damages resulting therefrom.”
F. Aiding and Abetting Breach of Fiduciary Duty
“A claim for aiding and abetting a breach of fiduciary duty [under New York law] requires: (1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated
I. SLUSA Preclusion
“SLUSA was enacted in 1998 to prevent class action plaintiffs from circumventing the heightened pleading requirements under the [Private Securities Litigation Reform Act] through artful pleading.”
No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging (A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or (B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.113
A complaint triggers SLUSA when it alleges “ ‘(1) an explicit claim of fraud or misrepresentation (e.g., common law fraud, negligent misrepresentations, or fraudulent inducement), or (2) other garden-variety state law claims that sound in fraud.’ ”
To qualify as a covered class action, the suit must be one in which “damages are sought on behalf of more than fifty persons or prospective class members.”
However, an action is not precluded by SLUSA “if a communication or recommendation is made by the issuer to shareholders with respect to the sale of securities and concerns decisions regarding voting securities, exercising appraisal rights or acting in response to an exchange.”
(3) Preservation of certain actions.
(A) Actions under State law of State of incorporation.
(i) Actions preserved ... a covered class action described in clause (ii) of this subparagraph that is based upon the statutory or common law of the State in which the issuer is incorpo*456 rated ... or organized ... may be maintained in a State or Federal court by a private party.
(ii) Permissible actions. A covered class action is described in this clause if it involves ...
(II) any recommendation, position, or other communication with respect to the sale of securities of an issuer that(aa) is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and
(bb) concerns decisions of such equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters’ or appraisal rights.119
V. DISCUSSION
A. Service of Process
Hirst claims that “[p]laintiffs ... waited approximately 181 days before they began to attempt to serve [him] with the complaint.”
Hirst contends that he has not resided in Florida since May 2011. The Second Circuit has recognized that “[i]n a highly mobile and affluent society, it is unrealistic to interpret Rule 4(d)(1) so that the person to be served has only one dwelling house or usual place of abode at which process may be left.”
B. Section 14(a)
Whether Gerova is a foreign private issuer impacts plaintiffs’ 14(a) claim because foreign private issuers are not subject to 14(a) liability.
In addition to the fact that the SEC was sufficiently satisfied with Gerova’s response that it completed its review of Gerova and did “not have any further comments,”
Plaintiffs’ 14(a) claim as pleaded against SCP fares no better. As SCP states, “[p]laintiffs do not allege — because they cannot — that their interests in the Stillwater Funds were subject to Section 12 of
Plaintiffs cite Wilson v. Great American Industries, Inc. for the proposition that even where a proxy is not required, “when defendants choose to issue a proxy plaintiffs have a right to a truthful one.”
C. Section 10(b) and Rule 10b-5 of the Securities Exchange Act
1. SCP and SCP Principal Liability
The proxy solicitation at issue was sent by SCP to the plaintiffs in order to obtain their votes to approve the SCP/Gerova merger and was signed by Doueck and Rudy.
SCP claims that these omissions were not material because the $17 million in management fees were due and had a right to be collected absent the Gerova merger.
SCP contends that the plaintiffs do not ascribe any motive to SCP for withholding information with the intent of inducing the plaintiffs to vote in favor of the merger.
Because SCP does not argue a lack of reliance, the only element left for plaintiffs to establish is loss causation. Plaintiffs assert that loss causation is shown by the fact that once the Dalrymple Report was released — which contained allegations of the same relatedness and management fees that plaintiffs complain of as having been omitted from the proxy statement
2. Gerova and Gerova Officers’ Liability
Gerova contends that it cannot be held liable under Section 10(b) because any misstatements or omissions of related parties in the proxy statement were not made by Gerova.
Gerova officers Hirst, Hlavsa, and Nag argue that they are not liable under 10(b) because none of the alleged misstatements or omissions were attributed to them.
Gerova contends that plaintiffs failed to plead scienter sufficiently. Plaintiffs, in turn, point to Gerova’s strong desire to effectuate the SCP/Gerova merger in order to receive the nearly $650 million SCP assets. The Amended Complaint pleads the following facts as the basis for plaintiffs’ allegations of scienter: (1) the various omissions in the memorandum Gerova made with reckless, if not knowing, disregard for the truth; (2) the resignations and deferred appointments of seven officers and directors and the replacement of its entire board of directors except Hirst;
Gerova only contests reliance with respect to the holders of the Cayman Island
For the same reason that loss causation was satisfied concerning SCP, it is also satisfied with regard to Gerova — once the Dalrymple Report was released, which contained allegations of the same relatedness and management fees that plaintiffs complain of as having been omitted from the proxy statement,
D. Section 20(a)
Plaintiffs assert control person liability claims under Section 20(a) of the Exchange Act against the individual defendants: Doueck, Rudy, Hirst, van Roon, Hlavsa, Laslop, and Nag. “While a party cannot be held liable for both a primary violation and as a control person, alternative theories of liability are permissible at the pleading stage.”
E. Breach of Fiduciary Duty
Counts IV-VT concern plaintiffs’ breach of fiduciary claims against SCP and the SCP principals.
Count V (breach of duty of loyalty by inducing plaintiffs to exchange their investments for shares in Gerova) and Count VI (breach of duty of candor by providing a false and misleading proxy solicitation to plaintiffs) survive SCP’s motions to dismiss. SCP sets forth two arguments in support of dismissing Counts V and VI: (1) that they are preempted by the Martin Act and (2) that they are duplica
F. Aiding and Abetting Breach of Fiduciary Duty
Count VII alleges that Gerova substantially assisted SCP’s breaches of fiduciary duty by negotiating and finalizing the January 2010 transaction even though it knew that SCP had not performed due diligence.
Although plaintiffs concede that the elements of SLUSA preclusion are met by this claim, they assert that the claim is preserved by the “Delaware carve-out” exception.
VI. CONCLUSION
For the foregoing reasons, Counts I, IV, and VII are dismissed and Counts II, III, V, and VI survive defendants’ motions to dismiss. The Clerk of the Court is directed to close these motions [Docket Nos. 103, 106, 109,112],
SO ORDERED.
. The funds are in two groups, the Delaware Funds and the Offshore Funds. Plaintiffs list the Delaware Funds as: a) Stillwater Asset Backed Fund, LP; b) Stillwater Asset Backed
. Defendant Stillwater is comprised of Still-water Capital Partners, LLC (“SCP, DE”), the general partner of the Delaware Funds, and Stillwater Capital Partners, Inc. ("SCP, NY”), the investment manager of the Delaware and Offshore Funds. See id. ¶¶ 58, 60. I refer to them collectively as "SCP.”
. Unless otherwise noted, all facts are drawn from the Amended Complaint and are presumed true for the purposes of this motion.
. See id. ¶ 1. SCP argues that some of the plaintiffs lack standing to bring these claims because they sought redemption of their SCP investments prior to the merger and/or were investors in the Cayman Funds and therefore not entitled to a vote regarding the merger. See Memorandum of Law in Support of the Motion to Dismiss of the Stillwater Defendants ("SCP Mem.”) at 6. However, it is not clear from the Amended Complaint that the named plaintiffs sought redemption of all of their investments or were solely investors in the Cayman Funds. These factual issues should be resolved as part of the class certification motion, not at the motion to dismiss stage. See Cohen v. Gerson Lehrman Grp., Inc., 686 F.Supp.2d 317, 324 (S.D.N.Y.2010) (contention that "plaintiff [was] an inadequate class representative” was inappropriate at motion to dismiss stage); Andrade v. JP Morgan Chase Bank, N.A., No. 08 Civ. 3703, 2009 WL 2899874, at *4 (E.D.N.Y. Sept. 4, 2009) ("[w]hether [p]Iaintiff can meet her burden with respect to 'commonality,’ 'typicality,' and the other requirements of Rule 23 is a question that must await a motion seeking class certification.”).
. See Am. Compl. ¶ 4. A blank check company is "a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company, or companies, other entity or person.” 17 C. F.R. § 230.419.
. See Am. Compl. ¶ 51.
. See id. ¶ 204, 224, 261.
. See id. ¶ 58.
. See id. ¶ 60.
. See id. ¶¶ 204, 224, 238, 246, 254.
. See id. ¶ 52.
. Id. ¶ 53. Van Roon has failed to enter an appearance.
. See id. ¶ 54.
. See id. ¶ 55. Laslop has failed to enter an appearance.
. See id. ¶ 56.
. Id.
. See id. ¶ 61.
. See id. ¶ 62.
. See id. ¶¶ 206, 218, 231.
. See id. ¶¶ 238, 246, 254.
. See id. ¶ 77.
. See id. ¶ 79.
. Id. ¶¶ 39-40.
. Id. ¶ 80.
. See Consent Solicitation Letter, Ex. 1 to 12/21/11 Declaration of Jonathan Home, counsel to plaintiffs, in Opposition to Defendants' Motions to Dismiss ("Horne Decl.”) at 1.
. See id. at 19.
. See Gerova Financial Group, Ltd.’s Memorandum of Law in Support of Its Motion to Dismiss Amended Class Action Complaint ("Gerova Mem.”) at 4.
. See Am. Compl. ¶ 119. The Gerova proxy disclosed the adjustment of SCP’s net asset value and contained adjusted net asset values for SCP and Wimbledon. See id.
. See id. ¶ 82. Gerova also sought to acquire Northstar, but that acquisition did not close. See id. These transactions are referred to throughout as the "January 2010 transactions.”
. Id. ¶ 83.
. Id. ¶ 93.
. See id.
. Id. ¶ 95.
. See id. ¶ 96.
. Id. ¶99.
. See id. ¶ 102.
. Id. ¶ 103.
. See id. ¶ 104.
. See id. ¶¶ 102, 105. The Amended Complaint twice refers to Bianco as a “defendant,” but he does not appear to have been named or served in this case. See id. ¶¶ 102, 105.
. See id. ¶ 106.
. See id. ¶¶ 97-98.
. See id. ¶ 107.
. Id. ¶ 108.
. See id. ¶¶ 113-114.
. "The securities held by persons other than affiliates of the issuer.” 1A Going Public Corp. § 5:80 (quotation marks omitted).
. See Am. Compl. ¶ 136.
. See Plaintiffs’ Omnibus Memorandum of Law in Opposition to Defendants’ Motions to Dismiss ("PL Opp.”) at 8.
. Id.
. See Am. Compl. ¶ 150.
. Id. ¶ 151.
. See id. ¶ 140.
. See id-¶ 141.
. Id. ¶ 143.
. Id. ¶ 154.
. See id. ¶¶ 154, 161.
. See id. ¶¶ 162, 164.
. See id. ¶ 164.
. See id. ¶¶ 124-125, 127, 128.
. See id. ¶ 168.
. See id. ¶ 169.
. Wilson v. Merrill Lynch & Co., 671 F.3d 120, 128 (2d Cir.2011) (quotation marks omitted).
. 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009).
. Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir.2010) (quoting Iqbal, 129 S.Ct. at 1950). Accord Ruston v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 59 (2d Cir.2010).
. Id. ¶ 165.
. Iqbal, 129 S.Ct. at 1949 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
. Id. at 1950. Accord Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 124 (2d Cir.2010).
. Twombly, 550 U.S. at 564, 127 S.Ct. 1955.
. Iqbal, 129 S.Ct. at 1949 (quotation marks omitted).
. Id. (quotation marks omitted).
. DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 111 (2d Cir.2010) (citing Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.2002)).
. Id. (quoting Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir.2006)). Accord Global Network Commc’ns, Inc. v. City of NY., 458 F.3d 150, 156 (2d Cir.2006).
. ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007).
. See GlobalNet Financial.Com, Inc. v. Frank Crystal & Co., 449 F.3d 377, 382 (2d Cir.2006) (“The New York Court of Appeals has held that 'the first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved.’ ”) (quoting In re Allstate Ins. Co. (Stolarz-New Jersey Mfrs. Ins. Co.), 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 613 N.E.2d 936 (1993)).
. International Bus. Machs. Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir.2004).
. Scottish Air Int’l, Inc. v. British Caledonian Group, PLC, 81 F.3d 1224, 1234 (2d Cir.1996) (citations omitted). Accord City of Sterling Heights Police & Fire Ret. Sys. v. Abbey Nat., PLC, 423 F.Supp.2d 348, 363 (S.D.N.Y.2006).
. Edgar v. MITE Corp., 457 U.S. 624, 645, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982). Accord Restatement (Second) of Conflict of Laws § 302 cmt. e ("Uniform treatment of directors, officers and shareholders is an important objective which can only be attained by having the rights and liabilities of those persons with respect to the corporation governed by a single law.”).
. Fed.R.Civ.P. 4(e).
. DeMott v. Bacilious, No. 11 Civ. 6966, 2012 WL 601074, at *3 (S.D.N.Y. Feb. 24, 2012).
. Weston Funding, LLC v. Consorcio G Grupo Dina, S.A. de C.V., 451 F.Supp.2d 585, 589 (S.D.N.Y.2006) (quotation marks omitted).
. Zapata v. City of New York, 502 F.3d 192, 196 (2d Cir.2007).
. 15 U.S.C. § 78n(a).
. In re Bank of Am. Corp. Secs., Derivatives, & "ERISA" Litig., 757 F.Supp.2d 260, 290 (S.D.N.Y.2010) (quoting Mendell v. Greenberg, 927 F.2d 667, 674 (2d Cir.1990)).
. See 17 C.F.R. § 240.3al2-3b ("Securities registered by a foreign private issuer, as defined in Rule 3b-4 ..., shall be exempt from sections 14(a), 14(b), 14(c), 14(f) and 16 of the Act.”). See also Schiller v. Tower Semiconductor Ltd., 449 F.3d 286, 291 (2d Cir.2006) ("The rule exempting foreign private issuers from § 14(a) is nearly as old as § 14(a) itself.”).
. See Republic Tech. Fund, Inc. v. Lionel Corp., 483 F.2d 540, 545 (2d Cir.1973) (no liability for proxy-rule violations where the "proxies were not solicited in respect of any security ... registered pursuant to Section 12 of the Act”) (quotation marks omitted).
. 15 U.S.C. § 78j(b).
. 17 C.F.R. § 240.10b-5.
. Ashland Inc. v. Morgan Stanley & Co., Inc., 652 F.3d 333, 337 (2d Cir.2011) (quoting Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008)). Accord Erica P. John Fund, Inc. v. Halliburton Co., — U.S. —, 131 S.Ct. 2179, 2184, 180 L.Ed.2d 24 (2011).
. Rombach v. Chang, 355 F.3d 164, 172 (2d Cir.2004) (quotation marks omitted).
. Janus Capital Grp., Inc. v. First Derivative Traders, — U.S. —, 131 S.Ct. 2296, 2302, 180 L.Ed.2d 166(2011).
. Id.
. Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86, 92-93 (2d Cir.2010) (quoting Azrielli v. Cohen Law Offices, 21 F.3d 512, 518 (2d Cir.1994)).
. Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir.2000) (citation omitted).
. Id. (citation omitted). Accord Rothman v. Gregor, 220 F.3d 81, 90 (2d Cir.2000).
. ATSI, 493 F.3d at 99 (citing Ganino v. Citizens Util. Co., 228 F.3d 154, 168-69 (2d Cir.2000)). Accord Dandong v. Pinnacle Performance Ltd., No. 10 Civ. 8086, 2011 WL 5170293, at *11 (S.D.N.Y. Oct. 31, 2011) (quoting Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir.2006)).
. Kalnit v. Eichler, 264 F.3d 131, 139 (2d Cir.2001) (quoting Novak, 216 F.3d at 307).
. Id. Accord ECA & Local 134 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 198 (2d Cir.2009).
. Kalnit, 264 F.3d at 142 (quoting Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir.1987)). Accord South Cherry St., LLC v. Hennessee Grp. LLC, 573 F.3d 98, 109 (2d Cir.2009); In re Novagold Res. Inc. Secs. Litig., 629 F.Supp.2d 272, 297 (S.D.N.Y.2009) (quoting ECA, 553 F.3d at 198-99).
. South Cherry St., 573 F.3d at 109 (quotation marks and emphasis omitted). Accord ECA, 553 F.3d at 203.
. In re Gildan Activewear, Inc. Secs. Litig., 636 F.Supp.2d 261, 272 (S.D.N.Y.2009) (quotation marks and citation omitted).
. Wilamowsky v. Take-Two Interactive Software, Inc., 818 F.Supp.2d 744, 751 (S.D.N.Y.2011) (quoting ATSI, 493 F.3d at 106).
. ATSI, 493 F.3d at 106-07 (citing Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 346, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005); Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 172 (2d Cir.2005)). Accord Lattanzio v. Deloitte & Touche LLP, 476 F.3d 147, 157 (2d Cir.2007); Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189, 197 (2d Cir.2003).
. In re Omnicom Grp., Inc. Secs. Litig., 597 F.3d 501, 513 (2d Cir.2010) (quoting Lentell, 396 F.3d at 173) (emphasis in original).
. Lentell, 396 F.3d at 175.
. ATSI, 493 F.3d at 108 (citing S.E.C. v. First Jersey Secs., Inc., 101 F.3d 1450, 1472 (2d Cir.1996)).
. In re Parmalat Secs. Litig., 414 F.Supp.2d 428, 440 (S.D.N.Y.2006).
. In re Scottish Re Grp. Secs. Litig., 524 F.Supp.2d 370, 386 (S.D.N.Y.2007) (quoting In re Converium Holding AG Secs. Litig., No. 04 Civ. 7897, 2006 WL 3804619, at *14 (S.D.N.Y. Dec. 28, 2006)).
. In re American Int'l Grp., 741 F.Supp.2d 511, 534-35 (S.D.N.Y.2010) (citing Police & Fire Ret. Sys. of City of Detroit v. SafeNet, Inc., 645 F.Supp.2d 210, 241 (S.D.N.Y.2009)).
. Johnson v. Nextel Commc'ns, Inc., 660 F.3d 131, 138 (2d Cir.2011) (citing Barrett v. Freifeld, 64 A.D.3d 736, 883 N.Y.S.2d 305, 308 (2d Dep’t 2009)).
. Marino v. Grupo Mundial Tenedora, S.A., 810 F.Supp.2d 601, 607 (S.D.N.Y.2011) (citing Heller v. Kieman, No. Civ. A. 1484-K, 2002 WL 385545, at *3 (Del.Ch. Feb. 27, 2002), aff'd, 806 A.2d 164 (Del.2002)).
. Kaufman v. Cohen, 307 A.D.2d 113, 760 N.Y.S.2d 157, 169 (1st Dep't 2003). Accord In re Sharp Int'l Corp., 403 F.3d 43, 49 (2d Cir.2005).
. "SLUSA is a statute of preclusion, rather than preemption,” because it does not "displace state law with federal law. Rather, SLUSA renders nonactionable[,] state claims brought by plaintiffs as part of a covered class action because such claims cannot be litigated in state court or federal court.” Romano v. Kazacos, 609 F.3d 512, 519, n. 2 (2d Cir.2010) (emphasis in original) (citing Kircher v. Putnam Funds Trust, 547 U.S. 633, 637, n. 1, 126 S.Ct. 2145, 165 L.Ed.2d 92 (2006)).
. In re Beacon Assocs. Litig., 745 F.Supp.2d 386, 429 (S.D.N.Y.2010) (citing Ring v. AXA Fin., Inc., 483 F.3d 95, 97-98 (2d Cir.2007)).
. 15 U.S.C. § 78bb(f)(l)(A).
. In re Merkin, 817 F.Supp.2d 346, 359 (S.D.N.Y.2011) (quoting Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F.Supp.2d 258, 261 (S.D.N.Y.2004)).
. 15 U.S.C. § 78bb(f)(5)(B).
. See id. § 78bb(f)(l)(A).
. Romano, 609 F.3d at 520 n. 3 (quoting 15 U.S.C. § 77r(b)).
. Fisher v. Kanas, 487 F.Supp.2d 270, 280 (E.D.N.Y.2007).
. 15 U.S.C. § 78bb. This provision is known as the "Delaware carveout."
. Memorandum of Law in Support of Defendant Gary T. Hirst’s Motion to Dismiss the Amended Complaint ("Hirst Mem.”) at 21.
. See Affidavits of Due Diligence, Service, and Non Service, Ex. I to 12/7/11 Declaration of Joshua S. Sohn, counsel to Gary T. Hirst, in Support of Hirst’s Motion to Dismiss ("Sohn Dec!.”).
. See id. (253 Saddleworth Place, Lake Maty, FL).
. See id. (257 Saddleworth Place, Lake Mary, FL).
. Jaffe & Asher v. Van Brunt, 158 F.R.D. 278, 280 (S.D.N.Y.1994). Cf. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950).
. National Dev. Co. v. Triad Holding Corp., 930 F.2d 253, 257 (2d Cir.1991) (quotation marks omitted).
. See Certificate of Service, Ex. J to Sohn Deck at 1.
. See Fed.R.Civ.P. 4(m) ("If a defendant is not served within 120 days after the complaint is filed, the court ... must dismiss the action without prejudice against that defendant or order that service be made within a specified time.”). Because service of the
. See Affidavit of Service, Ex. E to 12/7/11 Declaration of Dan C. Kozusko, counsel to Tore Nag, in Support of Nag's Motion to Dismiss (“Kozusko Decl.”).
. See Certificate of Service, Ex. F to Kozusko Decl.
. Jaffe & Asher, 158 F.R.D. at 280.
. See 17 C.F.R. § 240.3al2-3b ("Securities registered by a foreign private issuer, as defined in Rule 3b-4 ..., shall be exempt from sections 14(a), 14(b), 14(c), 14(f) and 16 of the Act.”).
. See Am. Compl. ¶ 51.
. See id. ¶ 70.
. 11/18/10 Letter from SEC to Michael Hlavsa, CFO, Gerova Financial Group, Ltd.
. See PL Opp. at 46.
. SCP Mem. at 17.
. PI. Opp. at 43.
. 979 F.2d 924, 931 (2d Cir.1992).
. See Republic Tech. Fund, 483 F.2d at 545 ("claimed violation of the proxy rules must fail because proxies were not solicited in respect of any security ... registered pursuant to Section 12”) (quotation marks omitted).
. See Consent Solicitation Letter.
. See Am. Compl. ¶¶ 92 (Amalphis transaction), 101 (Wimbledon transaction).
. See id. ¶¶ 113.
. Id. ¶ 114.
. SCP Mem. at 11-12. Defendants do not argue that the statements fail to meet the "in connection with” requirement of Section 10(b). Because the proxy statement sought plaintiffs’ approval of a merger through which they would receive Gerova securities, and interests acquired through mergers are considered securities, the "in connection with the purchase or sale of any security” requirement has been met. See, e.g., SEC v. National Secs. Inc., 393 U.S. 453, 467, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969) (holding shareholders "purchase” shares in the new entity by exchanging them for their old stock when merger occurs), abrogated on other grounds by United States Dep’t of Treasury v. Fabe, 508 U.S. 491, 507, 113 S.Ct. 2202, 124 L.Ed.2d 449 (1993); Madden v. Cowen & Co., 576 F.3d 957, 966 (9th Cir.2009) (construing the phrase “purchase or sale” of securities to include a stock-for-stock merger).
. SCP Mem. at 12.
. See PI. Opp. at 37.
. See SCP Mem. at 14.
. Kalnit, 264 F.3d at 139 (quotation marks omitted).
. See Am. Compl. ¶ 30 ("Doueck admitted to certain other plaintiffs that he had not performed due diligence on Gerova or its principals prior to the Share Exchange.").
. S.E.C. v. Tecumseh Holdings Corp., 765 F.Supp.2d 340, 350 (S.D.N.Y.2011) (quoting South Cherry St., 573 F.3d at 109).
. See Am. Compl. ¶ 154.
. PL Opp. at 38.
. Castellano v. Young & Rubicam, Inc., 257 F.3d 171, 187 (2d Cir.2001) (quoting Suez Equity Investors v. Toronto-Dominion Bank, 250 F.3d 87, 97-98 (2d Cir.2001)).
. See Gerova Mem. at 11.
. Am. Compl. ¶ 80.
. See Consent Solicitation Letter, at 1, 17.
. See Janus, 131 S.Ct. at 2302 ("For purposes of Rule 10b-5, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.”).
. See id. ("attribution within a statement or implicit from surrounding circumstances is strong evidence that a statement was made by ... the party to whom it is attributed”).
. See Hirst Mem. at 13; Nag Mem. at 5-6.
. PL Opp. at 25.
. S.E.C. v. Landberg, 836 F.Supp.2d 148, 153 (S.D.N.Y.2011) (quotation marks omitted) (finding circumstances supporting attribution of fraudulent financial statements and marketing materials to the defendant in his role as CFO).
. See Janus, 131 S.Ct. at 2300.
. See Am. Compl. ¶¶ 124-130.
. See id. ¶ 99.
. See id. ¶ 150.
. Novak, 216 F.3d at 308 (quotation marks omitted).
. See Gerova Mem. at 18.
. See Am. Compl. ¶ 154.
. In re American Int’l Grp., 741 F.Supp.2d at 534-35 (citing Police & Fire Ret. Sys. of City of Detroit, 645 F.Supp.2d at 241).
. See Am. Compl. ¶ 87.
. In re Optimal U.S. Litig., 813 F.Supp.2d 351, 377-78 (S.D.N.Y.2011) (quoting San Diego Cnty. Emps. Ret. Ass’n v. Maounis, 749 F. Supp.2d 104, 127 (S.D.N.Y.2010)); Saltz v. First Frontier, LP, 782 F.Supp.2d 61, 79 (S.D.N.Y.2010) (claims “based on [] alleged mismanagement ... through the failure to conduct adequate due diligence ... is a paradigmatic derivative claim”) (quotation marks omitted) (applying Delaware law).
. See 18 N.Y.3d 341, 348, 939 N.Y.S.2d 274, 962 N.E.2d 765 (2011) ("common-law causes of action for breach of fiduciary duty and gross negligence ... are not preempted" by the Martin Act).
. See Am. Compl. ¶ 262.
. See Scottish Airlnt'l, 81 F.3d at 1234.
. In their opposition brief, plaintiffs appear to contend that SCP, rather than Gerova, was the issuer. However, this contention lacks any factual support.
. See PL Opp. at 52-53.
. See 15 U.S.C. § 78bb(f)(3)(A)(i). See also Lalondriz v. USA Networks, Inc., 54 F.Supp.2d 352, 354 (S.D.N.Y.1999) (not precluded by SLUSA because claim was for breach of fiduciary duty under the common law of Delaware, the state in which [the issuer was] incorporated).