Kass v. Simon
Opinion of the Court
SUMMARY ORDER
Lead plaintiff Charles L. Kass, on behalf of himself and all others similarly situated, and plaintiffs Scott Kale, Margaret Bander, Charles Kass, Thomas Kissane, Daljit Dhanjal, Donna Buckhaults and Casey Sheahan (collectively, “plaintiffs”) appeal from the district court’s partial dismissal of their complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim against defendant-appellee Feldman, Sherb & Co., P.C. (“FSC”). Their complaint alleges violations of § 10(b) of the Securities Exchange Act, 15 U.S.C. § 783(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. We assume familiarity with the facts and procedural background of the case.
We note that the case against the corporate defendant Light Management Group, Inc., its principals, and its prior auditor (collectively, the “other defendants”) remains pending and that this appeal comes before us as a result of the district court’s entry of partial final judgment as to FSC pursuant to Federal Rule of Civil Procedure 54(b). That rule requires that the district make an explicit finding that there is “no just reason for delay” in entering a judgment as to one party. Fed.R.Civ.P. 54(b); see also O’Bert v. Vargo, 331 F.3d 29, 41 (2d Cir. 2003) (“[Certification must be accompanied by a reasoned, even if brief, explanation of [the district court’s] conclusion.”). We review this determination for abuse of discretion and upset it only where “ 'clearly unreasonable.’ ” O’Bert, 331 F.3d at 41 (quoting Curtiss-Wright Corp. v. Gen. Electric Co., 446 U.S. 1, 10, 100 S.Ct. 1460, 64 L.Ed.2d 1 (1980)). Here the district court’s stated reason for certification was that there was “no basis for putting FSC through partic
We review dismissal under Rule 12(b)(6) de novo. Velez v. Levy, 401 F.3d 75, 84 (2d Cir. 2005). We affirm the district court’s dismissal for substantially the’ reasons it gave in its Memorandum and Order of December 18, 2003. The complaint sets out with great particularity the alleged wrongdoing of the other defendants, but fails to allege facts supporting a strong inference that FSC itself knew or should have known, after roughly five months as outside auditor, of the alleged deceptions and accounting problems of its client. See Rothman v. Gregor, 220 F.3d 81, 98 (2d Cir. 2000). In the absence of such facts, the complaint does not include the requisite circumstantial evidence that FSC, as an outside auditor, engaged in “‘highly unreasonable’” auditing “representing ‘an extreme departure from the standards of ordinary care ... approximating] an actual intent to aid in the fraud being perpetrated by the audited company.’ ” Id. (quoting Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 120-21 (2d Cir. 1982) (further internal quotation marks omitted)).
The district court’s dismissal for failure adequately to plead scienter was therefore correct, and we affirm its dismissal of the complaint against FSC.
Reference
- Full Case Name
- Charles L. KASS, on behalf of himself and all others similarly situated, Consolidated Lead Scott KALE, Margaret Bander, Charles Kass, Thomas Kisane, Daljit Dhanjal, Donna Buckhaults and Casey Sheehan v. Barrington L. SIMON, Donald J. Iwacha, Eve Sigfrid, Greg Amur, Light Management Group, Inc., James E. Slayton, Feldman, Sherb & Co., P.C.
- Status
- Published