Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-02142/USCOURTS-cand-4_05-cv-02142-5/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 7:6(b) Federal Commodity Exchange Regulation

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United States District Court

For the Northern District of California

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1 Pursuant to Civ. L. R. 7-13, this order shall notbe cited exceptas provided by Civ.

L. R. 3-4(e). 

2 The court finds this motion appropriate for decision without oral argument as

permitted by Civil L.R. 7-1(b) and Fed. R. Civ. P. 78. See also Lake at Las Vegas Investors

Group, Inc. v. Pacific Malibu Dev. Corp., 933 F.2d 724, 729 (9th Cir. 1991) (holding that the

court's considerationof the moving and oppositionpapers is deemed anadequate substitute for

a formal hearing), cert. denied, 503 U.S. 920 (1992). Accordingly, the September 14, 2005

hearing date is hereby VACATED.

United States District Court

For the Northern District of California

NOT FOR CITATION

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

COMMODITY FUTURES TRADING

COMMISSION,

Plaintiff, No. C 05-2142 PJH

v. ORDER DENYING DEFENDANTS’

MOTION TO DISMISS; GRANTING

ROBERT JOSEPH BEASLEY, et al., DEFENDANTS’ MOTION FOR MORE

DEFINITE STATEMENT

Defendants.

_______________________________/

Before this court is defendants Beasley and Longboat Global Funds Management

LLC’s motion to dismiss or, in the alternative, motion for more definite statement.1 Having

read the papers and carefully considered the relevant legal authority, the court hereby DENIES

plaintiff’s motion to dismiss and GRANTS the defendants’ motion for more definite statement,

for the reasons that follow.2

BACKGROUND

This is a case involving violations of the anti-fraud provisions of the Commodities

Exchange Act, 7 U.S.C. §6o(1)(A) and (B) (“the Act”). The Commodities Futures Trading

Commission (“the Commission”) claims that defendant Longboat Global Funds Management

LLP (“Longboat”), through the acts of its CEO, defendant Robert Beasley, have defrauded

their investors in a fund known as “Piranha” by, among other things, falsely stating in Annual

Reports that the promissory notes in which they invested were secured against real property

Case 4:05-cv-02142-PJH Document 30 Filed 09/06/05 Page 1 of 4
United States District Court

For the Northern District of California

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when they were not. 

Defendants move to dismiss the complaint for failure to comply with Rule 9's

heightened pleading requirements for fraud, or, in the alternative, move to dismiss under Fed.

R. Civ. P. 12(e) for lack of definite statement due to the plaintiff’s failure to comply with Rule 8.

DISCUSSION

A. Legal Standards

1. Rule 9(b)

Fed. R. Civ. P. 9(b) requires that “in all averments of fraud or mistake, the

circumstances constituting fraud or mistake shall be stated with particularity.” To meet this

standard, the pleading must provide “the who, what, when, where, and how of the misconduct

charged . . . . The plaintiff must set forth what is false or misleading about a statement and why

it is false.” Vess v. Ciba-Geigy Corp., USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citations

omitted). The court may dismiss the complaint for failure to comply with Rule 9(b). Id. at

1107-08. 

2. Rule 8 and Rule 12(e)

Fed. R. Civ. P. 8(a) requires that every complaint contain “a short and plain statement”

of the allegations at issue. See also, e.g., Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513

(2002). 

Under Fed. R. Civ. P. 12(e), a party may move for a more definite statement if the

pleading to which the party must respond “is so vague or ambiguous that [the] party cannot

reasonably be required to frame a responsive pleading.” Motions for more definite

statements are disfavored in light of the liberal pleading standards of Rule 8, and should not

be granted unless the moving party “literally cannot frame a responsive pleading.” Bureerong

v. Uvawas, 922 F.Supp. 1450, 1461 (C.D. Cal. 1996). 

B. Rule 9(b)

The motion to dismiss under Rule 9(b) is DENIED. While it is true that Rule 9(b)

creates heightened standards of pleading for fraud-related claims, the complaint in this case

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provides adequate information about the factual basis for the claims for the defendants to

prepare their response. The Commission is correct that many of the issues raised by

defendants go not to the sufficiency of the pleadings but rather, the factual merits of the case,

which are not appropriately adjudicated on a motion to dismiss. The complaint adequately

alleges all the elements of a fraud claim. 

The Commission is also correct that Rule 9(b) specifically states that scienter “may be

averred generally” for the purposes of a fraud claim. The cases cited by the defendants relate

not to general fraud claims but rather, to securities fraud cases under the Private Securities

Litigation Reform Act, which requires that both fraud and scienter be pled with specificity in the

context of cases arising under the 1934 Securities Act. See, e.g., In re Read-Rite Corp., 335

F.3d 843, 846 (9th Cir. 2003). Because this case does not arise under the 1934 Securities

Act, scienter need only be pled in conformity with the requirements of Rule 9(b). 

C. Rule 8 and Rule 12(e)

However, the defendants are correct that the complaint as currently drafted requires the

defendants to guess as to which allegations apply to which elements of which causes of

action. Cf. In re GlenFed Inc. Sec. Litig., 42 F.3d 1541, 1544 (9th Cir. 1994) (“A complaint is

not a puzzle”); In re Autodesk Inc. Sec. Litig., 132 F.Supp. 2d 833, 841 (N.D. Cal. 2000)

(discouraging pleadings where plaintiff does not specifically set forth the factual basis of

specific legal allegations). Thus, while the complaint easily meets the standards of Rule 8's

“short and plain statement,” it is nonetheless confusing to read. 

The court therefore GRANTS the motion for more definite statement under Rule 12(e). 

Plaintiff shall file an amended complaint that, much as its opposition brief does, specifically

sets forth in a logical order the facts supporting the allegations of fraud at issue in this case

(namely, whether plaintiff claims that defendants defrauded investors in all transactions or only

the transactions concerning Beasley-related entities), explains which of defendants’

statements are alleged to be false, and clarifies which factual allegations correspond with

which elements of the claims at issue. 

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United States District Court

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Plaintiff shall file an amended complaint no later than October 3, 2005. This order fully

adjudicates the matter listed at no. 23 on the clerk’s docket for this case. 

IT IS SO ORDERED.

Dated: September 6, 2005

______________________________

PHYLLIS J. HAMILTON

United States District Judge

Case 4:05-cv-02142-PJH Document 30 Filed 09/06/05 Page 4 of 4