United States District Court, N.D. Illinois
April 14, 2004.
SAMUELSON TRADING CORP., Plaintiff,
SAMUEL D. WAKSAL, Defendant
The opinion of the court was delivered by: JAMES ZAGEL, District Judge
MEMORANDUM OPINION AND ORDER
This lawsuit arises out of Defendant Samuel Waksal's allegedly improper
purchase of ImClone put options from Plaintiff Samuelson Trading Corp.
("Samuelson"). In Counts T-1II of its Complaint, Samuelson alleges that
Waksal willfully and intentionally violated Section 10(b), Rule 10b-5,
and Section 20A of the Securities Exchange Act of 1934. Waksal now moves
to dismiss Count II of the Complaint in its entirety and/or certain
portions of Count I and IT, pursuant to Fed. R, Civ. P. 12(b)(6), and for
a more definite statement as to Count III, pursuant to Fed.R.Civ.P. 12(e)
I. Rule 12(b)(6)
A motion to dismiss under Rule 12(b)(6) is proper where it appears
beyond doubt that the plaintiff can prove no set of facts in support of
his claim, which would entitle him to relief. Conley v. Gibson,
355 U.S. 41, 45-46 (1957). In reviewing a motion to dismiss, the court
must construe all allegations in the complaint in the light most
favorable to the plaintiff and accept all well-pled facts and allegations
as true. Bontkowski v. First Nat'l Bank, 998 F.2d 459, 461 (7th Cir.
1993). Waksal moves to dismiss Count II on the grounds that a plaintiff may
not, in the alternative, seek damages against a defendant under Section
10b/Rule 10b-5 and Section 20A, Count I seeks damages for Samuelson's
sale of 110 ImClone put options to Waksal, in violation of Section 10(b)
and Rule 10b-5, and Count II seeks damages for Samuelson's
contemporaneous sale of ImClone put options to persons other than
Waksal, in violation of Section 20A, Waksal relies on Fujisawa Pharm.
Co. v. Kapoor, 115 F.3d 1332, 1337 (7th Cir. 1997) to support the
proposition that a plaintiff may not simultaneously maintain a Section
10b/Rule 10b-5 and a Section 20A claim against a single defendant,
In Fujisawa, the Court found that a cause of action under Section 20A
applied only where the contemporaneous trading was done with a party other
than the defendant. Id. To find otherwise, the Court reasoned, would
allow the plaintiff two causes of action for the same violation. Id.
Since the plaintiff in Fujisawa had only traded with the defendant, the
Court found that a Section 20A claim could not be used alternatively with
a Section 10(b) claim. Id. In this case, unlike Fujiaawa, the put option
sales on which Samuelson bases its Section 20A claim are independent of
the put option sales made by the defendant. Since Samuelson made
contemporaneous sales of ImClone put options to persons other than
Waksal, I find it may properly assert both a Section 10(b)/Rule 10b-5 and
a Section 20A claim against Waksal.
Waksal also moves to dismiss any portion of Count I or Count II related
to trades made by Samuelson on December 27, 2001. Waksal argues that
neither Rule 10b-5 nor Section 20A allows recovery for trading activity
engaged in before the date he allegedly traded on material, non-public
information. While this may be true, Samuelson does allege that Waksal's
improper trading began on December 27th when he "caused his daughter to
sell $2 million worth of ImClone stock." Accordingly, I find that Samuelson's claims related
to trading that took place on December 27, 2001 may stand.
II. Rules 12(c) and 9(b)
In his motion, Waksal also asks me to order, pursuant to Rule 12(e), a
more definite statement as to the "others" who bought ImClone put options
from Samuelson. As a general rule, the court should order a more definite
statement "when a defendant is unclear about the meaning of a particular
allegation in the complaint." Am. Nurses' Ass'n v. Illinois, 783 F.2d 716,
725 (7th Cir. 1986). Rule 12(e), Waksal argues, is particularly relevant
to an allegation of fraud, which, according to Rule 9(b), must be pled
"with particularity," The purpose of the heightened pleading standard
under Rule 9(b) is to provide the defendant fair notice of the basis of
plaintiff's claim and to protect defendant's reputation from groundless
accusations of fraud. Dexia Credit Local v. Rogan, No. 02 C 8288, 2003
U.S. Dist. LEXIS 18368 at *30 (N.D. Ill. Oct. 10, 2003).
Samuelson's Complaint succeeds in this purpose. The Complaint
adequately details the alleged fraud and provides fair notice of the
claims. Specifically, it alleges that Waksal learned of material,
nonpublic information on December 26, 2001 and, without disclosing that
information, caused his daughter to sell stock and purchased put options
on December 27, 2001 and December 28, 2001 respectively. Samuelson
further alleges that this led it to sell ImClone put options to both
Waksal and to others at a price that was below their actual market
value*fn1 on December 27th and December 28th, To prove these
damages, Samuelson will have to provide detailed information about its sale of ImClone put options. However, I
find it needn't do so in its complaint.
For the reasons stated herein, Waksal's Motion to Dismiss and For a
More Definite Statement is DENIED.