UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT NEW YORK 

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RITCHIE CAPITAL MANAGEMENT LLC, ) 

RITCHIE RISK-LINKED STRATEGIES ) 

TRADING (IRELAND), LIMITED, RITCHIE ) 

RISK-LINKED STRATEGIES TRADING ) 

(IRELAND) II, LIMITED, WALKERS SPV ) 

LIMITED, as trustee for Ritchie Risk-Linked ) Civil Action No. 07CV3494 (DLC) (DCF) 

Life Strategies Trust I and Ritchie Life Strategies ) 

Master Trust, and RITCHIE RISK-LINKED ) (ECF) 

STRATEGIES TRADING, LTD., ) 

 ) 

 Plaintiffs, ) 

 ) 

 v. ) 

 ) 

COVENTRY FIRST LLC, THE COVENTRY ) 

GROUP, INC., MONTGOMERY CAPITAL, INC., ) 

LST I LLC, ALAN BUERGER, CONSTANCE ) 

BUERGER, REID S. BUERGER, ANTONIO ) 

MUNIZ, ALEX SELDIN, NEAL JACOBS, ) 

EILEEN SHOVLIN, and JIM DODARO, ) 

 ) 

 Defendants. ) 

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SURREPLY IN OPPOSITION TO PLAINTIFFS’ MOTION FOR RECONSIDERATION 

AND FOR LEAVE TO FILE THEIR PROPOSED SECOND AMENDED COMPLAINT 

 WILLIAMS & CONNOLLY LLP 

 ______________/s/______________ 

 Katherine G. Lindsey (KL-0902) 

 Dane H. Butswinkas 

 Robert M. Cary 

 David A. Forkner 

 Kenneth J. Brown 

 725 Twelfth Street, N.W. 

 Washington, D.C. 20005 

 (202) 434-5000 

 (202) 434-5029 (facsimile) 

Dated: October 9, 2007 Attorneys for Defendants

Case 1:07-cv-03494-DLC Document 66 Filed 10/09/2007 Page 1 of 6
1

Contrary to Plaintiffs’ assertion, Defendants do have answers to Plaintiffs’ reliance on 

Merrill Lynch & Co. v. Allegheny Energy, Inc., No. 05-5129, 2007 WL 2458411 (2d Cir. Aug. 

31, 2007) (“Merrill Lynch”). See Reply in Sup. of Mot. for Reconsid. (“Reply”) at 1. Plaintiffs 

misconstrue and misapply that decision. 

I. MERRILL LYNCH DOES NOT PERMIT FRAUD CLAIMS BASED ON 

CONTRACTUAL MISREPRESENTATIONS. 

In Merrill Lynch, the Second Circuit held that alleged pre-contractual representations of 

present fact that induce the contract may give rise to a claims for fraudulent inducement under 

Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13 (2d Cir. 1996), even 

though they also breach contractual provisions warranting their accuracy. 2007 WL 2458411, at 

**10–11. The misrepresentations in Merrill Lynch were statements concerning the present 

financial condition of a business being sold, see id. at **1-3, 8, were made prior to the contract 

and induced the contract, but were not repeated in the contract.1

 

Contrary to Plaintiffs’ argument, Merrill Lynch did not conclude that all statements of 

present fact are per se actionable in fraud. Under New York law, even present factual statements 

must be collateral to the parties’ contract to give rise to a claim of fraud or fraudulent 

inducement. See Deerfield Commc’ns Corp. v. Chesebrough-Ponds Inc., 68 N.Y.2d 954, 956 

(1986) (Plaintiffs must establish not only “a representation of present fact,” but also a 

representation “collateral to, but which was the inducement for[,] the contract”); TVT Records v. 

Island Def Jam Music Group, 412 F.3d 82, 91 (2d Cir. 2005) (same); Bridgestone/Firestone, 

 

1

 The cases cited by the Second Circuit in Merrill Lynch likewise involved statements of present 

fact, made prior to the contracts that were intended to induce those contracts. See Deerfield 

Commc’ns Corp., 68 N.Y.2d at 956 (allowing fraudulent inducement claim when defendant 

falsely claimed that it would not sell plaintiffs products in certain markets and the contract did 

not contain any geographical restrictions); see also Bridgestone/Firestone, Inc., 98 F.3d at 20 

(Deerfield involved misrepresentation of present fact that was “collateral to, but which was the 

inducement for the contract” and thus not duplicative of contract claim); First Bank of Ams. v. 

Motor Car Funding, Inc., 690 N.Y.S.2d 17, 21 (N.Y. App. Div. 1999) (allowing fraudulent 

inducement claim when defendant made factual representations about individual loans, including 

quality of collateral and borrowers’ credit history where representations did not duplicate 

contractual warranties specifying only that loans complied with certain underwriting guidelines). 

 

Case 1:07-cv-03494-DLC Document 66 Filed 10/09/2007 Page 2 of 6
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Inc., 98 F.3d at 20 (same).2 

Under Merrill Lynch, pre-contractual representations of present fact that induce a contract 

satisfy this standard. See 2007 WL 2458411, at *10; Triangle Underwriters, Inc. v. Honeywell, 

Inc., 604 F.2d 737, 747 (2d Cir. 1979); Great Earth Int’l. Franchising Corp. v. Milks Dev., 311 

F. Supp. 2d 419, 429 (S.D.N.Y. 2004) (“[T]he present fact exception draws its vigor . . . from the 

fact that such a misrepresentation wrongfully induced the other party to enter into the contract.”). 

But, contractual representations themselves do not. Such representations by their nature are not 

collateral to the contract and do not give rise to a separate claim for fraud or fraudulent 

inducement. See DynCorp v. GTE Corp., 215 F. Supp. 2d 308, 325-26 (S.D.N.Y. 2002); 

WestCom Corp. v. GTE Telecom Inc., NO. 01 CIV. 2352 (RO), 2001 WL 1568814, *1 (S.D.N.Y. 

Dec 10, 2001); Four Finger Art Factory, Inc. v. Dinicola, No. 99 Civ. 1259 (JGK), 2000 WL 

145466, *5 (S.D.N.Y. Feb. 9, 2000); Suzy Phillips Originals, Inc. v. Coville, Inc., 939 F. Supp. 

1012, 1016 (E.D.N.Y. 1996), aff’d, 125 F.3d 845 (2d Cir. 1997); Varo, Inc. v. Alvis PLC, 691 

N.Y.S.2d 51, 55 (N.Y. App. Div. 1999); J.E. Morgan Knitting Mills, 663 N.Y.S.2d at 211; 

Pramco III, LLC v. Partners Trust Bank, No. 2006/02318, 2007 WL 1118380, (N.Y. Sup. Ct. 

Feb 23, 2007); see also In re Enron Corp., 2005 WL 356985, *11. Cf. Jo Ann Homes, 250 

N.E.2d 214 (1969) (holding without discussion on collateral statements). That is especially true 

where, as here, Plaintiffs claim they were fraudulently induced to sign contracts by 

representations in those contract that became effective only upon execution. See infra discussion 

at § II; see also Yenom Corp. v. 155 Wooster Street Inc., 805 N.Y.S.2d 304, 304-05 (N.Y. App. 

Div. 2005). Thus Plaintiffs are left to argue they satisfy the collateral statement requirement by 

alleging “pre-and post-contractual statements.” Reply at 3; Mot. for Reconsid. at 6-7; Opp. to 

 

2

 See also DER Travel Servs., Inc. v. Dream Tours & Adventures, Inc., No. 99 Civ. 2231 (HBP), 

2005 WL 2848939, at 15 (S.D.N.Y. Oct. 28, 2005); In re Enron Corp., No. 04 Civ. 1496 (NRB), 

2005 WL 356985, at 10 (S.D.N.Y. Feb. 15, 2005); The Hawthorne Group, LLC v. RRE Ventures, 

776 N.Y.S.2d 273, 276 (N.Y. App. Div. 2004); Orix Credit Alliance, Inc. v. R.E. Hable Co., 682 

N.Y.S.2d 160, 161 (N.Y. App. Div. 1998); J.E. Morgan Knitting Mills, Inc. v. Reeves Bros., 

Inc., 663 N.Y.S.2d 211, 211 (N.Y. App. Div. 1997); Sandra Greer Real Estate, Inc. v. Johansen 

Org., 581 N.Y.S.2d 792, 793 (N.Y. App. Div. 1992). 

Case 1:07-cv-03494-DLC Document 66 Filed 10/09/2007 Page 3 of 6
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Mot. to Dismiss at 16. The MPPAs bar Plaintiffs’ argument. 

II. MERRILL LYNCH DOES NOT SUPPORT PLAINTIFFS’ FRAUD CLAIMS 

BASED ON PRE- AND POST-CONTRACTUAL REPRESENTATIONS. 

A. The Integration Clause Precludes Plaintiffs’ Reliance on Merrill Lynch. 

 Plaintiffs’ reliance on Merrill Lynch is misplaced because the contract in that case 

expressly warranted that Allegheny could rely on the financial statements provided by Merrill 

Lynch prior to the contract’s execution. See 2007 WL 2458411, at **7-8. Here, by contrast, 

“plaintiffs expressly disclaimed reliance on the very representations they now claim were 

fraudulent.” Ritchie Capital Mgmt., LLC v. Coventry First, LLC, No. 07 Civ. 3494(DLC), 2007 

WL 2044656, at *8 (S.D.N.Y. July 17, 2007); MPPAs § 7.12. 

B. The Pre-Contractual Representations Alleged By Plaintiffs Do Not Satisfy 

Merrill Lynch. 

 In their Reply, Plaintiffs claim §§ 3.01(a)(vi) and 3.02(b) of the draft MPPAs contain 

statements of present fact that give rise to independent fraudulent inducement claims under 

Merrill Lynch. See Reply at 2-3 n.3 (citing SAC ¶ 55(b) & (d)); Opp. to Mot. Dismiss at 15-16, 

Plfs’ Rev. Mot. for Reconsid. at 6 (citing Compl. ¶ 27-33, 35-39, 87).3

 Plaintiffs are wrong. 

 First, provisions of the draft MPPAs cited by Plaintiffs are forward-looking. The parties 

agreed that representations and warranties contained in § 3.01(vi) would not become effective 

until the Closing Date of those agreements. See MPPAs at § 3.01(a) (“The Seller hereby 

represents and warrants to the Purchaser as of the Closing Date and each Funding Date . . . .”) 

(emphasis added). Similarly, § 3.02 of the MPPAs provides that representations under § 3.02(b) 

would became effective “[a]s of the Funding Date,” and not prior thereto. Id. § 3.02; see also id.

§ 3.02(b) (“All Life Settlement Policies the purchases of which are being funded [on such 

Funding Date] have been . . . Originated . . . in compliance with all applicable . . . laws, rules 

and regulations applicable to life settlement transactions. . . .”) (bracketed portions in original) 

 

3

 The only other alleged pre-contractual misrepresentations of fact are opinions by individual 

non-attorney defendants that Coventry First “conducts itself in accordance with law” and the life 

insurance policies involved have “no legal taint.” Compl. ¶ 27. Besides being barred by § 7.12, 

these allegations do not support a fraud claim. See Defs’ Mot. Dismiss at 12. n.16. 

Case 1:07-cv-03494-DLC Document 66 Filed 10/09/2007 Page 4 of 6
4

(emphasis added); see also Compl. ¶ 34(d) (omitting bracketed portions). The “Funding Date” 

did not occur until Policies were transferred to Ritchie I and II following execution of the 

MPPAs. See id. (Glossary of Terms). Thus, until the MPPAs were signed and Policies were 

transferred, the representations contained in § 3.02(b) had no effect. As Merrill Lynch confirms, 

a promise to make a representation in the future is not a “present statement of fact” giving rise to 

a fraud claim. See 2007 WL 2458411, at *10. 

 Second, Plaintiffs’ claimed reliance on draft contracts is not reasonable as a matter of 

law. See Frutico S.A. de C.V. v. Bankers Trust Co., 833 F. Supp. 288, 299-300 (S.D.N.Y. 1993). 

The parties expressly contemplated that the representations in their draft contracts would become 

effective upon the MPPAs’s execution, that the terms of the MPPAs would be reduced to 

writing, and that the writing would supersede all prior understandings. See MPPAs § 7.12. 

C. The Post-Contractual Representations Alleged By Plaintiffs Do Not Satisfy 

Merrill Lynch. 

Merrill Lynch does not permit Plaintiffs to salvage their fraud claims by alleging postcontractual misrepresentations. Statements made after a contract’s execution cannot induce the 

contract, see O’Dell v. Ginsberg, 677 N.Y.S.2d 583, 584 (N.Y. App. Div. 1998), and do not give 

rise to a separate fraud claim. See Stewart v. Jackson & Nash, 976 F.2d 86, 88 (2d Cir. 1992) 

(“[F]raudulent breach of a contract does not give rise to an action for fraud. Thus, where the 

only fraud charged relates to a breach of the contract and not to its inducement or making, no 

action for fraud is alleged.”).4

 

CONCLUSION

 For the foregoing reasons, Plaintiffs’ Motion for Reconsideration should be denied. 

 

4

 Plaintiffs initially alleged Coventry First’s counsel made misrepresentations on June 26 and 27, 

2007 and that Alan Buerger sent an article from TheStreet.com on June 22, 2006. Compl. ¶¶ 52-

53. New factual allegations contained in the SAC may not be considered on a motion for 

reconsideration. See SAC ¶¶ 71, 73, 74; Opp. at 7. In any event, all of the alleged postcontractual misrepresentations and contractual representations that pertain to § 3.01(a)(vi) of the 

MPPAs relate to the NYAG Action. Plaintiffs have contractually agreed the NYAG Action does 

not constitute a breach of the MPPAs. Opp. at 19. Plaintiffs’ claim that these allegations 

nonetheless give rise to fraud is, therefore, not plausible. See Iqbal v. Hasty, 490 F.3d 143, 157-

58 (2d Cir. 2007) (factual allegations must render the claim plausible). 

Case 1:07-cv-03494-DLC Document 66 Filed 10/09/2007 Page 5 of 6
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CERTIFICATE OF SERVICE

I hereby certify that, on this 9th day of October, 2007, I caused true and correct copies of 

the foregoing to be served electronically via the Court’s ECF system on the following counsel: 

Lawrence S. Robbins, Esq. 

Gary A. Orseck, Esq. 

Daniel R. Walfish, Esq. 

Robbins, Russell, Englert, Orseck & Untereiner LLP 

1801 K Street, N.W. 

Washington, DC 20006 

(202) 775-4500 

(202) 775-4510 (telecopy) 

lrobbins@robbinsrussell.com 

gorseck@robbinsrussell.com 

dwalfish@robbinsrussell.com 

Thomas P. Puccio, Esq. 

Law Offices of Thomas P. Puccio 

230 Park Avenue 

New York, NY 10169 

(212) 883-6383 

(212) 883-6388 (telecopy) 

tpuccio@lotpp.com 

Attorneys for Plaintiffs

 ______________/s/______________ 

 Rachel R. Shanahan 

Case 1:07-cv-03494-DLC Document 66 Filed 10/09/2007 Page 6 of 6