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Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 21, 2005 Decided January 17, 2006

No. 04-7187

MONICA BELIZAN,

AND ALL OTHERS SIMILARLY SITUATED, AND

WILLIAM PRATHER, DR., AS TRUSTEE FOR THE AVON

MEDICAL GROUP PC EMPLOYEES PROFIT SHARING PLAN &

TRUST, AND AS TRUSTEE FOR THE JUDITH ANN PRATHER

REVOCABLE TRUST,

APPELLANTS

v.

SIMON HERSHON, ET AL.,

APPELLEES

Consolidated with

04-7188

Appeals from the United States District Court

for the District of Columbia

(No. 02cv01490)

(No. 02cv01886)

Donald J. Enright argued the cause for appellants. With

him on the briefs were Burton H. Finkelstein and Tracy D.

Rezvani. Adam T. Savett and Steven J. Toll entered appearances.

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Michael L. Martinez argued the cause and filed the brief

for appellee Radin Glass & Co., LLP. 

Jeff G. Hammel argued the cause for appellee CIBC

World Markets Corporation. With him on the brief were David

M. Brodsky, Donna C. Goggin, and DeMaurice F. Smith.

Before: GINSBURG, Chief Judge, and ROGERS and

GRIFFITH, Circuit Judges.

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge: Monica Belizan appeals an

order of the district court because it dismissed “with prejudice”

her claims under the Securities Act of 1933 and the Securities

Exchange Act of 1934 against Radin Glass & Co. and CIBC

World Markets Corp. She also contends the district court erred

in determining she failed to move for leave to amend her

complaint. 

Because Belizan’s oral request for leave was not a proper

motion under Federal Rule of Civil Procedure 15(a), the district

court did not err in refusing to recognize it. The district court,

however, failed adequately to explain, in light of the standard set

in Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996),

why it dismissed Belizan’s complaint with prejudice.

Accordingly, we vacate the order in part and remand the

question of prejudice for clarification.

I. Background

According to Belizan’s complaint, between 1997 and

2002 she and other members of an uncertified class of plaintiffs

purchased debt securities from InterBank Funding Corp. (IBF)

and its subsidiaries. IBF, which was owned by Simon Hershon,

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had formed several investment funds with the purpose of

purchasing and restructuring or rehabilitating underperforming

loans. Belizan claims IBF’s funds were actually part of a “Ponzi

scheme,” wherein proceeds from successive securities offerings

were used to make interest payments to those who had invested

in prior offerings. During the relevant period, Radin Glass &

Co. served as IBF’s independent auditor and CIBC World

Markets Corp. sold IBF’s debt securities to investors. 

Investors’ suits against Hershon, Radin, CIBC, and

others were consolidated and Belizan, designated as lead

plaintiff pursuant to the Private Securities Litigation Reform Act

of 1995 (PSLRA), 15 U.S.C. § 78u-4 et seq., filed a consolidated

complaint. (Belizan and the others then settled their claims

against Hershon.) In the complaint, Belizan alleged Radin and

CIBC had disseminated materially false and misleading

information about IBF’s funds and engaged in a scheme to

defraud investors, in violation of § 10(b) of the Securities

Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5

promulgated thereunder, 17 C.F.R. § 240.10b-5. In addition, she

claimed Radin, by attesting that IBF’s financial statements

complied with Generally Accepted Accounting Principles when,

in fact, the statements were materially false or misleading, had

violated § 11 of the Securities Act of 1933, 15 U.S.C. § 77.

Finally, she alleged CIBC had violated the prospectus delivery

requirements of §§ 12(a)(1) and (2) of the ’33 Act, 15 U.S.C. §§

77l(a)(1)-(2), when it sold IBF’s securities to investors.

Radin and CIBC each moved, pursuant to Federal Rule

of Civil Procedure 12(b)(6), to dismiss the complaint for failure

to state a claim upon which relief can be granted. At a hearing

on the motions to dismiss, Belizan’s counsel defended the

complaint but volunteered his “belie[f] that at this point we

probably could, if it was required, file [an] amended complaint,”

and later, referring to an unnamed officer of IBF who was the

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source of some allegations in the complaint, reiterated that “if

the Court requires us to, we can plead that [source] in an

amended pleading if the Court would like.” Belizan did not,

however, follow up with a written motion for leave, much less

a proposed amended complaint. 

Some weeks after the hearing, the district court granted

the defendants’ motions to dismiss Belizan’s claims. See In re

Interbank Funding Corp. Sec. Litig., 329 F. Supp. 2d 84 (D.D.C.

2004). With respect to the alleged violations of § 10 and Rule

10b-5, the court held Belizan had failed adequately to: (1) plead

scienter; (2) allege her claims with the specificity required by

Rule 9(b) and the PSLRA, 15 U.S.C. § 78u-4; and (3) plead

causation. 329 F. Supp. 2d at 89-94. The district court also held

Belizan failed properly to plead a violation of § 11; her claim

under § 12(a)(1) was time-barred; and she and her fellow class

members lacked standing to bring the claim under § 12(a)(2).

Id. at 94-96.

The district court also said Belizan would not be allowed

to amend her complaint, which was dismissed “with prejudice.”

The court explained that counsel’s references to the possibility

of amending the complaint did not “amount to formal motions

for leave to amend” and that even if they did, the PSLRA

“counsel[s] restraint in granting leave to amend.” 329 F. Supp.

2d at 96. As for the dismissal being with prejudice, the court

cited In re Champion Enterprises Inc. Securities Litigation, 145

F. Supp. 2d 871, 873 (E.D. Mich. 2001), for the proposition “the

[PSLRA] ... set[s] a high standard of pleading which if not met

results in a mandatory dismissal.... with prejudice.” 329 F.

Supp. 2d at 96. 

Belizan filed a motion under Rule 59(e) seeking

reconsideration insofar as the court had not permitted her leave

to amend the complaint and dismissed her claims with prejudice.

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*

 Although Belizan noted her appeal of the order denying

her motion for reconsideration, she advances no argument specific

to that order.

With her motion, Belizan submitted an amended complaint in

draft form. The district court denied reconsideration and further

stated that Belizan’s draft amended complaint “share[d]

important failings with [her] earlier effort.”

II. Analysis

On appeal Belizan does not take issue with the district

court’s determination that she failed properly to plead her

various claims under the ’33 and ’34 Acts. Rather, Belizan first

argues she made an adequate motion for leave to amend and

then contests the district court’s decision to dismiss her

complaint “with prejudice.” Radin and CIBC defend the district

court on both counts.*

A. Leave to Amend

Belizan argues the district court erred in determining she

never properly moved to amend her complaint because her oral

offer to amend was sufficient in view of the instruction in Rule

15(a) that “leave shall be freely given when justice so requires.”

She also relies upon Taylor v. Beckas, 424 F.2d 905, 908 (D.C.

Cir. 1970), in which we implied the now defunct District of

Columbia Court of General Sessions could grant an oral motion

for leave to amend a complaint under a local rule similar to Rule

15(a). Proceeding from that premise, Belizan goes on to argue

the district court would not have been justified in denying leave

on the substantive grounds raised by the defendants, had it

addressed them. 

Radin and CIBC respond that Belizan’s request was

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properly refused because oral “motions” are not acceptable

under the local rules of the district court. Specifically, Local

Rule 7(a) requires that every “motion shall include or be

accompanied by a statement of the specific points of law and

authority that support the motion.” Furthermore, Local Rule

15.1 provides each “motion for leave ... shall be accompanied by

an original of the proposed pleading as amended.” The

defendants also note that even if Belizan had requested leave in

her brief in opposition, she would not have satisfied Rule 15(a)

because “a bare request in an opposition to a motion to dismiss

-- without any indication of the particular grounds on which

amendment is sought -- does not constitute a motion within the

contemplation of Rule 15(a).” United States ex rel. Williams v.

Martin-Baker Aircraft Co., 389 F.3d 1251, 1259 (D.C. Cir.

2004) (internal quotation marks and citations omitted). As for

Taylor v. Beckas, Radin and CIBC point out that the

permissibility of an oral motion for leave was not there in issue

and, in any event, the case involved a D.C. rule of procedure, not

Rule 15(a) or Local Rule 15.1.

When the district court denies a motion for leave to

amend under Rule 15(a), we review its decision for abuse of

discretion, see Carribean Broad. Sys., Ltd. v. Cable & Wireless

PLC, 148 F.3d 1080, 1083 (D.C. Cir. 1998), bearing in mind

that the rule is to be construed liberally. For in Foman v. Davis,

371 U.S. 178, 182 (1962), the Supreme Court instructed:

In the absence of any apparent or declared reason -- such

as undue delay, bad faith or dilatory motive on the part

of the movant, repeated failure to cure deficiencies by

amendments previously allowed, [or] undue prejudice to

the opposing party ... the leave sought should ... be

“freely given.”

Nevertheless, Rule 15(a) -- even as liberally construed -- applies

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only when the plaintiff actually has moved for leave to amend

the complaint; absent a motion, there is nothing to “be freely

given.” 

Contrary to Belizan’s suggestion, a request for leave

must be submitted in the form of a written motion, as is made

clear by the local rules of the district court and implied by our

decision Ex rel. Williams, 389 F.3d at 1259. The statement of

Belizan’s counsel at oral argument that he “probably could, if it

was required, file another ... complaint” was not a proper motion

for leave to amend under Rule 15(a) or Local Rule 15.1.

Therefore, as the district court correctly determined, Belizan

never moved for leave. 

B. Dismissal with Prejudice 

Dismissal with prejudice “operates as a rejection of the

plaintiff’s claims on the merits and [ultimately] precludes

further litigation” of them. Jaramillo v. Burkhart, 59 F.3d 78,

79 (8th Cir. 1995). Belizan argues the district court erred as a

matter of law in “premis[ing] its dismissal with prejudice” on

the PSLRA.

That Act requires the plaintiff, in a suit for “securities

fraud,” to “specify each statement alleged to have been

misleading, the reason or reasons why the statement is

misleading, and, if an allegation regarding the statement or

omission is made on information and belief, ... all facts on which

that belief is formed.” 15 U.S.C. § 78u-4(b)(1)(B). In addition,

“with respect to each act or omission,” the plaintiff must “state

with particularity facts giving rise to a strong inference that the

defendant acted with the required state of mind.” 15 U.S.C. §

78u-4(b)(2). Belizan contends that her failure to satisfy these

heightened pleading standards did not necessitate the dismissal

of her complaint with prejudice because the PSLRA does not

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supercede the procedure for moving to amend a complaint under

Rule 15(a). See United States v. Microsoft Corp., 165 F.3d 952,

958 (D.C. Cir. 1999) (under Rules Enabling Act, rules of civil

procedure are deemed to supercede conflicting statute except

insofar as a substantive right is involved). 

Relying upon Eminence Capital, LLC v. Aspeon, Inc.,

316 F.3d 1048 (9th Cir. 2003), Belizan also argues the

heightened pleading requirements of the PSLRA lead to a

conclusion far different from that reached by the district court.

In Eminence Capital the court explained that because the

PSLRA “requires a plaintiff to plead a complaint of securities

fraud with an unprecedented degree of specificity and detail,” it

is important that the district court “consider the relevant factors

and articulate why dismissal should be with prejudice instead of

without prejudice.” Id. at 1052. 

Radin and CIBC contend the heightened pleading

standards of the PSLRA logically limit the application of Rule

15(a) and concomitantly imply dismissal with prejudice is

indicated in securities fraud cases that do not measure up to

those standards. Cf. Miller v. Champion Enters., Inc., 346 F.3d

660, 690-92 (6th Cir. 2003) (affirming dismissal with prejudice

on ground PSLRA counsels against repeated amendments to

complaint). Therefore, Radin and CIBC urge, “the District

Court’s dismissal ... with prejudice was well within its

discretion.” Furthermore, they argue, although the district court

did consider the PSLRA in making its determination, the court

did not “premise dismissal with prejudice” solely upon that Act,

as Belizan maintains. 

We are uncertain why the district court dismissed the

complaint with prejudice, and what role the PSLRA played in its

thinking. The standard for dismissing a complaint with

prejudice is high: “dismissal with prejudice is warranted only

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when a trial court determines that the allegation of other facts

consistent with the challenged pleading could not possibly cure

the deficiency.” Firestone, 76 F.3d at 1209 (internal quotation

marks omitted). Therefore, a complaint that omits certain

essential facts and thus fails to state a claim warrants dismissal

pursuant to Rule 12(b)(6) but not dismissal with prejudice. 

Although the PSLRA provides that “[d]ismissal for

failure to meet pleading requirements” is appropriate, 15 U.S.C.

§ 78u-4(b)(3)(A), the Act does not say whether such dismissal

should be with or without prejudice. If it does not imply

dismissal with prejudice, then it does nothing to change the

ordinary consequences of a “failure to meet pleading

requirements.” On the other hand, had the Congress wished to

make dismissal with prejudice the norm, and to that extent

supercede the ordinary application of Rule 15(a), we would

expect the text of the PSLRA so to provide. Cf. 21 U.S.C. §

1605(e) (under Biomaterials Access Assurance Act of 1998,

“[a]n order granting a motion to dismiss” in a suit against a

supplier to a manufacturer of medical devices “shall be entered

with prejudice”). Unable to derive any guidance from the

PSLRA itself, we are governed simply by Rule 15(a), which, as

we have observed, allows “maximum opportunity for each claim

to be decided on its merits rather than on procedural

technicalities.” United States v. Hicks, 283 F.3d 380, 387

(2002) (quoting 6 Charles Alan Wright & Arthur R. Miller,

Federal Practice & Procedure § 1471, 505-06 (2d ed. 1990)).

We note also that the heightened pleading standard of Rule 9(b),

which requires a plaintiff to plead any allegation of fraud with

specificity, does not alter the operation of Rule 15(a). See BlyMagee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)

(holding leave to amend should have been “freely given”

pursuant to Rule 15(a) even though plaintiff failed in first

amended complaint to plead fraud with specificity required by

Rule 9(b)). We therefore hold the PSLRA does not mandate

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dismissal with prejudice.

The next question is whether Belizan could not allege

additional facts that would cure the deficiencies in her complaint

-- the standard under Firestone for dismissal with prejudice, 76

F.3d at 1209. In its order, the district court neither adverted to

Firestone nor undertook the inquiry required by that decision.

Perhaps the district court, because it believed the PSLRA

“counsel[s] restraint in granting leave to amend,” 329 F. Supp.

2d at 76, deemed that inquiry unnecessary. Regardless of the

standard for leave to amend, however, the PSLRA, as we have

seen, does not require dismissal with prejudice. The proper

course for the district court, therefore, is to exercise its

discretion under Firestone and determine whether the allegation

of other facts consistent with the challenged pleading could not

possibly meet the heightened pleading requirements of the

PSLRA.

III. Conclusion

In sum, the district court did not err in determining

Belizan’s oral request to amend her complaint was not a proper

motion for leave. The district court did, however, fail

adequately to explain, with reference to the standard we set in

Firestone, why it dismissed Belizan’s complaint with prejudice.

We therefore vacate the order of dismissal and remand the case

for the district court to enter a new order either dismissing

without prejudice or explaining its dismissal with prejudice in a

manner consistent with this opinion. See Confederate Mem’l

Ass’n v. Hines, 995 F.2d 295, 301 (D.C. Cir. 1993). 

 So ordered.

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