Court Opinion

ID: 620490
Source: CourtListenerOpinion
Date Created: 2012-01-09 16:36:56+00
Date Added: 2024-06-11T17:50:52.555291
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 12a0016n.06

                                          Case No. 10-3168                                   FILED
                                                                                        Jan 09, 2012
                           UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT                             LEONARD GREEN, Clerk

 PATRICK COLE, et al.,                                  )
                                                        )
         Plaintiffs-Appellants,                         )
                                                        )       ON APPEAL FROM THE
                 v.                                     )       UNITED STATES DISTRICT
                                                        )       COURT FOR THE NORTHERN
 KEVIN HARRIS, et al.,                                  )       DISTRICT OF OHIO
                                                        )
       Defendants-Appellees.                            )
 _______________________________________                )

BEFORE: BATCHELDER, Chief Judge; SUHRHEINRICH and GRIFFIN, Circuit Judges.

        ALICE M. BATCHELDER, Chief Circuit Judge. The plaintiffs “invested” almost $22

million with the defendants based on the defendants’ promise of 5% or more per month in profits

with only 20% of the money at risk. The “investment” turned out to be a Ponzi scheme.

        The plaintiffs sued, claiming numerous securities-law violations, including violations of

Section 10(b), Rule 10B-5, and Section 17(a), as well as common law fraud, breach of contract,

breach of fiduciary duty, conversion, civil RICO, Ohio Revised Code § 2923.32(A)(3) corrupt

activities, and Ohio Revised Code § 1707.44 false representations in sales of securities. The parties

agreed to determination by a magistrate judge.

        One defendant moved the court to dismiss the complaint pursuant to Federal Rule of Civil

Procedure 9(b) and the Private Securities Litigation Reform Act (PSLRA), on the basis that the

plaintiffs had failed to allege fraud with particularity. The plaintiffs replied that “the amended

complaint’s allegations of fraud are sufficiently specific.” Six days later, another defendant moved

to dismiss, also citing the plaintiffs’ failure to plead with particularity. The plaintiffs replied that
No. 10-3168, Cole, et al. v. Harris, et al.

because their complaint alleged a Ponzi scheme, the defendants were well aware of the charges

against them and the complaint was sufficiently particular and needed no further amendment.

         The magistrate judge found, pursuant to Rule 9(b), that the plaintiffs had failed to plead the

common-law-fraud claim with sufficient particularity; the court dismissed that claim without

prejudice. The court dismissed the RICO claims as stipulated by the parties, and declined to exercise

supplemental jurisdiction over the remaining state law claims.

         The court also found that the plaintiffs had failed to plead the federal-securities-law claims

with the particularity required by the PSLRA, and dismissed those claims with prejudice. In

dismissing with prejudice, the court relied on Sixth Circuit case law in which we held that “allowing

repeated filing of amended complaints would frustrate the purpose of the PSLRA.” See PR

Diamonds, Inc. v. Chandler, 364 F.3d 671, 700 (6th Cir. 2004); Miller v. Champion Enters Inc., 346
F.3d 660, 690 (6th Cir. 2003). The court denied the plaintiffs an opportunity to further amend their

complaint because they had already argued — in response to both motions to dismiss for lack of

particularity — that the complaint was fine as written and no amendment was necessary. Both Miller

and PR Diamonds support the denial of the motion to amend, and the court was justified in relying

on those cases.

         After carefully reviewing the record, the law, and the arguments on appeal, we conclude that

the court’s orders correctly set out the applicable law and correctly apply that law to the facts in the

record. The issuance of a full written opinion by this court would serve no useful purpose.

Accordingly, for the reasons stated in the magistrate judge’s Memorandum Opinion and Orders, we

AFFIRM.

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