Kirk v. Citigroup Global Markets Holdings Inc.

Background

David Kirk, proceeding without a lawyer, sued Citigroup Global Markets Holdings, Inc. (CGMHI), alleging violations of Sections 11 and 12(a)(2) of the Securities Act, Section 10(b) of the Securities Exchange Act, and common-law fraud under New York law. Kirk alleged that he purchased UWT exchange-traded notes linked to the S&P GSCI Oil Index and that the notes lost more than half their value during March 17–19, 2020. He alleged that the notes should have risen by 73.17% on March 19 because the index rose by 24.39%, but instead rose by only 23%. He sought compensatory and punitive damages.

The notes’ pricing supplement warned that they were highly risky, intended primarily as daily trading tools, and could experience significant volatility. It also stated that secondary-market trading prices were determined by market supply and demand and could differ significantly from the notes’ indicative value. The court treated Kirk’s third amended complaint as the operative complaint. The Court of Appeals for the Second Circuit had previously vacated an earlier dismissal for lack of diversity jurisdiction, holding that Kirk’s allegations sufficiently invoked federal securities law to establish federal-question jurisdiction.

The Court’s Analysis

The court held that Kirk failed to state a claim under Sections 11 and 12(a)(2) of the Securities Act because he did not identify a material false statement or omission. The court concluded that the pricing supplement disclosed the risks about which Kirk claimed he was misled, including that the notes’ secondary-market prices might not track the index or the notes’ indicative value. The court also held that Kirk’s Section 10(b) claim failed because he did not identify a fraudulent statement. It therefore did not address CGMHI’s remaining arguments concerning that claim.

The court separately held that it lacked subject-matter jurisdiction over Kirk’s New York fraud claim because his alleged compensatory damages were $43,300, below the $75,000 diversity-jurisdiction threshold, and his punitive-damages allegations did not support including the requested punitive damages in the jurisdictional amount. The court stated that, even if jurisdiction existed, the state-law fraud claim would fail because Kirk had not adequately alleged a false or fraudulent statement. The court declined to exercise supplemental jurisdiction over the state claim because it dismissed the federal claims.

Other Requests and Disposition

The court denied Kirk’s renewed request for pro bono counsel. It explained that Kirk had not shown that his claims were likely to have substance and that his assertion that the earlier appellate decision had affirmed the merits was incorrect. That appellate decision addressed only federal-question jurisdiction, not whether Kirk stated a valid claim.

The court ordered Kirk to submit a letter clarifying which documents he sought and how he wanted to receive them. After that issue was resolved, the court would allow him to file an amended complaint. The court granted CGMHI’s motion to dismiss without prejudice and directed the clerk to terminate the motion. Judge Andrew L. Carter, Jr. did not state that the dismissal itself was with prejudice.