Plaintiffs alleged, among other things, that defendants violated the Securities and Exchange Act of 1934 by engaging in a scheme to defraud investors through the sale of unregistered securities and by making misrepresentations to induce plaintiffs to invest in defendant corporation. Defendants filed a motion to dismiss, arguing that plaintiffs failed to plead each element of fraud with particularity and therefore did not meet the pleading requirements of Federal Rule of Civil Procedure 9(b) (Rule 9(b)).
The court denied defendants’ motion to dismiss. The court agreed with defendants that plaintiffs’ claims had to be pled with particularity pursuant to Rule 9(b). As such, the court stated that the plaintiff must plead sufficient detail in terms of time, place and content of the fraud and the injury resulting from the fraud to allow the defendant to prepare a responsive pleading. The court held that plaintiffs adequately set forth the time of the fraudulent scheme by alleging, for example, that on December 12, 2001, defendants intentionally misrepresented the yields that would result from plaintiffs’ investments with defendants. The court further determined that although the pleading did not explicitly allege the place of the fraudulent scheme, it implicitly identified the place by alleging that defendants induced the investment by plaintiffs at a place known by defendants and plaintiffs. The court also decided that plaintiffs sufficiently alleged the content of defendants’ misrepresentations by alleging that defendants represented to plaintiffs that if they invested a certain amount of money in defendants’ company, these funds would be invested into a pool of securities from which they would receive the return on their investment plus interest. Finally, the court stated that plaintiffs pled fraudulent intent sufficiently to meet the requirements of Rule 9(b) because Rule 9(b) allows a plaintiff to plead intent generally, and plaintiffs averred that defendants knowingly made material misrepresentations. (Jennings v. Bodrick, 2009 WL 1607711 (S.D. Ohio June 9, 2009))