Starostenko v. UBS AG

Background

Yuri Starostenko and Irina Tsareva, proceeding without lawyers, asserted federal securities claims and related claims against UBS AG and UBS (Bahamas) Ltd. arising from an alleged investment fraud scheme. The Third Amended Complaint asserted claims under the Securities Act of 1933, the Securities Exchange Act of 1934 and Rule 10b-5, New York common law, the federal Racketeer Influenced and Corrupt Organizations Act, and the Sherman Act. It also referred to the Clayton Act, although that statute was not listed among the five claims for relief.

The court had previously granted permission to file the Third Amended Complaint only for limited purposes: to restore certain claims that had appeared in the First Amended Complaint but were omitted from the Second Amended Complaint, and to clarify that the securities-fraud claims were brought under subsections (a) and (c), rather than subsection (b), of Rule 10b-5. The court did not permit the plaintiffs to add new defendants. The defendants then asked the court to strike the entire Third Amended Complaint or particular allegations and claims.

Ruling

Under Federal Rule of Civil Procedure 12(f), a court may strike insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court explained that striking is generally disfavored but may be appropriate when a party exceeds the scope of permission to amend a complaint.

The court declined to strike the Third Amended Complaint in its entirety and deemed it the operative pleading. It struck paragraph 13, which incorporated the First and Second Amended Complaints by reference. The court had previously instructed the plaintiffs to provide a complete pleading rather than require the court and defendants to search through earlier complaints, affidavits, and exhibits for the relevant allegations.

The court also struck claims first asserted in the Third Amended Complaint: the Securities Act of 1933 claim, the New York common-law claim, and the federal RICO claim. The court stated that these claims were outside the limited permission to amend because they had not appeared in the First Amended Complaint and had not been identified in the plaintiffs’ request to file the Third Amended Complaint. The court added that it would dismiss the Securities Act claim under Section 17(a) because, in its view, that provision does not create a private right to sue. To the extent the Third Amended Complaint asserted a Clayton Act claim, the court struck it for the same reasons.

The court confirmed that the only defendants named in the case were UBS AG and UBS Bahamas. It reaffirmed its earlier decision denying permission to add other defendants. The claims under the Securities Exchange Act and the Sherman Act were not among the claims struck in this order. The defendants were directed to file a consolidated motion to dismiss the Third Amended Complaint by May 3, 2022; the plaintiffs’ opposition was due May 31, 2022; and the defendants’ reply was due June 14, 2022.

Disposition

The court deemed the Third Amended Complaint the operative pleading and struck paragraph 13 and the claims under the Securities Act of 1933, New York common law, and federal RICO. It also struck any Clayton Act claim asserted in the complaint. The court did not strike the entire Third Amended Complaint.