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. ) 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 

DEFENDANTS’ OPPOSITION TO PLAINTIFFS’ MOTION FOR RECONSIDERATION 

AND FOR LEAVE TO FILE THEIR PROPOSED AMENDED COMPLAINT 

 

 WILLIAMS & CONNOLLY LLP 

 ______________/s/______________ 

 Katherine G. Lindsey (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: September 21, 2007 Attorneys for Defendants 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 1 of 33
i 

TABLE OF CONTENTS 

TABLE OF AUTHORITIES .......................................................................................................... ii 

BACKGROUND .............................................................................................................................1 

STANDARD OF REVIEW .............................................................................................................1 

ARGUMENT...................................................................................................................................2 

I. THE COURT PROPERLY DISMISSED PLAINTIFFS’ BREACH OF 

 FIDUCIARY DUTY CLAIM..............................................................................................2 

A. The Court Did Not Overlook Controlling Decisions or Data .......................................2 

 B. Plaintiffs’ New Allegations and Authorities Also Fail .................................................6 

II. THE COURT PROPERLY DISMISSED PLALINTIFFS’ FRAUD CLAIM ..................10 

 A. The Court Did Not Misread Telecom Int’l Am. Ltd. v. AT&T 

 Corp. ...........................................................................................................................10 

 B. The Court Properly Rejected the Non-Contracting Plaintiffs’ Fraud Claims .............11 

 C. The Court Did Not Disregard Plaintiffs’ Claims of a Separate Legal Duty ...............12 

 D. The Court Properly Rejected Plaintiffs’ Collateral Statements Argument.................14 

 E. The Court Did Not Overlook Plaintiffs’ Claim for Special Damages.........................16 

 1. Plaintiffs Did Not Incur Special Damages Related to Ritchie IV..........................17 

 2. Plaintiffs Did Not Incur Special Damages in Connection With the 

 Securitization .........................................................................................................20 

III. THE COURT PROPERLLY DISMISSED PLAINTIFFS’ FRAUDULENT 

INDUCEMENT CLAIM ...................................................................................................22 

IV. THE COURT PROPERLY CONCLUDED PLAINTIFFS FAILED TO PLEAD 

PERSONAL JURISDICTION OVER MONTGOMERY CAPITAL...............................24 

CONCLUSION..............................................................................................................................25 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 2 of 33
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 TABLE OF AUTHORITIES 

FEDERAL CASES 

Ades v. Deloitte & Touche, 843 F. Supp. 888 (S.D.N.Y. 1994) ......................................................7 

Advanced Marine Techs., Inc. v. Burnham Sec., Inc., 16 F. Supp. 2d 375 (S.D.N.Y. 1998) ........17 

Amy Axelrod, Inc. v. Simon & Schuster, Inc., No. 07 Civ. 891(DLC), 2007 WL 2412257 

(S.D.N.Y. Aug. 27, 2007) ....................................................................................................9

Argonaut P’ship L.P. v. Bankers Tr. Co. Ltd., No. 96 Civ. 1970(LLS), 2001 WL 585519 

(S.D.N.Y. May 30, 2001).....................................................................................................6 

Barrett v. U.S. Banknote Corp., No. 91 Civ. 7420(RPP), 1992 WL 232055 

(S.D.N.Y. Sept. 2, 1992)..............................................................................................18, 21 

Bates Adver. USA, Inc. v. McGregor, 282 F. Supp. 2d 209 (S.D.N.Y. 2003)...............................14 

Big East Entm’t, Inc. v. Zomba Enters., Inc., 453 F. Supp. 2d 788 (S.D.N.Y. 2006) ...................11 

Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13 (2d Cir. 1996)...........5, 21 

Broder v. Cablevision Sys. Corp., 418 F.3d 187 (2d Cir. 2005)......................................................6 

Browning v. Clinton, 292 F.3d 235 (D.C. Cir. 2002) ....................................................................18 

Calvin Klein Trademark Trust v. Wachner, 123 F. Supp. 2d 731 (S.D.N.Y. 2000)........................9 

Crigger v. Fahnestock & Co., 443 F.3d 230 (2d Cir. 2006)..........................................................13 

DIRECTV Group, Inc. v. Darlene Inv., LLC, No. 05 Civ. 5819 (WHP) 

2006 WL 2773024 (S.D.N.Y. Sept. 27, 2006).....................................................................3 

Donoghue v. Casual Male Retail Group, Inc., 427 F. Supp. 2d 350 (S.D.N.Y. 2006) ...................7 

Draskicevic v. Entersport Mgmt., Inc., No. 03 Civ. 8447(DLC), 2004 WL 1575393 

(S.D.N.Y. Jul 15, 2004) ...............................................................................................10, 17 

Dunkin’ Donuts Inc. v. Got-A-Lot-A-Dough, Inc., No. 04CV4100(DRH)(MLO), 

2006 WL 3725340 (E.D.N.Y. Dec. 18, 2006) ...................................................................10 

DynCorp v. GTE Corp., 215 F. Supp. 2d 308 (S.D.N.Y. 2002) ....................................................13 

Employers Mut. Cas. Co. v. Key Pharms., 75 F.3d 815 (2d Cir. 1996).........................................19 

In re Enron Corp., No. 04 Civ. 1367(NRB), 2005 WL 356985 (S.D.N.Y. Feb 15, 2005) ...........14 

Feldberg v. Quechee Lakes Corp., 463 F.3d 195 (2d Cir. 2006)...................................................19 

Feinberg v. Katz, No. 99 Civ. 0045(CSH), 2005 WL 2990633 (S.D.N.Y. Nov. 7, 2005)...........11 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 3 of 33
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Four Finger Art Factory, Inc. v. Dinicola, No. 99 Civ. 1259(JGK), 2000 WL 145466 

(S.D.N.Y. Feb. 9, 2000).....................................................................................................14 

Fried v. Kelly, No. 06 Civ. 1528(HB), 2007 WL 1821697 (S.D.N.Y. Jun 26, 2007) .....................8 

Frota v. Prudential-Bache Secs., Inc., 639 F. Supp. 1186 (S.D.N.Y. 1986) ...................................2 

Global Crossing Estate Representative v. Winnick, No. 04 Civ. 2558(GEL), 

2006 WL 2212776 (S.D.N.Y. Aug. 3, 2006).......................................................................4 

Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980) ........................................................10 

Harsco Corp. v. Segui, 91 F.3d 337 (2d Cir. 1996).......................................................................21 

In re Health Mgmt. Sys. Inc. Sec. Litig., 113 F. Supp. 2d 613 (S.D.N.Y. 2000) .............................1 

Hogan v. Wal-Mart Stores, Inc., 167 F.3d 781 (2d Cir. 1999)......................................................18 

Holloway v. King, 361 F. Supp. 2d 351 (S.D.N.Y. 2005) ...............................................................3 

Info. Superhighway, Inc. v. Talk Am., Inc., No. 03 Civ. 1995(RWS), 2003 WL 22705132 

(S.D.N.Y. Nov. 17, 2003) ....................................................................................................7 

Int’l CableTel Inc. v. Le Groupe Videotron Ltee, 978 F. Supp. 483 (S.D.N.Y. 1997)......14, 15, 22 

Iqbal v. Hasty, 490 F.3d 143 (2d Cir. 2007)..................................................................................19 

Itel Containers Int’l Corp. v. Atlanttrafik Exp. Serv. Ltd., 909 F.2d 698 (2d Cir. 1990) ................8 

John Paul Mitchell Sys. v. Quality King Distribs., Inc., No. 99 Civ. 9905(SHS), 

2001 WL 910405 (S.D.N.Y. Aug. 13, 2001).....................................................................14 

Jones v. Niagara Frontier Trans. Auth., 836 F.2d 731 (2d Cir. 1987)..........................................11 

Kamen v. A.T. & T. Co., 791 F.2d 1006 (2d Cir. 1986) ................................................................25

Kidz Cloz, Inc. v. Officially For Kids, Inc., 320 F. Supp. 2d 164 (S.D.N.Y. 2004) ........................7 

Kolbeck v. LIT Am., Inc., 923 F. Supp. 557 (S.D.N.Y. 1996), aff’d, 1998 WL 406036 

(2d Cir. 1998).....................................................................................................................14 

Korry v. Int’l Tel. & Tel. Corp., 444 F. Supp. 193 (S.D.N.Y. 1978).......................................18, 21 

Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) ........................................................12, 13 

Manson v. Stacescu, 11 F.3d 1127 (2d Cir. 1993).........................................................................11 

Meadowlands Inv., LLC v. CIBC World Mkts. Corp., No. 04 Civ. 7328 (DAB), 

2005 WL 2347856 (S.D.N.Y. Sept. 22, 2005)...................................................................23 

In re Mid-Island Hosp., Inc., 276 F.3d 123 (2d Cir. 2002)..............................................................3 

Montanile v. Nat’l Broad, Co., 216 F. Supp. 2d 341 (S.D.N.Y. 2002) ...........................................1 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 4 of 33
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Muller Boat Works, Inc. v. Unnamed 52’ House Barge, 464 F. Supp. 2d 127 

(E.D.N.Y. 2006).................................................................................................................20 

Nat’l Petrochem. Co. v. M/T Stolf Sheaf, 930 F.2d 240 (2d Cir. 1991)...........................................1 

Nat’l Union Fire Ins. Co. v. Stroh Cos., Inc., 265 F.3d 97 (2d Cir. 2001) ................................7, 16 

Patterson v. Balsamico, 440 F.3d 104 (2d Cir. 2006) ...................................................................12 

Project Hope v. M/V IBN SINA, NO. 97-CV-3853, 2001 WL 1875854 

(S.D.N.Y. Jul. 17, 2001) ...................................................................................................20

Ritchie Capital Mgmt., LLC v. Coventry First LLC, No. 07 Civ. 3494, 2007 WL 2044656 

(S.D.N.Y. July 17, 2007) ........................................................................................... passim

Ross v. FSG PrivatAir, Inc., No. 03 Civ. 7292(NRB), 2004 WL 1837366 

(S.D.N.Y. Aug. 17, 2004) ....................................................................................................9 

In re Rubin Brothers Footwear, Inc., 119 B.R. 416 (S.D.N.Y. 1990)...........................................13 

Rush v. Oppenheimer & Co., 681 F. Supp. 1045 (S.D.N.Y. 1988) .................................................9 

San Francisco v. Tutor-Saliba Corp., No. C 02-5286 CW, 2005 WL 645389 

(N.D. Cal. Mar. 17, 2005)..................................................................................................18 

Secs. Investor Prot. Corp. v. BDO Seidman, LLP, 222 F.3d 63 (2d Cir. 2000) ............................13 

Seinfeld v. WorldCom, Inc., No. 06 Civ. 13274(DLC), 2007 WL 1573870 

(S.D.N.Y. May 31, 2007).....................................................................................................1 

Sequa Corp. v. GBJ Corp., 156 F.3d 136 (2d Cir. 1998) ......................................................2, 9, 11 

Shrader v. CSX Transp., Inc., 70 F.3d 255 (2d Cir. 1995) ............................................1, 11, 12, 25 

Sommer v. PMEC Assoc., No. 88 Civ. 2537, 1992 WL 196748 (S.D.N.Y. Aug. 5, 1992) .....18, 21 

Spang Indus., Ft. Pitt Bridge Div. v. Aetna Cas. & Sur. Co., 512 F.2d 365 (2d Cir. 1975)..........20 

Telecom Int’l Am. Ltd. v. AT&T Corp., 280 F.3d 175 (2d Cir. 2001) ...........................................10 

Toussaint v. JJ Weiser & Co., No. 04 Civ. 2592(MBM), 2005 WL 356834 

(S.D.N.Y. Feb. 13, 2005).....................................................................................................2 

Trell v. Am. Ass’n of Advancement of Sci., No. 04-CV-0030ESR, 2007 WL 1500497 

(W.D.N.Y. May 21, 2007) .................................................................................................10 

Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737 (2d Cir. 1979) ..............................14 

U2 Home Entm’t, Inc. v. Lai Ying Music & Video Trading, Inc., No. 04 Civ. 1233(DLC), 

2005 WL 2230454 (S.D.N.Y. Sept. 12, 2005)...................................................................12 

United States v. Brennan, 183 F.3d 139 (2d Cir. 1999)...................................................................4 

United States v. Chestman, 947 F.2d 551 (2d Cir. 1991) ................................................................4 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 5 of 33
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Valjean Mfg., Inc. v. Michael Werdiger, Inc., No. 03 Civ. 6185(HB), 2004 WL 1948752 

(S.D.N.Y. Sep 2, 2004)......................................................................................................10 

Warner Theatre Assoc. Ltd. P’ship v. Metro. Life Ins. Co., No. 97 Civ. 4914(SS), 

1997 WL 685334 (S.D.N.Y. Nov. 4, 1997).......................................................................14 

Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982) ......................................................................3 

Weissman v. Dawn Joy Fashions, Inc., 214 F.3d 224 (2d Cir. 2000)............................................19 

Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 210 (2d Cir. 2002) ......................20 

WestRM-West Risk Markets, Ltd. v. XL Reinsurance Am., Inc., No. 02 Civ. 7344(MGC), 

2006 WL 2034627 (S.D.N.Y. July 19, 2006) ....................................................................13 

Young v. Dep’t of Justice, 882 F.2d 633 (2d Cir. 1989) ................................................................21 

Zurich Am. Ins. Co. v. Dah Sing Bank, Ltd., No. 03 Civ. 7778(DLC), 2004 WL 1328215 

(S.D.N.Y. Jun. 15, 2004) ...................................................................................................25 

STATE CASES 

Abrams v. Donati, 489 N.E.2d 751 (N.Y. 1985) ...........................................................................11 

Alpert v. 28 Williams St. Corp., 473 N.E.2d 19 (N.Y. 1984) ..........................................................4 

Bd. of Mgrs. of 411 E. 53rd St. Condo. v. Dylan Carpet, Inc., 582 N.Y.S.2d 1022 

(N.Y. App. Div. 1992) .......................................................................................................15 

Blue Chip Emerald LLC v. Allied Partners Inc., 750 N.Y.S.2d 291 

(N.Y. App. Div. 2002) .........................................................................................................7

Brunetti v. Musallam, 783 N.Y.S.2d 347 (N.Y. App. Div. 2004) ...............................................3, 6 

Cassata v. Brewster-Allen-Wichert, Inc., 670 N.Y.S.2d 552 (N.Y. App. Div. 1998) .....................7 

Deerfield Comms. Corp. v. Chesebrough-Ponds, Inc., 502 N.E.2d 1003 (N.Y. 1986).................15 

First Bank of the Americas v. Motor Car Funding, Inc., 690 N.Y.S.2d 17 

(N.Y. App. Div. 1999) .......................................................................................................14 

Friedman v. Anderson, 803 N.Y.S.2d 514 (N.Y. App. Div. 2005) .................................................3 

Glenn v. Hoteltron Sys., Inc., 547 N.E.2d 71 (N.Y. 1989) ............................................................11 

Hart v. Gen. Motors Corp., 517 N.Y.S.2d 490 (N.Y. App. Div. 1987) ..........................................4

Lama Holding Co. v. Smith Barney Inc., 668 N.E.2d 1370 (N.Y. 1996) ......................................17 

Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928) .........................................................................3, 6 

Northeast Gen. Corp. v. Wellington Adver., Inc., 624 N.E.2d 129 (N.Y. 1993) .............................3 

Sager Spuck Statewide Supply Co. v. Meyer, 710 N.Y.S.2d 429 (N.Y. App. Div. 2000) ...............7 

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Spodek v. Neiss, 756 N.Y.S.2d 903 (N.Y. App. Div. 2003) ............................................................7 

In re T.J. Ronan Paint Corp., 469 N.Y.S.2d 931 (N.Y. App. Div. 1984) ...................................3, 6 

FEDERAL STATUTES

18 U.S.C. § 1962(c) .........................................................................................................................1 

18 U.S.C. § 1962(d) .........................................................................................................................1 

18 U.S.C. § 1965(a) .......................................................................................................................25 

Fed. R. Civ. P. 6(b) ........................................................................................................................19 

Fed. R. Civ. P. 9(b) ....................................................................................................................2, 14 

Fed. R. Civ. P. 9(g) ..................................................................................................................17, 18 

Fed. Civ. P. 59(e) ................................................................................................................... passim

Fed. R. Civ. P. 60(b) ..................................................................................................................1, 19 

Fed. R. Evid. 902 ...........................................................................................................................24 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 7 of 33
BACKGROUND

 “This is essentially a breach of contract claim governed by two complex agreements 

negotiated between sophisticated parties.” Ritchie Capital Mgmt., LLC v. Coventry First LLC, 

No. 07 Civ. 3494(DLC), 2007 WL 2044656, at *1 (S.D.N.Y. July 17, 2007) (“Ritchie”). 

Accordingly, the Court dismissed with prejudice Plaintiffs’ claims for fraud, fraudulent 

inducement, and breach of fiduciary duty. Plaintiffs now seek reconsideration of that dismissal 

and leave to replead these claims as Counts III, IV, and V of their proposed second amended 

complaint (“SAC”).1 Plaintiffs, however, did not request leave to amend their Complaint prior to 

entry of the Court’s Order. Thus, Plaintiffs can revive their claims only by satisfying the 

exacting standards of Federal Rule of Civil Procedure Rule 59(e). Plaintiffs fall far short of that 

standard, and may not rely on Rule 59(e) to relitigate issues resolved against them. 

STANDARD OF REVIEW

 Once a claim has been dismissed, it cannot be repleaded until the dismissal “is set aside 

or vacated pursuant to Fed. R .Civ. P. 59(e) or 60(b).” Nat’l Petrochem. Co. v. M/T Stolf Sheaf, 

930 F.2d 240, 244 (2d Cir. 1991). Reconsideration pursuant to Rule 59(e) and Local Civil Rule 

6.3 is an “extraordinary remedy to be employed sparingly in the interests of finality and 

conservation of scarce judicial resources.” Montanile v. Nat’l Broad, Co., 216 F. Supp. 2d 341, 

342 (S.D.N.Y. 2002) (quoting In re Health Mgmt. Sys. Inc. Sec. Litig., 113 F. Supp. 2d 613, 614 

(S.D.N.Y. 2000)). Indeed, the standard for such a motion “is strict, and ‘reconsideration will 

generally be denied unless the moving party can point to controlling decisions or data that the 

court overlooked – matters, in other words, that might reasonably be expected to alter the 

conclusion reached by the court.’” Seinfeld v. WorldCom, Inc., No. 06 Civ. 13274(DLC), 2007 

WL 1573870, at *1 (S.D.N.Y. May 31, 2007) (Cote, J.) (quoting Shrader v. CSX Transp., Inc., 

70 F.3d 255, 257 (2d Cir. 1995)) (other quotation omitted). A party seeking reconsideration 

 

1

 The Cour previously granted Plaintiffs leave to replead their §§ 1962(c) and (d) RICO claims. 

Ritchie, 2007 WL 2044656, at *10. Consistent with the Court’ opinion, Defendants address 

these claims (repleaded as Counts I and II of the SAC) in a separate motion to dismiss. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 8 of 33
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bears this heavy burden because such motions may not “present[] the case under new theories, 

secur[e] a rehearing on the merits, or otherwise tak[e] a second bite at the apple.” Sequa Corp. v. 

GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998). 

ARGUMENT

I. THE COURT PROPERLY DISMISSED PLAINTIFFS’ BREACH OF 

 FIDUCIARY DUTY CLAIM. 

 The Court did not miss controlling law or facts when it dismissed Plaintiffs’ breach of 

fiduciary duty claim. Ritchie Risk-Linked Strategies Trading (Ireland), Limited (“Ritchie I”) and 

Ritchie Risk-Linked Strategies Trading (Ireland) II, Limited (“Ritchie II”) contracted with LST I, 

LLC (“LST”) to purchase life settlement policies (“Policies”). Ritchie, 2007 WL 2044656, at *1. 

The controlling Master Policy Purchase Agreements (“MPPAs”) contain express disclaimers 

stating: “Nothing contained in this Agreement is intended to . . . create . . . a partnership or joint 

venture.” Id. at **5-6. The Court held that, inter alia, the express disclaimer precluded Ritchie I 

and II from establishing a fiduciary duty between the contracting parties. Id. at *6. The Court 

also concluded that the non-contracting Plaintiffs “pleaded no adequate bases for establishment 

of a fiduciary relationship absent one between defendants and Ritchie I and II.” Id.2 

A. The Court Did Not Overlook Controlling Decisions or Data. 

 The non-contracting Plaintiffs disagree with the Court’s conclusion and claim Defendants 

owed them a fiduciary duty as de facto equity shareholders in Ritchie I and II. See Revised 

Mem. in Supp. of Plaintiffs’ Mot. for Reconsideration (“Rev. Mem.”) at 2-3 (describing a “joint 

equity-like investment in Ritchie I and Ritchie II,” and claiming “Plaintiffs . . . provided the 

funding for an investment arrangement that Defendants in practice had the responsibility for 

managing.”). Plaintiffs’ argument largely duplicates one previously made to the Court. In their 

 

2

 The breach of fiduciary duty claim must be pleaded with particularity because it is based in 

fraud. See Toussaint v. JJ Weiser & Co., No. 04 CIV. 2592 (MBM), 2005 WL 356834, at *8 

(S.D.N.Y. Feb. 13, 2005) (“Rule 9(b) extends to all averments of fraud or mistake, whatever may 

be the theory of legal duty – statutory, common law, tort, contractual, or fiduciary.”) (quoting 

Frota v. Prudential-Bache Secs., Inc., 639 F. Supp. 1186, 1193 (S.D.N.Y. 1986)); compare

Compl. ¶ 100 (Breach of Fiduciary Duty) with ¶ 87 (Fraud). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 9 of 33
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Opposition to Defendants’ Motion to Dismiss (“Opposition” or “Opp.”), Plaintiffs argued 

(1) “Ritchie Capital” and the corporate defendants “jointly invested in life insurance products as 

co-owners, in effect, of Ritchie I and Ritchie II,” see Opp. at 21; and (2) “Their status as coinvestors in a corporation imposes a duty of ‘fidelity and good faith.” Id. To support that 

argument, Plaintiffs cited the following decisions: Brunetti v. Musallam, 783 N.Y.S.2d 347 (1st 

Dep’t 2004); In re T.J. Ronan Paint Corp., 469 N.Y.S.2d 931 (N.Y. App. Div. 1984); and 

Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928). See Opp. at 17-18. The Court properly 

considered these authorities and rejected Plaintiffs’ arguments. It should do so again. 

 First, Plaintiffs’ conclusory allegations that they and Defendants were “partner[s], jointventurer[s], and co-venturer[s]” see Complaint (“Compl.”) ¶ 31, are insufficient to transform an 

ordinary arms length commercial relationship into a fiduciary one. See DIRECTV Group, Inc. v. 

Darlene Inv., LLC, No. 05 Civ. 5819 (WHP), 2006 WL 2773024, at *5 (S.D.N.Y. Sept. 27, 

2006); Holloway v. King, 361 F. Supp. 2d 351, 361 (S.D.N.Y. 2005); Friedman v. Anderson, 803 

N.Y.S.2d 514, 516 (N.Y. App. Div. 2005) (“A conventional business relationship, without more, 

does not become a fiduciary relationship by mere allegation”). 

 Second, Plaintiffs’ factual allegations fail to establish a fiduciary relationship. Where, as 

here, “parties deal at arms length in a commercial transaction, no relation of confidence or trust 

sufficient to find the existence of a fiduciary relationship will arise absent extraordinary 

circumstances.” In re Mid-Island Hosp., Inc., 276 F.3d 123, 130 (2d Cir. 2002); see also 

Weinberger v. Kendrick, 698 F.2d 61, 79 n.16 (2d Cir. 1982) (fact that relationship was product 

of “arm’s-length bargaining” constitutes “serious obstacle[ ]” to extension of fiduciary 

principles); Northeast Gen. Corp. v. Wellington Adver., Inc., 624 N.E.2d 129, 131 (N.Y. 1993) 

(unless parties “create their own relationship of higher trust, courts should not ordinarily 

transport them to the higher realm of relationship. . . .”). 

 Plaintiffs do not allege extraordinary circumstances that would give rise to fiduciary 

duties. To the contrary, they concede that only Ritchie I and II purchased Policies, and that these 

purchases were made pursuant to the MPPAs. Compl. ¶ 30; SAC ¶¶ 6, 45. Not only do the 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 10 of 33
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MPPAs disavow any partnership or joint venture relationship, Ritchie, 2007 WL 2044656, at 

**5-6, but any alleged fiduciary duty is negated by those contracts’ expansive integration clause, 

id. at *2. See also Exhibits (“Exs.”) 1-4 § 7.12 (Plaintiffs warranting that “independently and 

without reliance upon the Seller . . . [they] made . . . [their] own appraisal of and investigation 

into the business, operations, property, prospects, financial, and other conditions and 

creditworthiness of the Seller, and [their] own decision to enter into th[e] Agreement[s] and to 

take, or omit to take, action under any Transaction Document.”). By their terms, the MPPAs 

reflect only an arms-length business transaction between sophisticated parties, not a fiduciary 

relationship. 

 Nonetheless, Plaintiffs insist that even if Defendants do not owe fiduciary duties to 

Ritchie I and II, Defendants owe the non-contracting Plaintiffs fiduciary obligations because they 

“jointly committed capital to, and became owners of subordinated securities in Ritchie I and 

Ritchie II. . . .” Compl. ¶ 30; SAC ¶ 45. Fiduciary duties, however, do not arise from mere stock 

ownership. See Global Crossing Estate Representative v. Winnick, No. 04 Civ. 2558(GEL), 

2006 WL 2212776, at *18 (S.D.N.Y. Aug. 3, 2006) (stockholders are not in trust relation with 

each other or the corporation merely by virtue of owning stock) (citations omitted).3

 Instead, 

Plaintiffs must set forth factual allegations establishing Defendants’ “de facto control and 

dominance” of Ritchie I and II. United States v. Chestman, 947 F.2d 551, 568 (2d Cir. 1991) (en 

banc); see also United States v. Brennan, 183 F.3d 139, 150 (2d Cir. 1999) (elements of 

domination or control are of particular importance where sophisticated parties deal in armslength transactions); Alpert v. 28 Williams St. Corp., 473 N.E.2d 19, 25 (N.Y. 1984) (“Because 

the power to manage the affairs of a corporation is vested in the directors and majority 

shareholders, they are cast in the fiduciary role as ‘guardians of the corporate welfare.’”). 

 

3

 Nor may the non-contracting Plaintiffs, which were (at best) investors in Ritchie I and II, bring 

a breach of fiduciary duty claim based on injury to these entities. Hart v. Gen. Motors Corp., 

517 N.Y.S.2d 490, 492 n.2 (N.Y. App. Div. 1987) (shareholders may not bring breach of 

fiduciary duty claim predicated on injury to corporation). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 11 of 33
5 

 The Complaint does not allege Defendants dominated or controlled Ritchie I or II. See, 

e.g., Compl. ¶ 31; SAC ¶¶ 8, 46 (“Investing Plaintiffs contributed the great majority of financing. 

. . .”). To the contrary, it describes a standard arm’s length commercial relationship. Each noncontracting Plaintiff and corporate Defendant is a separately-incorporated, sophisticated entity. 

See Compl. ¶¶ 7-10; SAC ¶¶ 21-24. The transactions at issue involve the Policies valued in 

excess of $700 million. Compl. ¶¶ 4, 101. And, the relationship among the parties is controlled 

by a series of lengthy contracts negotiated by counsel for both sides. See id. ¶¶ 27, 35, 37; Rev. 

Mem. at 3 (“MPPAs were only two out of a large number of pertinent agreements governing the 

whole relationship.”). Pursuant to those contracts, Defendants allegedly were responsible for 

acquiring Policies for Ritchie I and II that met certain contractually-defined criteria “that the 

parties had agreed on.” Compl. ¶ 32; SAC ¶ 45. These contractual criteria obligated LST I to 

sell Policies to Ritchie I and II that, “in the aggregate [would] not cause [Ritchie I or II] to have 

purchased [Policies] as to which . . . more than 15% of the Portfolio were issued by any one 

Issuing Insurance Company that is rated at or below ‘A+’ by Standard & Poor’s, or more than 

20% of the Portfolio were issued by any one Issuing Insurance Company that is rated above ‘A+’ 

by Standard & Poor’s. . . .” Exs. 1, 3, 4 § 3.03(d), & Annex A. Such obligations do not create a 

fiduciary relationship. See Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 

13, 20 (2d Cir. 1996) (dismissing claim where whatever trust was placed had solely to do with 

carrying out contractual obligations). 

 Alternatively, Plaintiffs claim a fiduciary relationship arose from Coventry First’s 

obligation to service Policies purchased by Ritchie I and II. Compl. ¶ 33; SAC ¶ 48. Plaintiffs 

describe these obligations as “tracking premium payments and claims for death benefits from the 

issuing life insurance companies, determining when a claim for a death benefit could be made 

and placing the claim, monitoring the health of the insureds, and maintaining current information 

in the issuing life insurance companies.” Compl. ¶ 33; SAC ¶ 48.4

 Such actions are unrelated to 

 

4

 The SAC cites – for the first time – to the Servicing and Monitoring Agreements (“Monitoring 

Agreements”) between Coventry First and Ritchie I and II. SAC ¶ 48. But, those agreements 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 12 of 33
6 

Plaintiffs’ alleged harm. See Compl. ¶ 62 (claiming “Defendants’ misconduct . . . interfered with 

the salability and value of the life insurance policies” purchased by Ritchie I and II). Nor do 

they provide Defendants with control or dominance over Ritchie I and II. They establish nothing 

more than an ordinary commercial relationship between two sophisticated entities involved in the 

secondary market for life insurance. See Compl. ¶¶ 21-22; SAC ¶¶ 36, 37; see Argonaut P’ship 

L.P. v. Bankers Tr. Co. Ltd., No. 96 Civ. 1970(LLS), 00 Civ. 4244(LLS), 2001 WL 585519, at 

*3 (S.D.N.Y. May 30, 2001) (servicing agreement a conventional business relationship).5

 Third, none of the authorities cited in Plaintiffs’ Opposition support a fiduciary duty in 

this case. Rather, those cases stand for the unremarkable proposition that majority shareholders, 

officers, directors and others who control or dominate a closely held corporation owe fiduciary 

obligations to minority shareholders or others under their dominance or control. See Brunetti, 

783 N.Y.S.2d at 349 (plaintiff sought relief against defendants in their capacities as officers and 

directors of a close corporation); In re T.J. Ronan Paint Corp., 469 N.Y.S.2d at 936 (suit 

involved 50% shareholders in a closely held corporation, who were sole directors and only 

officers of the company); Meinhard, 164 N.E. at 546 (sole manager in a co-adventure leasing 

arrangement had fiduciary duty). Plaintiffs do not (and cannot) allege that Ritchie I and II – two 

Irish hedge funds listed on the Irish Stock Exchange – are close corporations or that Defendants 

have a controlling interest therein. 

B. Plaintiffs’ New Allegations and Authorities Also Fail.

 Plaintiffs now seek to repair this claim with new factual allegations, see Rev. Mem. at 3 

 

expressly state that nothing contained therein “shall be deemed or construed by the parties . . . or 

by any third person to create the relationship of principal and agent (including dependent agent) 

or of a partnership or joint venture.” Exs. 5, 6 § 8.15 (ellipses in original). The Monitoring 

Agreements– like other documents referenced in (but not attached to) Plaintiffs’ complaint – 

may be considered by the Court in evaluating Plaintiffs’ Second Amended Complaint. See, e.g.,

Broder v. Cablevision Sys. Corp., 418 F.3d 187, 196 (2d Cir. 2005). 

5

 The Monitoring Agreements provide that “the Servicer shall service the Conveyed Life 

Settlement Policies in accordance with its customary practices and procedures, using procedures 

effected in a manner substantially identical to those it would use in servicing Life Settlement 

Policies for other third parties and those held for its own account. . . .” Exs. 5, 6 § 3.11. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 13 of 33
7 

(citing to SAC ¶¶ 4-8, 45-53), and “additional authorit[ies]” from New York’s intermediate 

appellate courts. Id. at 4 (citing Spodek v. Neiss, 756 N.Y.S.2d 903 (N.Y. App. Div. 2003); Blue 

Chip Emerald LLC v. Allied Partners Inc., 750 N.Y.S.2d 291 (N.Y. App. Div. 2002); Cassata v. 

Brewster-Allen-Wichert, Inc., 670 N.Y.S.2d 552 (N.Y. App. Div. 1998)).6

 For procedural and 

substantive reasons, the Court should reject Plaintiffs’ claim. 

 Procedurally, on a motion for reconsideration, Plaintiffs cannot point to new factual 

allegations or legal authorities. See Nat’l Union Fire Ins. Co. v. Stroh Cos., Inc., 265 F.3d 97, 

115 (2d Cir. 2001) (party may not advance new facts, issues, or arguments not previously 

presented to the Court); Donoghue v. Casual Male Retail Group, Inc., 427 F. Supp. 2d 350, 354 

(S.D.N.Y. 2006) (“[C]ontrolling decisions or factual matters presented by a litigant for 

reconsideration must have been put before the court in the underlying motion.”). Moreover, for 

purposes of Rule 59(e) and Local Civil Rule 6.3, controlling authority does not include decisions 

from New York’s intermediate appellate courts. It is limited to decisions from the Second 

Circuit Court of Appeals. See Info. Superhighway, Inc. v. Talk Am., Inc., No. 03 Civ. 

1995(RWS), 2003 WL 22705132, at *1 (S.D.N.Y. Nov. 17, 2003) (citing Ades v. Deloitte & 

Touche, 843 F. Supp. 888, 892 (S.D.N.Y. 1994)). 

 Nor do these new factual allegations substantively support the existence of fiduciary 

obligations. Plaintiffs claim that “pursuant to a set of Intercreditor Agreements, among other 

instruments, [Coventry through a company known as Sandy Run was entitled] to receive the 

profits of Ritchie I and Ritchie II after other debts have been paid.” SAC ¶¶ 5, 45. Under New 

York law, an agreement to share profits may give rise to a fiduciary duty in the context of a 

partnership or joint venture. See Kidz Cloz, Inc. v. Officially For Kids, Inc., 320 F. Supp. 2d 164, 

 

6

 None of these authorities support Plaintiffs’ claim. See Spodek, 304 A.D.2d 557 (2d Dep’t 

2003) (citing Sager Spuck Statewide Supply Co. v. Meyer, 710 N.Y.S.2d 429 (N.Y. App. Div. 

2000) (“stockholders who dominate and control a corporation, occupy a position of ‘partial 

trust’”)); Blue Chip Emerald LLC v. Allied Partners Inc., 750 N.Y.S.2d 291, 293-94 (N.Y. App. 

Div. 2002) (Defendants who were 50% owners and manager of co-venture owed plaintiffs 

fiduciary duties); Cassata v. Brewster-Allen-Wichert, Inc., 670 N.Y.S.2d 552 (N.Y. App. Div. 

1998) (issue as to whether actions by a minority shareholder to force judicial dissolution of 

corporation to aid in competing business gave rise to fiduciary duty claim). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 14 of 33
8 

171 (S.D.N.Y. 2004). To establish a partnership or joint venture, however, Plaintiffs must 

establish, inter alia, control and mutual intent. See Itel Containers Int’l. Corp. v. Atlanttrafik 

Exp. Serv. Ltd., 909 F.2d 698, 701-02 (2d Cir. 1990) (elements of a joint venture); Fried v. Kelly, 

No. 06 Civ. 1528(HB), 2007 WL 1821697, *5 (S.D.N.Y. Jun 26, 2007) (elements of a 

partnership). Here, Plaintiffs fail to allege Sandy Run (a distinctly minority investor) controlled 

Ritchie I and II or that the parties intended a partnership or joint venturer relationship. Nor could 

they. The Intercreditor Agreements reflect only arms length commercial transactions between 

sophisticated parties and, by their terms, “are intended solely for the purpose of defining the 

relative payment rights of the parties [thereto].” Exs. 7, 9 § 7.3. Moreover, when executing the 

Intercreditor Agreements, the parties expressly disclaimed any intent to “enter[] into a 

partnership or joint venture.” Id. § 7.12; see also id. (“[N]one of the provisions of this Agreement 

shall be deemed to constitute a partnership or joint venture between or among the parties.”) 

(emphasis added). To the extent Plaintiffs claim the Intercreditor Agreements create or imply 

fiduciary obligations for Sandy Run as a de facto shareholder of Ritchie I and II, such claims are 

barred by § 7.11 of the Intercreditor Agreements. That section provides: 

No Recourse. No recourse for or under any obligation, covenant or agreement of 

the parties hereto contained in this Agreement, or any other agreement, document 

or instrument executed in connection herewith, shall be had against any member, 

shareholder . . . or agent of the parties hereto, by any proceeding, by virtue of any 

statute or otherwise; it being expressly agreed and understood that this Agreement 

is a corporate obligation of the parties hereto, and that no personal liability shall 

attach to or be incurred by the members, shareholders . . . or agents of the parties 

hereto, as such, or any of them under or by reason of any of the obligations, 

covenants or agreements of the parties hereto contained in this Agreement or 

implied therefrom, and that any and all personal liability for breaches of any such 

member, shareholder, . . . or agent of any of such obligations, covenants or 

agreements; either at law or in equity is hereby expressly waived by the parties 

hereto as a condition of and in consideration for the execution of this Agreement. 

Exs. 7, 9 § 7.11 (emphases added). 

 Alternatively, Plaintiffs claim – for the first time – that in a set of Investment 

Administration and Servicing Agreements (“Servicing Agreements”), a Coventry affiliate named 

Montgomery Limited agreed “to give advice and make recommendations” to Ritchie I and II 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 15 of 33
9 

concerning the identification of potential purchasers, the value and marketability of their 

portfolio of life settlement policies, and the selection of intermediaries through whom such 

transactions might be executed. SAC ¶ 51.7

 However, Plaintiffs do not claim Montgomery 

Limited failed to perform these services. Nor does Plaintiffs’ breach of fiduciary claim arise 

from matters allegedly entrusted to Montgomery Limited. See Compl. ¶ 99; SAC ¶ 120 

(Defendants obligated “to make full disclosure of all material circumstances surrounding the 

purchase of life insurance policies, and of the existence of the [NYAG’s] investigation.”); see 

also Ross v. FSG PrivatAir, Inc., No. 03 Civ. 7292(NRB), 2004 WL 1837366, at *6 (S.D.N.Y. 

Aug. 17, 2004) (plaintiff must show that breach claimed involved “matters within the fiduciary 

obligation.”); Rush v. Oppenheimer & Co., 681 F. Supp. 1045, 1055 (S.D.N.Y. 1988) (finding of 

breach is “limited to matters relevant to affairs entrusted. . . .”). 

 Moreover, “[u]nder New York law, parties to a commercial contract do not ordinarily 

bear a fiduciary relationship to one another unless they specifically so agree.” Calvin Klein 

Trademark Trust v. Wachner, 123 F. Supp. 2d 731, 733-34 (S.D.N.Y. 2000); see also Amy 

Axelrod, Inc. v. Simon & Schuster, Inc., NO. 07 CIV 891 DLC, 2007 WL 2412257, at *7 

(S.D.N.Y. Aug. 27, 2007) (Cote, J.) (“conventional business relationship ‘without more’ is not 

converted into a fiduciary relationship ‘by mere allegation’”); Ross, 2004 WL 1837366, at *6 

(“where the parties’ contract forms both the foundation and boundary of their relationship, 

fiduciary responsibilities have not attached”). Here, the Servicing Agreements do not establish a 

fiduciary relationship. To the contrary, they prohibit Montgomery Limited from “effect[ing] any 

transactions for the account of [Ritchie I or II] as principal or agent.” Exs. 11, 12 § 2(b). Ritchie 

I and II also retained their own agent, and the Servicing Agreements required Montgomery 

Limited to cooperate with that agent. See, e.g., Ex. 13 § 1(a). Finally, the parties agreed that 

“[f]or all purposes of this Agreement, [Montgomery Limited] shall be an independent contractor 

 

7

 Plaintiffs claim – for the first time – that Montgomery Limited and Sandy Run are mere alter 

egos of the corporate defendants. SAC ¶¶ 5, 52. These allegations may not be considered on a 

motion for reconsideration. See Sequa Corp., 156 F.3d at 144. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 16 of 33
10 

and not an employee or dependent agent of [Ritchie I and II]; nor shall anything herein be 

construed as making [Ritchie I and II] a partner or co-venturer with [Montgomery Limited] or 

any of its affiliates or other Clients.” Ex. 11, 12 § 6 (emphasis added). 

II. THE COURT PROPERLY DISMISSED PLAINTIFFS’ FRAUD CLAIM. 

 The Court correctly held that Plaintiffs’ fraud claim rests on the representations 

encompassed by the MPPAs. Ritchie, 2007 WL 2044656, at *7. Thus, “[t]o the extent that there 

was a misrepresentation or omission in connection with those contractual representations and 

commitments, then that conduct must be pleaded as a breach of contract claim.” Id. Plaintiffs’ 

assertion that the Court “overlook[ed] several key points” lacks merit. 

A. The Court Did Not Misread Telecom Int’l American Ltd. v. AT&T Corp. 

 In Telecom Int’l Am. Ltd. v. AT&T Corp., 280 F.3d 175 (2d Cir. 2001), the Second 

Circuit concluded that, under New York law, a fraud claim will not lie when it is “simply a 

breach of contract claim in the tort clothing.” Id. at 196. The Second Circuit held that “where a 

fraud claim arises out of the same facts as plaintiff’s breach of contract claim, [even] with the 

addition . . . of an allegation that defendant never intended to perform the precise promises 

spelled out in the contract between the parties, the fraud claim is redundant and plaintiff’s sole 

remedy is for breach of contract.” Id. The Court’s dismissal of Plaintiffs’ fraud claim is 

consistent with that holding and with other courts that have relied on Telecom Int’l Am. Ltd. to

dismiss fraud claims that duplicate breach of contract claims. See Trell v. Am. Ass’n of 

Advancement of Sci., No. 04-CV-0030(ESR), 2007 WL 1500497, *7 (W.D.N.Y. May 21, 2007); 

Dunkin’ Donuts Inc. v. Got-A-Lot-A-Dough, Inc., No. 04CV4100 (DRH)(MLO), 2006 WL 

3725340, *6 (E.D.N.Y. Dec. 18, 2006); Valjean Mfg., Inc. v. Michael Werdiger, Inc., No. 03 

Civ. 6185(HB), 2004 WL 1948752, *5 (S.D.N.Y. Sep. 2, 2004).8

 

8

 The Court gave the same reading to Telecom Int’l Am. Ltd. in Draskicevic v. Entersport Mgmt., 

Inc., No. 03 CIV. 8447(DLC), 2004 WL 1575393, *1 (S.D.N.Y. Jul 15, 2004). Moreover, 

Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980) does not compel a contrary result. 

See id. at 899 (“If the only interest at stake is that of holding the defendant to a promise, the 

claim sounds in contract.”). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 17 of 33
11 

B. The Court Properly Rejected the Non-Contracting Plaintiffs’ Fraud Claims. 

 Plaintiffs previously argued that the MPPAs do not bar fraud claims by the noncontracting Plaintiffs. See Opp. at 19. The Court, however, considered and rejected this 

argument, holding that Plaintiffs failed to allege a separate legal duty owed to the noncontracting Plaintiffs. Ritchie, 2007 WL 2044656, at *8. In their motion for reconsideration, 

Plaintiffs identify no controlling authority or data the Court missed, see Rev. Mem. at 5-6, and 

on that basis, it should be rejected. See Sequa, 156 F.3d at 144; Shrader, 70 F.3d at 256-257. 

 On the merits, Plaintiffs’ argument also fails. The Complaint makes clear that Ritchie I 

and II were the only entities that purchased Policies. Compl. ¶¶ 30, 58; SAC ¶¶ 6, 45. The 

alleged misrepresentations on which the non-contracting Plaintiffs base their fraud claims were 

made during the negotiation of the MPPAs, pertain to representations encompassed by those 

agreements, and are the basis for Ritchie I’s and II’s contract claims. Compare Compl. ¶ 28 with

id. ¶¶ 34-35, and 104. The non-contracting Plaintiffs’ sole connection to Ritchie I and II was 

derivatively through their purchase of “subordinated securities” in these entities. Id ¶ 30; SAC ¶ 

45 (“The Investing Plaintiffs . . . committed capital to, and became owners of subordinated 

securities in, Ritchie I and Ritchie II, which entitled [them] . . . to receive the profits of Ritchie I 

and Ritchie II after other debts have been paid.”); see also Compl. ¶ 62 (“Defendants’ 

misconduct therefore harmed not only Ritchie I and Ritchie II, but the entities . . . that own or are 

beneficially interested in Ritchie I and Ritchie II. . . .”); Id. ¶ 89 (plaintiffs harmed by “investing 

in life insurance policies worth much less than Plaintiffs had reason to believe they were worth”). 

 Such allegations do not state a claim for fraud as a matter of law. As investors in a 

corporation, the non-contracting Plaintiffs cannot sue in their individual capacity to redress 

wrongs inflicted upon a corporation. See Manson v. Stacescu, 11 F.3d 1127, 1131 (2d Cir. 

1993); Jones v. Niagara Frontier Trans. Auth., 836 F.2d 731, 736 (2d Cir. 1987); Big East

Entm’t, Inc. v. Zomba Enters., Inc., 453 F. Supp. 2d 788, 797 (S.D.N.Y. 2006); Feinberg v. Katz, 

No. 99 Civ. 0045(CSH), 2005 WL 2990633, at *4 (S.D.N.Y. Nov. 7, 2005); Glenn v. Hoteltron 

Sys., Inc., 547 N.E.2d 71, 74 (1989); Abrams v. Donati, 489 N.E.2d 751, 751 (N.Y. 1985). Nor 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 18 of 33
12 

have Plaintiffs alleged facts establishing an independent duty to the non-contracting Plaintiffs. 

Ritchie, 2007 WL 2044656, at *6 (Plaintiffs “have pleaded no adequate bases for establishment 

of a fiduciary relationship absent one between Ritchie I and II”); id. at *7 (“plaintiffs have not 

pointed to any separate legal duty to support the fraud claim”). 

C. The Court Did Not Disregard Plaintiffs’ Claims of a Separate Legal Duty. 

 Plaintiffs’ argument that they “have identified a separate legal duty to disclose” repeats 

their prior contention, which the Court properly rejected. Rev. Mem. at 6 (emphasis in original); 

see also Opp. at 16-18 (same); Ritchie, 2007 WL 2044656, at *7 (rejecting “separate duty” 

argument). Rule 59(e) requires that it be rejected again. See Shrader, 70 F.3d at 256-257.9

 

 Nonetheless, even if the Court could ignore Rule 59(e)’s restrictions, Plaintiffs’ 

arguments are unpersuasive. As discussed supra, Defendants do not owe a fiduciary duty to the 

non-contracting Plaintiffs. As to Plaintiffs’ passing reference to Defendants’ purported superior 

knowledge, Plaintiffs’ claim is belied by their own allegations that: (1) Ritchie I and II purchased 

Policies, Compl. ¶¶ 30, 58; (2) each of the non-contracting Plaintiffs is affiliated with Ritchie I 

and II through, at most, the purchase of subordinated securities therein, id. ¶ 30; and 

(3) Defendants’ alleged misstatements and omissions induced Ritchie I, II and IV to enter into 

MPPAs. Id. ¶ 94; see also Lerner v. Fleet Bank, N.A., 459 F.3d 273, 292 (2d Cir. 2006) 

(superior knowledge “usually arises . . . in the context of business negotiations where parties are 

entering a contract”). But § 7.12 of the MPPAs expressly disclaims Plaintiffs’ reliance on 

Defendants’ purported superior knowledge and provides that, “without reliance upon the Seller,” 

 

9

 Plaintiffs allege – for the first time – in the SAC that once Defendants chose to speak about the 

NYAG investigation, they “had a duty to speak completely and truthfully about the investigation 

and the likely consequences of it.” SAC ¶ 72. However, Plaintiffs did not make this claim in 

their Complaint or Opposition. See U2 Home Entm’t, Inc. v. Lai Ying Music & Video Trading, 

Inc., NO. 04 CIV. 1233DLC, 2005 WL 2230454, at *1 (S.D.N.Y. Sept. 12, 2005) (Cote, J.) 

(plaintiffs may not “advance new facts, issues or arguments not previously presented to the 

Court.”). Nor do Plaintiffs address this theory in their Revised Memorandum. And they may not 

do so for the first time in their Reply. See id. (“New arguments first raised in reply papers in 

support of a motion will not be considered.”); see also Patterson v. Balsamico, 440 F.3d 104, 

113 n.5 (2d Cir. 2006) (“This Court generally will not consider arguments raised for the first 

time in a reply brief”). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 19 of 33
13 

the Purchaser “has made and will continue . . . to make its own appraisal of and investigation 

into the business, operations . . . financial and other conditions . . . of the Seller, and its own 

decision to enter into this Agreement and to take, or omit to take, action under any Transaction 

Document.” Exs. 1-4 § 7.12. Furthermore, this provision expressly dispels any duty of 

Defendants to “provide the Purchaser or any of its Affiliates any information.” Id. (emphasis 

added); see DynCorp v. GTE Corp., 215 F. Supp. 2d 308, 322 (S.D.N.Y. 2002) (sophisticated 

parties “cannot avoid their disclaimers by complaining that they received less than all 

information, for they could have negotiated for fuller information or more complete warranties”). 

 Although § 7.12 bars all Plaintiffs’ fraud claims, the non-contracting Plaintiffs, as 

affiliates of Ritchie I, II, and IV face additional hurdles. The only non-contracting Plaintiff 

alleged to have any direct dealings with Defendants regarding the purchase of Policies is Ritchie 

Capital Management (“RCM”). SAC ¶ 17 (Coventry employees communicated with RCM 

employees); see also WestRM-West Risk Markets, Ltd. v. XL Reinsurance Am., Inc., No. 02 Civ. 

7344(MGC), 2006 WL 2034627, at *10 (S.D.N.Y. July 19, 2006) (“[T]hird-party duty to 

disclose has only been found where the third-party to the transaction has had some direct 

communication with the fraud victim regarding the fraudulent transaction.”). RCM, however, is 

not an Investing Plaintiff, i.e., did not purchase subordinated securities in Ritchie I, II or IV. 

SAC ¶ 4. Nor is it a party to any agreement identified by Plaintiffs. See Crigger v. Fahnestock 

& Co., 443 F.3d 230, 234 (2d Cir. 2006) (fraud requires proof of detrimental reliance).10 

 

10 As to the remaining non-contracting Plaintiffs, there are no allegations (especially ones 

pleaded with particularity) that Defendants knew these entities were “acting on the basis of 

mistaken knowledge,” see Lerner, 459 F.3d at 292, that these entities were aware of Defendants’ 

alleged misrepresentations, or that Defendants intended RCM to convey the alleged 

misrepresentations to them. See Secs. Investor Prot. Corp. v. BDO Seidman, LLP, 222 F.3d 63, 

71-72 (2d Cir. 2000) (“[P]laintiff may state a claim for fraudulent misrepresentation made to a 

third party if . . . the defendant intended the misrepresentation to be conveyed to him.”). Rather 

statements identified in ¶¶ 55-58 are drawn directly from the MPPAs (and drafts thereof), to 

which the non-contracting Plaintiffs were not parties. And the representations set forth in ¶¶ 71-

79 allegedly were made to “[Jeff] Mulholland of RCM,” as well as RCM’s counsel. See SAC ¶¶ 

55-58, 71, 73, 75, 76, 77, 78. Nor does Plaintiffs’ vague statement that RCM “represented” the 

Investing Plaintiffs, id. ¶ 71, allege an agency relationship. See In re Rubin Bros. Footwear, Inc.,

119 B.R. 416, 421-22 (S.D.N.Y. 1990) (setting forth elements of agency relationship). 

Additionally, where fraud claims are based on a claim of agency, the pleading of the alleged 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 20 of 33
14 

D. The Court Properly Rejected Plaintiffs’ Collateral Statements Argument. 

 Plaintiffs insist they alleged misrepresentations “‘collateral’ to the main duty to perform 

under the [MPPAs].” Rev. Mem. at 6-7. This argument – which the Court previously rejected, 

see Ritchie, 2007 WL 2044656, at *7 – lacks merit. 

 Under New York law, “the majority view – an overwhelming majority view – [is] that a 

false promise, whenever made, cannot give rise to a fraud claim where that promise is directly 

incorporated into a written contract between the parties.” Int’l CableTel Inc. v. Le Groupe 

Videotron Ltee, 978 F. Supp. 483, 489 (S.D.N.Y. 1997) (emphasis added); see also Bates Adver. 

USA, Inc. v. McGregor, 282 F. Supp. 2d 209, 220 (S.D.N.Y. 2003) (misrepresentations “cannot 

serve as a basis for a fraud claim because they concern the same matter as the terms of the 

Purchase Agreement”); John Paul Mitchell Sys. v. Quality King Distribs., Inc., No. 99 Civ. 

9905(SHS), 2001 WL 910405, at*5 (S.D.N.Y. Aug. 13, 2001) (“[P]re-contractual representation 

. . . was the very same promise expressly incorporated into the contract, and [plaintiff] therefore 

may not recover for fraud based upon those pre-contractual representations.”); Four Finger Art 

Factory, Inc. v. Dinicola, No. 99 Civ. 1259(JGK), 2000 WL 145466, at *5 (S.D.N.Y. Feb. 9, 

2000) (plaintiff’s fraud claims were not collateral because contract contained specific provisions 

at issue); Warner Theatre Assocs. Ltd. P’ship v. Metro. Life Ins. Co., No. 97 Civ. 4914(SS), 1997 

WL 685334, at *5 (S.D.N.Y. Nov. 4, 1997) (“[M]isrepresentations . . . are in no sense ‘collateral’ 

to the Agreement. . . . [T]hey involve a term negotiated by the parties – a matter at the very heart 

of the Agreement.”).11 

 

agency relationship must itself meet the requirements of Rule 9(b). See Kolbeck v. LIT Am., Inc., 

923 F. Supp. 557, 569-70 (S.D.N.Y. 1996), aff’d, 1998 WL 406036 (2d Cir. 1998). 

11 None of the cases cited by Plaintiffs holds that a statement appearing in a contract can be 

collateral to that contract. Such a holding would defy logic and would be irreconcilable with the 

weight of authority set forth above. In First Bank of the Ams. v. Motor Car Funding, Inc., 690 

N.Y.S.2d 17, 22 (N.Y. App. Div. 1999), for example, the relevant contract contained a general 

requirement that loans would meet certain underwriting criteria. The representations on which 

the fraud claim was based, by contrast, were statements concerning the attributes of individual 

loans not addressed by the general contractual warranty. See In re Enron Corp., No. 04 Civ. 

1367(NRB), 2005 WL 356985, at *11 n.44 (S.D.N.Y. Feb 15, 2005) (distinguishing First Bank 

of the Ams. on this basis). Nor do the opinions in Triangle Underwriters, Inc. v. Honeywell, Inc., 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 21 of 33
15 

 Here, Defendants’ alleged misrepresentations are encompassed by express provisions of 

the MPPAs. Plaintiffs admit that “[i]t is, of course, statements ‘set forth [in the MPPAs]’ whose 

substance is at the heart of the claims of fraudulent representation.” Opp. at 20; Rev. Mem. at 8 

(“Plaintiffs have alleged they were relying on . . . several of the very representations and 

warranties set forth [in the MPPAs]”). Nonetheless, they seek reconsideration by claiming 

certain pre- and post-contractual statements were collateral to the MPPAs. Rev. Mem. at 6-7. 

There are several flaws with that argument. First, the timing of the alleged misrepresentations – 

i.e., whether it is pre- or post-contractual – is irrelevant. “A false promise, whenever made, 

cannot give rise to a fraud claim where that promise is directly incorporated into a written 

contract between the parties.” Int’l CableTel, 978 F. Supp. at 489. 

 Second, each alleged pre-contractual misrepresentation, see Rev. Mem. at 7 (citing 

Compl. ¶¶ 27-33, 35-39, 87), is encompassed by express terms of the MPPAs (or drafts thereof, 

which Plaintiffs admit are “substantially identical” to the final, executed versions). See, e.g, 

SAC ¶ 35 (Ritchie I MPPA); id. ¶ 37 (Ritchie II MPPA); id. ¶ 36 (draft of Ritchie II MPPA); id.

¶ 104 (Count VI of Compl.). Indeed, a comparison of the those alleged misrepresentations with 

the express terms of the MPPAs reveals the duplication and the flaw in Plaintiffs’ arguments. 

Compare alleged misstatements found in Compl. ¶ 28 (“[P]olicies in which Coventry transacts 

have no legal taint . . .”); id. ¶ 39 (“Coventry . . . was scrupulous about complying with 

regulatory requirements.”); and id. ¶ 87 (representations concerning circumstances under which 

policies were obtained and existence and target of the [NYAG’s] investigation); with Exs. 1-4 § 

3.02(a)(ii)(A) (“Seller shall have taken all reasonable actions . . . to protect and perfect the 

ownership of the Seller in such policy . . . .”); id. § 3.02(b) (Life Settlement Policies were, to 

Seller’s knowledge, lawfully originated); id. § 3.01(a)(v) (transactions contemplated by MPPAs 

 

604 F.2d 737 (2d Cir. 1979), Deerfield Comms. Corp. v. Chesebrough-Ponds, Inc., 502 N.E.2d 

1003 (N.Y. 1986) and Bd. of Mgrs. of 411 E. 53rd St. Condo. v. Dylan Carpet, Inc., 582 

N.Y.S.2d 1022, 1023 (N.Y. App. Div. 1991), consider the proposition – much less hold – that a 

representation appearing in a contract can be collateral to that contract. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 22 of 33
16 

will not violate any applicable law); and id. § 3.01(a)(vi) (“There is no action, suit or proceeding 

before any . . . governmental agency . . . seeking any determination or ruling that might 

materially and adversely [a]ffect the performance by the Seller of its obligations under . . . this 

Agreement.”). 

 Third, the post-contractual misrepresentations alleged by Plaintiffs are likewise 

encompassed by the MPPAs. Plaintiffs claim: (1) Coventry failed “to disclose or describe a 

subpoena received from the NYAG in a manner that would have revealed it to be a target of the 

investigation,” Compl. ¶ 50; (2) Defendants stated they were not a likely target of that 

investigation, id. ¶ 51; and (3) “Coventry implied that Defendants were not engaging in the type 

of Policy origination practices targeted by the NYAG. Id. Each these alleged misrepresentations 

are covered by the MPPAs. See Exs. 1-4 § 3.01(a)(vi) (“There is no action, suit or proceeding 

before or by any court . . . or other governmental agency . . . against or affecting the Seller or its 

assets or properties . . . seeking any determination or ruling that might materially and adversely 

[a]ffect the performance by the Seller of its obligations under, or the validity or enforceability of, 

this Agreement.”); id. ¶ 3.02(b) (Policies were lawfully originated). 

E. The Court Did Not Overlook Plaintiffs’ Claim for Special Damages. 

 Plaintiffs did not plead special damages in their Complaint.12 When Defendants noted 

Plaintiffs’ failure to allege special damages, see Mot. to Dismiss at 17, Plaintiffs did not respond. 

See Opp. at 16-18. The Court likewise recognized Plaintiffs’ failure to allege special damages. 

Ritchie, 2007 WL 2044656, at *7 (“The plaintiffs have not pointed to . . . any special damages.”). 

Nonetheless, to revive their fraud claim, the Investing Plaintiffs claim – for the first time – “they 

are prepared to prove that at least some of them did suffer special damages.” Rev. Mem. at 7 

(emphasis in original). Not only is it too late to raise this argument, see Nat’l Union Fire Ins. 

 

12 This is evidenced by the fact that Plaintiffs’ citations for this argument are almost entirely to 

their proposed Second Amended Complaint. See Rev. Mem. at 7 (citing SAC ¶¶ 92-94, 110, 

116). Indeed, Plaintiffs have not previously alleged they incurred transaction costs from the 

securitization transaction. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 23 of 33
17 

Co., 265 F.3d at 115, but the argument is substantively flawed. 

 1. Plaintiffs Did Not Incur Special Damages Related to Ritchie IV. 

 The Investing Plaintiffs claim they “were induced to enter into the Ritchie IV 

arrangement by Coventry’s fraudulent conduct in connection with Ritchie I and Ritchie II.” 

SAC ¶ 92; see also id. (identifying “fraudulent conduct” as alleged misrepresentations set forth 

in SAC ¶¶ 55-58 and 71-79). These Plaintiffs allege they incurred “substantial transaction costs 

and opportunity costs”13 in “setting up” Ritchie IV. SAC. ¶ 92; Rev. Opp. at 7. The Investing 

Plaintiffs incorrectly claim these transactions costs constitute special damages. Id. ¶ 94. 

 First, the Ritchie IV “arrangement” was actually a MPPA between LST I and Ritchie IV, 

the terms of which are materially identical to the Ritchie I and II MPPAs. See Ex. 4. The 

Investing Plaintiffs did not “enter into” this contract at all. Id. Instead, these entities are linked 

to Ritchie IV through their commitment of capital, i.e., their investment in Ritchie IV. See SAC 

¶ 92. And the alleged representations on which they base their claim for special damages – like 

those underlying all of Plaintiffs’ fraud allegations – are directly incorporated in the MPPAs. 

Compare SAC ¶¶ 55-58, 71-79 with Ex. 1-4 §§ 3.01(a)(v), 3.01(a)(vi), 3.02(a)(ii)(A), and 

3.02(b). Accordingly, any losses incurred by the Investing Plaintiffs are properly sought by 

Ritchie IV through a breach of contract action.14 

 Second, the Investing Plaintiffs fail to allege special damages with specificity. Federal 

Rule of Civil Procedure 9(g) requires special damages to be “specifically stated.” Fed. R. Civ. P. 

9(g); Draskicevic, 2004 WL 1575393, at *2; Advanced Marine Techs., Inc. v. Burnham Sec., 

 

13 Under New York law, the measure of damages for fraud is governed by the “out-of-pocket” 

rule, which permits “indemnity for the actual pecuniary loss sustained as a direct result of the 

wrong,” and bars “recovery of profits which would have been realized in the absence of fraud.” 

Lama Holding Co. v. Smith Barney Inc., 668 N.E.2d 1370, 1374 (N.Y. 1996) (citations and 

internal quotation marks omitted). Thus, lost opportunity costs cannot constitute special 

damages, as they are not recoverable under Plaintiffs’ fraud claims. 

14 At least two of the three Investing Plaintiffs, by signing an amendment to the Ritchie IV 

Intercreditor Agreement, agreed to hold Defendants “harmless” and agreed that “no party shall 

have any right to make any claim or seek remedies relating to any liabilities arising from the 

Transaction Documents.” Ex. 10 at § 8.1(b); see also SAC ¶ 4 (defining “Investing Plaintiffs”). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 24 of 33
18 

Inc., 16 F. Supp. 2d 375, 383 (S.D.N.Y. 1998) (special damages under Bridgestone must be 

pleaded specifically under Rule 9(g)).15 That requires the non-contracting Plaintiffs to “allege 

actual damages with particularity and specify facts showing that such special damages were the 

natural and direct result of the defendant’s conduct . . . .” Browning v. Clinton, 292 F.3d 235, 

245 (D.C. Cir. 2002) (quotation and internal punctuation omitted). Here, the non-contracting 

Plaintiffs ignore Rule 9(g) by failing to identify (1) the Plaintiff that allegedly incurred 

“substantial transaction costs” associated with Ritchie IV, see SAC ¶¶ 92-94 (special damages 

allegedly incurred by “Investing Plaintiffs” collectively); (2) the nature and type of these 

transaction costs; and (3) the amount of the alleged transaction costs, see id. ¶ 92 (characterizing 

transaction costs merely as “substantial”). The only dollar amount identified by Plaintiffs is their 

allegation of “damages in an amount believed to be not less than $700 million,” which, notably, 

matches the amount claimed under their breach of contract theory. Comp. ¶¶ 90, 96, 101, 106; 

SAC ¶¶ 12, 103, 106,111, 117, 121, 128. Such allegations fail to satisfy Rule 9(g). See San 

Francisco v. Tutor-Saliba Corp., No. C 02-5286 CW, 2005 WL 645389, at *17 (N.D. Cal. Mar. 

17, 2005) (“A specific statement of special damages requires not just the total lump sum, but a 

statement of the specific items which make up the lump sum.”); Barrett v. U.S. Banknote Corp., 

No. 91 Civ. 7420(RPP), 1992 WL 232055, at *8 (S.D.N.Y. Sept. 2, 1992) (denying leave to 

amend where amendment offered neither a specific number nor a specific method of computing 

special damages); Sommer v. PMEC Assocs., No. 88 Civ. 2537, 1992 WL 196748, at *8 

(S.D.N.Y. Aug. 5, 1992) (“Round sums without any attempt at itemization are not sufficient 

allegations of special damages.”); Korry v. Int’l Tel. & Tel. Corp., 444 F. Supp. 193, 197 

(S.D.N.Y. 1978) (undifferentiated damages insufficient). 

 Third, the Investing Plaintiffs cannot claim, for the first time in their SAC, that the 

“fraudulent conduct” that allegedly induced them to enter the Ritchie IV arrangement included 

statements regarding the NYAG investigation. See SAC ¶ 92 (citing ¶¶ 71-79). As an initial 

 

15 Hogan v. Wal-Mart Stores, Inc., 167 F.3d 781, 783 (2d Cir. 1999) (“The form in which claims 

for special damages must be stated is a procedural question governed by Fed. R. Civ. P. 9(g).”).

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 25 of 33
19 

matter, that claim was not made within 10 days after the Court entered its July 18, 2007 Order 

and, therefore, must satisfy Rule 60(b). Compare SAC ¶ 92 (filed on August 8, 2007) with First 

Am. Compl. ¶ 92 (timely filed but citing only ¶¶ 55-58). See also Weissman v. Dawn Joy 

Fashions, Inc., 214 F.3d 224, 230 (2d Cir. 2000) (court may not extend time to file a motion for 

reconsideration as Rule 59(e) is jurisdictional); Feldberg v. Quechee Lakes Corp., 463 F.3d 195, 

197 (2d Cir. 2006) (“[p]ermitting the [party] to supplant the[ ] timely yet insufficient 

‘placeholder’ Rule 59(e) motion . . . with the[ ] subsequent augmented filing . . . would afford [ ] 

an easy way to circumvent Rule 6(b)’s prohibition on granting an enlargement of time for filing 

motions under Rule 59(e)”). 

 “A movant under Rule 60(b) must demonstrate ‘exceptional circumstances’ justifying the 

extraordinary relief requested.” Employers Mut. Cas. Co. v. Key Pharms., 75 F.3d 815, 824-25 

(2d Cir. 1996). Here, Plaintiffs have not demonstrated exceptional circumstances. Nor is their 

Plaintiffs newly-minted claim plausible. See Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) 

(factual allegations must render the claim plausible). Indeed, any transaction costs in 

establishing Ritchie IV must have been incurred in the eight days between June 22, 2006 (the 

date of the first alleged misrepresentation, see SAC ¶ 73) and June 30, 2006, by which time 

“Ritchie IV [was] an Irish private limited company, duly organized, validly existing and in good 

standing under the laws of the Republic of Ireland . . . .” See Ex. 4 § 3.01(b)(i). Moreover, fraud 

claims founded on the NYAG investigation conflict with an express disclaimer in the Amended 

and Restated Intercreditor Agreement. Section 7 of that Agreement provides that the “the 

Attorney General Action16 . . . does not . . . constitute . . . an event of default (whether matured or 

unmatured) or termination event under any of the . . . Transaction Agreements.” Ex. 8 ¶ 7. 

“Transaction Agreements” are defined to include, inter alia, the Intercreditor Agreement and the 

MPPA. See Ex. 7 § 1.1. Signatories to the Intercreditor Agreement include all of the so-called 

 

16 The “‘Attorney General Action’ means the action commenced by the New York Attorney 

General against the Servicer and others filed with the Supreme Court of the State of New York, 

County of New York, Complaint Index No. 404620/06.” Ex. 8 at 2(a)(iii). 

 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 26 of 33
20 

“Investing Plaintiffs.” See SAC ¶ 4; Exs. 7, 8. These entities cannot credibly claim that 

representations incorporated into the MPPAs see SAC ¶¶ 56, 58, 123, give rise to fraud claims 

when they do not give rise to a breach of contract claims. 

 Fourth, Plaintiffs do not allege the parties contemplated the Investing Plaintiffs would 

incur transaction costs in connection with Ritchie IV when the Ritchie I and II MPPAs were 

negotiated and signed. See Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 210 

(2d Cir. 2002) (special damages must have been contemplated by parties at time of contracting); 

Spang Indus., Ft. Pitt Bridge Div. v. Aetna Cas. & Sur. Co., 512 F.2d 365, 368 (2d Cir. 1975) 

(same). Indeed, such a claim would require Plaintiffs to allege the parties anticipated in 2005 

that Ritchie IV would come into existence in June 2006,17 and that the non-contracting Plaintiffs, 

as opposed to any other entity, would incur specific transaction costs in connection therewith.18 

Because Plaintiffs make no such allegations, their claim for special damages fails. See Muller 

Boat Works, Inc. v. Unnamed 52’ House Barge, 464 F. Supp. 2d 127, 148 (E.D.N.Y. 2006) (no 

special damages where defendant had no reason to believe they would be incurred); Project 

Hope v. M/V IBN SINA, NO. 97-CV-3853, 2001 WL 1875854, at *2 (S.D.N.Y. Jul. 17, 2001) 

(special damages only recoverable upon a showing that they were foreseeable and within the 

contemplation of the parties at time contract was made); Kenford Co., Inc. v. County of Erie, 537 

N.E.2d 176, 178-80 (N.Y. 1989) (same). 

 2. Plaintiffs Did Not Incur Special Damages in Connection With the 

 Securitization. 

The Investing Plaintiffs claim for the first time that they incurred “substantial transaction 

costs in connection with the contemplated securitization transaction, which was the subject of 

 

17 The original Ritchie I MPPA was executed on June 30, 2005, see Ex. 1, and the Amended and 

Restated Ritchie I MPPA was executed on September 8, 2005, see Ex. 2. The Ritchie II MPPA 

was executed on December 15, 2005. See Ex. 3. The Ritchie IV MPPA was not executed until 

June 30, 2006. See Ex. 4. 

18 Plaintiffs’ sole allegation relating to the foreseeability of Plaintiffs’ damages is that it was 

foreseeable the Policies would diminish in value when Defendants’ alleged fraud in originating 

the Policies was disclosed. SAC. ¶ 95. Plaintiffs do not allege the parties foresaw the creation of 

Ritchie IV, or that the Investing Plaintiffs would incur any transaction costs related to this entity. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 27 of 33
21 

over a year’s worth of legal, financial, and accounting work.” SAC ¶ 93. These allegations do 

not satisfy Rule 9(g), as Plaintiffs do not identify (1) which of the non-contracting Plaintiffs 

allegedly bore the “substantial transaction costs” associated with contemplated securitization, see

SAC ¶¶ 93-94 (special damages allegedly incurred by “Investing Plaintiffs” collectively); or 

(2) the amount of those alleged costs. See Barrett, 1992 WL 232055, at *8; Sommer, 1992 WL 

196748, at *8; Korry, 444 F. Supp. at 197. 

Moreover, any transaction costs in connection with the securitization would be 

recoverable by Ritchie I and II (if they prevailed) under a breach of contract theory. 

Bridgestone/Firestone, 98 F.3d at 20 (special damages must be “unrecoverable as contract 

damages”). Indeed, Plaintiffs allege each element of such a claim: (1) the Policies to be 

securitized were purchased and owned solely by Ritchie I and II pursuant to the MPPAs, id. ¶¶ 6, 

45, 86; (2) Plaintiffs performed under these agreements, id. ¶ 125; (3) Defendants purportedly 

breached certain representations in these contracts, id. ¶¶123-29; (4) when Ritchie I and II 

purchased Policies the parties were aware that Ritchie I and II intended to “re-sell[] them at a 

future point through a securitization transaction,” Id. ¶¶ 42, 87, 95; and (5) it was foreseeable 

that “Defendants’ misconduct would damage” Ritchie I and II. Id. ¶ 95. These allegations are 

consistent with a claim for breach of contract. See Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d 

Cir. 1996) (breach of contract claim under New York law requires “(1) the existence of an 

agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by 

the defendant, and (4) damages.”); Young v. Dep’t of Justice, 882 F.2d 633, 640 n.9 (2d Cir. 

1989) (damages in contract actions include those that “may reasonably be supposed to have been 

in the contemplation of both parties, at the time they made the contract, as the probable result of 

the breach of it.”). 

Contract damages recoverable by Ritchie I and II do not, however, become “special 

damages” simply because the Investing Plaintiffs are investors in Ritchie I and II and, therefore, 

lack standing to sue Defendants directly for breach of contract. See id. ¶ 90 (Defendants’ alleged 

misconduct “harmed not only the Contracting Plaintiffs, but the Investing Plaintiffs, which are 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 28 of 33
22 

beneficially interested in the Contracting Plaintiffs. . . .”); id. ¶ 45 (Investing Plaintiffs are 

“owners of subordinated securities in Ritchie I and Ritchie II”); id. (non-contracting Plaintiffs 

entitled “to receive the profits of Ritchie I and Ritchie II after other debts have been paid”); id. ¶ 

4 (Investing Plaintiffs are “de facto equity shareholders in [Ritchie I and II]”); see also

discussion at supra section II.B.19 Any harm allegedly suffered by the Investing Plaintiffs in 

connection with the securitization is derivative of that incurred by Ritchie I and II and 

recoverable only by those entities. See SAC ¶ 45. 

III. THE COURT PROPERLY DISMISSED PLAINTIFFS’ FRAUDULENT 

 INDUCEMENT CLAIM. 

 The Court did not disregard controlling law or facts when it dismissed Plaintiffs’ 

fraudulent inducement claim on the ground that it is barred by the MPPAs’ integration clause. 

See Ritchie, 2007 WL 2044656, at **7-8. Plaintiffs attack the Court’s conclusion on several 

grounds, none of which is persuasive. 

 First, Plaintiffs claim the Court failed to recognize that (1) the integration clause provides 

that LST I “has not made any representations or warranties other than as set forth herein.” Rev. 

Mem. at 8; and (2) Plaintiffs have alleged “they were relying on . . . several of the very 

representations and warranties “set forth [there]in” to support their fraudulent inducement 

claims. Plaintiffs’ allegation that Defendants violated the express terms of the MPPAs may be 

pursued, if at all, only by the contracting parties under a breach of contract theory. See 

discussion supra at II.D; Int’l CableTel Inc., 978 F. Supp. at 489 (“[A] false promise, whenever 

made, cannot give rise to a fraud claim where that promise is directly incorporated into a written 

contract between the parties.”) (emphasis added); Ritchie, 2007 WL 2044656, at **7-8 (“These 

 

19 A contrary conclusion would trigger the indemnification and hold harmless provisions of the 

MPPAs, in which Ritchie I, II, and IV agreed to: indemnify the Seller and its Affiliates, and 

agree[d] to hold each of them harmless, with respect to any issuance of debt or equity securities 

of the Purchaser or its subsidiaries or the marketing, offer or sale thereof or of any Life 

Settlement Policies to any persons not affiliated with Coventry First. . . .” Exs. 1-4, Ex. B at B-2. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 29 of 33
23 

representations or concealments are not extraneous to the contract, and therefore must be 

asserted as a breach of contract claim and not as a fraudulent inducement claim.”). 

Second, Plaintiffs claim the Court disregarded their allegation that Defendants’ alleged 

misrepresentations induced not only the Ritchie I and II MPPAs, but other contracts and the 

“Ritchie IV arrangement” as well. Rev. Mem. at 9. To support this claim, Plaintiffs cite to 

paragraphs 64 and 94 of their Complaint. Id. These paragraphs, however, do not identify any 

contract besides the MPPAs as having allegedly been induced by Defendants. Paragraph 64 

simply repeats Plaintiffs’ allegation that Defendants induced them to enter into the Ritchie IV 

“arrangement,” which is a euphemism for the Ritchie IV MPPA. See Ex. 4. Paragraph 94 says 

only that Defendants’ alleged misrepresentations induced Ritchie I and II to enter into “among 

other agreements, the policy purchase agreements.” Plaintiffs do not say what these other 

agreements were or, more significantly, how Plaintiffs were harmed by entering into them. See 

Meadowlands Inv., LLC v. CIBC World Mkts. Corp., No. 04 Civ. 7328(DAB), 2005 WL 

2347856, at *5 (S.D.N.Y. Sept. 22, 2005) (fraudulent inducement must be pleaded with 

particularity).20 To the contrary, Plaintiffs’ damages theory is based on the alleged devaluation 

of Policies purchased by Ritchie I and II under the MPPAs, not any action taken pursuant to any 

other agreement. See Compl. ¶ 58 (“The market value of those policies has greatly diminished 

since the [NYAG]’s action was commenced.”); ¶ 59 (“Each of the [P]laintiffs anticipated a profit 

from the planned sale of the policies in a secured transaction); ¶ 62 (“Defendants’ misconduct 

has thus directly interfered with the salability and value of the life insurance policies at issue.”). 

Whether Defendants’ alleged misrepresentations also caused Plaintiffs to enter into other 

agreements is irrelevant to their theory of harm, does not form the basis of Plaintiffs’ fraud 

claims, is not pleaded with particularity, and is insufficient to salvage their fraud claims. 

 

20 Plaintiffs’ attempts “to make these allegations clearer,” Rev. Mem. at 9, do not save their 

claims. See SAC ¶ 80 (Plaintiffs continued purchasing policies and entered into the Ritchie IV 

arrangement); Id. ¶ 92 (Plaintiffs induced to enter the Ritchie IV arrangement); id. ¶ 113 

(MPPAs and agreements relating to Ritchie IV); id. ¶ 115 (Contracting Plaintiffs entered into 

MPPAs and Investing Plaintiffs entered into the Ritchie IV arrangement). 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 30 of 33
24 

Finally, Plaintiffs claim the MPPAs’ integration clause cannot bind the Investing 

Plaintiffs, which are not parties to those agreements. See Rev. Mem. at 9 (“[T]he Investing 

Plaintiffs, as well as most of the Coventry Defendants are not signatories to the MPPAs [and] 

cannot possibly be affected . . . by the integration clause in the MPPAs.”). This argument fails, 

however, because the Investing Plaintiffs’ inability to state a claim under the MPPAs reflects that 

they are mere investors in Ritchie I, II, and IV, and that their alleged harm is derivative of that 

purportedly suffered by these entities. See supra section II.B; SAC ¶ 45 (“The Investing 

Plaintiffs. . . committed capital to, and became owners of subordinated securities in, Ritchie I and 

Ritchie II, which entitled the Investing Plaintiffs . . . to receive the profits of Ritchie I and Ritchie 

II after other debts have been paid.”). 

IV. THE COURT PROPERLY CONCLUDED PLAINTIFFS FAILED TO PLEAD 

 PERSONAL JURISDICTION OVER MONTGOMERY CAPITAL. 

 The Court did not miss controlling law or facts when it allowed Plaintiffs to replead 

personal jurisdiction under RICO. Plaintiffs challenge the Court’s determination that “[p]ersonal 

jurisdiction has not sufficiently been pled in the complaint as to the . . . RICO claims. . . .” 

Ritchie, 2007 WL 2044656, at *10. Plaintiffs allege the Court ignored the fact that Montgomery 

Capital, Inc. is “licensed to do business in New York [and] is subject to jurisdiction in New York 

on any claim.” Rev. Mem. at 10. The Complaint, however, is devoid of allegations suggesting 

Montgomery Capital is licensed to do business in New York or that it is otherwise subject to 

jurisdiction under the RICO statute. See Compl. ¶¶ 2, 5, 12. Instead, Plaintiffs argued for the 

first time in their Opposition that Montgomery Capital “has long been licensed to do business in 

New York, with a New York agent for service of process.” Opp. at 3. For this proposition, 

Plaintiffs rely on an affidavit from their counsel. See id. (citing Robbins Decl. Ex. 2). That 

affidavit, however, does not purport to be based on personal knowledge and the exhibits attached 

thereto are not self-authenticating. See id.21 Consequently, it does not provide a basis for 

 

21 A domestic public document is self-authenticating if it satisfies Fed. R. Evid. 902. Here, the 

only document that potentially satisfies that rule is the Delaware Secretary of State Certificate of 

Good Standing attached as exhibit two to the Declaration of Lawrence S. Robbins. See Fed. R. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 31 of 33
25 

establishing personal jurisdiction over Montgomery Capital. See Kamen v. A.T. & T. Co., 791 

F.2d 1006, 1011 (2d Cir. 1986) (refusing to consider attorney affidavit that is not based on 

personal knowledge).; Zurich Am. Ins. Co. v. Dah Sing Bank, Ltd., No. 03 Civ. 7778(DLC), 2004 

WL 1328215, at *1 n.2 (S.D.N.Y. Jun. 15, 2004) (Cote, J.) (same). 

 Moreover, to prevail on their motion for reconsideration, Plaintiffs must show the Court 

overlooked controlling decisions or data that would have altered the outcome of the original 

ruling. See Shrader, 70 F.3d at 257. Here, the outcome would not have changed, as the Court 

expressly granted Plaintiffs an opportunity to “replead on the personal jurisdiction under RICO. . 

. .” Ritchie, 2007 WL 2044656, at *10. Thus, even if the Court erred – which it did not – 

Plaintiffs are free to amend their Complaint to allege Montgomery Capital is subject to 

jurisdiction under the RICO statute. See 18 U.S.C. § 1965(a). 

CONCLUSION

 For the foregoing reasons, Plaintiffs’ Motion for Reconsideration and for Leave to File 

Counts III, IV, and V of Their Proposed Second Amended Complaint should be denied.

 

Evid. 902(1). That document, however, simply indicates Montgomery Capital is a Delaware 

corporation in good standing and does not provide a basis for conferring personal jurisdiction 

over Montgomery Capital in New York. 

Case 1:07-cv-03494-DLC Document 56 Filed 09/21/2007 Page 32 of 33
CERTIFICATE OF SERVICE

I hereby certify that, on this 21st day of September, 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 56 Filed 09/21/2007 Page 33 of 33