United States District Court, D. Delaware
KEYSTONE ASSOCIATES LLC, and CABLE MOUNTAIN PARTNERS LLC, Plaintiffs,
BARCLAYS BANK PLC, Defendant.
Timothy R. Dudderar, Jonathan A. Choa, Potter Anderson &
Corroon LLP, Wilmington, Delaware. David J. Jordan, Michael
R. Menssen, Stoel Rivers LLP, Salt Lake City, Utah. Counsel
S. Saunders, Skadden, Arps, Slate, Meagher & Flom LLP,
Wilmington, Delaware. Jeffrey Geier, Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. Counsel for
NOREIKA, U.S. DISTRICT JUDGE.
Keystone Associates LLC (“Keystone”) and Cable
Mountain Partners LLC (“Cable Mountain, ” and
collectively, “Plaintiffs”) have sued defendant
Barclays Bank PLC (“Barclays”) for securities
fraud, common law fraud, and negligent misrepresentation.
Currently before the Court is Defendant's motion to
dismiss the complaint pursuant to Rules 12(b)(1),
12(b)(6) and 9(b) of the Federal Rules of
Civil Procedure as well as the Private Securities Litigation
Reform Act of 1995, 15 U.S.C. § 78u-4.
(“PSLRA”) (D.I. 8). The Court has subject matter
jurisdiction over this action pursuant to 28 U.S.C.
§§ 1331 and 1367. For the following reasons,
Defendant's motion to dismiss is GRANTED.
three separate transactions between February 18, 2016 and
January 30, 2017, Plaintiffs invested $2, 500, 000 in Elkhorn
Capital Group, LLC (“Elkhorn”) based on alleged
misrepresentations about Elkhorn's relationship with
Barclays. (D.I. 1 ¶ 19). The complaint provides no
details regarding the transactions, such as which entity
actually purchased the securities, on what dates, for how
much, on what terms, and whether that entity still holds
those securities today. Instead, the complaint simply states
that the “three transactions all included the sale of
non-registered securities.” (Id.). The
complaint also does not allege that Barclays had any role in
connection with the sale of Elkhorn securities or that
Plaintiffs ever interacted with Barclays, either in
connection with their purchases of Elkhorn securities or
to the complaint, Plaintiffs engaged in all three
transactions based on the same misrepresentation.
Specifically, on February 6, 2016, Elkhorn sent Plaintiffs an
email stating that Barclays committed to providing Elkhorn
“a total of $5, 000, 000 in capital, ” with $3,
000, 000 being a 5-year interest only loan and the remainder
being an annual marketing agreement for $500, 000 every May
through 2018. (Id. ¶ 16). Elkhorn
“prominently advertised its partnership with Barclays
on its website.” (Id. ¶ 11). Elkhorn
included a link on its website to the following statement
Barclays made in a July 2015 press release about its
partnership with Elkhorn:
This partnership allows us to offer our clients an expanded
range of investment opportunities. We're enhancing
efficiency in product delivery, and matching that with
innovation in investment content. Elkhorn's
multi-dimensional setup is very complementary to
Barclay's business, and very aligned to investors'
(Id. ¶ 9; D.I. 10, Ex. 1, “the Barclays
complaint alleges that the annual $500, 000 marketing payment
was contingent upon Elkhorn selling $100, 000, 000 of
Barclays' products annually, and it was not, as they were
led to believe, “guaranteed money.” (Id.
¶ 21). The complaint alleges that by time Plaintiffs
made their first investment in Elkhorn in February 2016,
Barclays knew that Elkhorn had no realistic possibility of
meeting the contingency requirements and receiving the $500,
000 marketing payment. (Id. ¶ 22). Barclays
also knew that the representations it made in its statement
about Elkhorn were no longer true. (Id. ¶ 23).
Yet, Barclays continued to allow Elkhorn to advertise their
partnership. (Id.). Elkhorn is now insolvent, and
Plaintiffs' investments are “essentially
worthless.” (Id. ¶ 25).
survive a motion to dismiss, a civil plaintiff must allege
facts that ‘raise a right to relief above the
speculative level on the assumption that the allegations in
the complaint are true (even if doubtful in
fact).'” Victaulic Co. v. Tieman, 499 F.3d
227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). Dismissal under Rule
12(b)(6) is appropriate if a complaint does not contain
“sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570);
see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210
(3d Cir. 2009). A claim is facially plausible “when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S.
at 678. The factual allegations do not have to be detailed,
but they must provide more than labels, conclusions, or a
“formulaic recitation” of the claim elements.
Twombly, 550 U.S. at 555-56. The Court is not
obligated to accept as true “bald assertions” or
“unsupported conclusions and unwarranted
inferences.” Morse v. Lower Merion Sch. Dist.,
132 F.3d 902, 906 (3d Cir. 1997); Schuylkill Energy Res.,
Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d
Cir. 1997). Instead, “[t]he complaint must state enough
facts to raise a reasonable expectation that discovery will
reveal evidence of [each] necessary element” of a
plaintiff's claim. Wilkerson v. New Media Tech.
Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008)
(internal quotation marks omitted). The court must accept all
well-pleaded factual allegations in the complaint as true and
draw all reasonable inferences in favor of the plaintiff.
In re Rockefeller Ctr. Prop., Inc. Sec. Litig., 311
F.3d 198, 215 (3d Cir. 2002). The court's review is
limited to the allegations in the complaint, exhibits
attached to the complaint, and documents incorporated by
reference. Procter & Gamble Co. v. Nabisco Brands,
Inc., 697 F.Supp. 1360, 1362 (D. Del. 1988).