De Rothschild v. Serlin

Background

Charles Gregoire de Rothschild sued Jordan D. Serlin after their business relationship involving Conundrum Capital LLC failed. The complaint asserted claims for fraudulent inducement, fraud, breach of contract, tortious interference with contractual relations, violation of the Investment Advisers Act of 1940, negligent infliction of emotional distress, defamation, and loss of reputation.

The complaint alleged that Serlin offered de Rothschild’s company, GDR Privée, a one-third membership interest in Conundrum to induce de Rothschild to join the business. Later amendments allegedly gave de Rothschild a 49 percent ownership interest and 50 percent of Conundrum’s profits. De Rothschild alleged that Serlin failed to provide access to Conundrum’s records, failed to pay his share of profits, dissolved Conundrum without his knowledge or written approval, and used Conundrum’s assets to create Eagle International, LLC.

De Rothschild also alleged that Serlin made false reports to the New York City Police Department and the Federal Bureau of Investigation and spread false rumors that damaged de Rothschild’s reputation. The complaint alleged that de Rothschild learned of Serlin’s alleged misconduct through an investigation completed in or around January 2014.

Motion to Dismiss

Serlin moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legally recognized claim. He argued that the claims were barred by earlier Florida litigation, were filed too late, duplicated the contract claim, were brought by a person without standing to enforce the contract, lacked a basis for disregarding the company’s separate legal identity, lacked a private right of action under the Investment Advisers Act, and were inadequately pleaded.

The court granted the motion. It concluded that the fraud claims were untimely under both New York and Florida law. Under New York law, the claims expired no later than 2018 under an accrual theory or January 2016 under a discovery theory. Under Florida law, even assuming discovery in January 2014, the claims expired in January 2018. The case was filed in December 2019.

The breach-of-contract claim was governed by Florida law under the Operating Agreement. Because the latest alleged breach occurred in February 2012, the court held that the five-year limitations period expired in 2017.

The court held that the tortious-interference and negligent-infliction-of-emotional-distress claims were also untimely. Those claims were based on alleged conduct occurring no later than 2013, so they expired in 2016 under New York law and in 2017 under Florida law.

The defamation claims based on the reports to the police and the Federal Bureau of Investigation were untimely. The court recognized that allegations of defamation as recently as 2019 could potentially be timely, but ruled that those allegations were too vague. The complaint did not identify or describe the alleged statements, specify when they were made, or identify the people to whom they were communicated. Statements attached to the complaint from other individuals did not show that Serlin had made defamatory statements about de Rothschild.

The separate loss-of-reputation claim was treated as a defamation claim because neither New York nor Florida recognizes an independent common-law claim for loss of reputation. It was therefore time-barred to the same extent as the defamation claim.

The court also rejected the Investment Advisers Act claim. It explained that the Act provides a limited private remedy to void an investment-advisory contract when its formation or performance violates the Act. De Rothschild alleged that Serlin failed to permit access to Conundrum’s books, but did not allege that the Operating Agreement was an investment-advisory contract or seek to void that agreement. The complaint therefore did not state a claim under the Act.

Leave to Amend and Disposition

De Rothschild requested permission to file an amended complaint if the court found defects. The court denied that request because de Rothschild offered no plausible argument that amendment could make the claims timely. The court also found that the 2019 defamation allegation was vague and conclusory and that de Rothschild had not shown that amendment could cure the defect.

The court granted Serlin’s motion to dismiss and directed the clerk to terminate the motion. The opinion does not separately state a disposition for each individual claim beyond granting the motion as a whole.