CP Stone Fort Holdings, LLC v. Doe(s)

Northern District of Illinois, ilnd-1:2016-cv-04991

ORDER signed by the Honorable Robert W. Gettleman on 10/3/2017: Motion {{53}} to compel John Doe No. 1 to reveal its identity is granted. The portion of that motion that seeks to compel John Doe #1 to identify transactions is denied without prejudice. Motion to dismiss {{57}} is denied. Defendant John Doe #1 is directed to answer the second amended complaint on or before 10/18/2017. A joint status report is due by 10/20/2017. Status hearing date of 10/5/2017 is reset to 10/26/2027 at 9:00 a.m. Mailed notice

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Case: 1:16-cv-04991 Document #: 67 Filed: 10/03/17 Page 1 of 3 PageID #:468 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION CP STONE FORT HOLDINGS, LLC,)) Plaintiff,) Case No. 16 C 4991 v.)) Judge Robert W. Gettleman JOHN DOE(S),)) Defendant.) ORDER Plaintiff CP Stone Fort Holdings, LLC brought a one count amended complaint against certain John Doe defendants alleging that those defendants engaged in a scheme to manipulate the United States Treasury markets in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78(j)(b) and Rule 10b-5(a) and 10b-5(c) promulgated thereunder. Defendant John Doe No. 1 moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing that the amended complaint failed to state a claim because it failed to allege: (1) manipulative acts; (2) facts giving rise to a strong inferences of scienter; (3) reliance; and (4) loss causation. On March 22, 2017, the court issued a memorandum opinion and order granting the motion to dismiss, dismissing the action, and entering judgment for defendant, concluding that plaintiff had sufficiently pled manipulative acts, scienter, and reliance, but had failed to plead loss causation. Plaintiff moved under Fed. R. Civ. P. 59(e) to alter or amend that judgment, arguing that the court had misapprehended the controlling law by applying the Supreme Court's decision in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 342-43 (2005), rather than the analysis from a district court decision that predated Dura. See In re Initial Pub. Offering Sec. Litg., 297 F. Supp.2d 668, 674 (S.D. N.Y. 2003). On May 31, 2017, the court rejected plaintiff's argument, but agreed that plaintiff's failure to plead loss causation was curable. The court Case: 1:16-cv-04991 Document #: 67 Filed: 10/03/17 Page 2 of 3 PageID #:469 granted plaintiff leave to file a second amended complaint limited to adding allegations pleading loss causation. Plaintiff filed its second amended complaint and John Doe No. 1 again moved to dismiss, arguing that the new allegations in that complaint demonstrate that plaintiff cannot plead loss causation. In particular, defendant argues that because plaintiff has now alleged that it traded "similar to a market maker," placing orders at the inside prices on both sides of the market and thereby playing the spread, it has alleged that it would have placed its bids and offers at the exact same prices even without defendant's allegedly deceptive orders. As plaintiff notes, however, if defendant artificially manipulated the spread, plaintiff might have incurred losses (or earned smaller profits) as a result of defendant's actions. Thus, it is plausible that plaintiff can establish loss causation. Whether plaintiff can prove its losses is not required at this stage, "notice pleading applies to allegations of loss causation and plaintiffs are not required to allege the absence of other factors that might have affected the price of securities." Ong v. Sears Roebuck & Co., 459 F.Supp.2d 729, 746 (N.D. Ill. 2006). Plaintiff need only provide defendant with "some indication of the loss." Id. at 746. The second amended complaint provides just that. Consequently, the court concludes that the allegations of loss causation added to the second amended complaint are sufficient to state a claim. Defendant John Doe No. 1's motion to dismiss (Doc. 57) is denied. Finally, because plaintiff has now filed a viable complaint, its motion (Doc. 53) to compel John Doe No. 1 to reveal its identity is granted. The portion of that motion that seeks to compel John Doe #1 to identify the transactions to which it was a counterparty is denied without prejudice. Plaintiff can obtain that information through the discovery process. Defendant John 2 Case: 1:16-cv-04991 Document #: 67 Filed: 10/03/17 Page 3 of 3 PageID #:470 Doe No. 1 (under its/his/her actual name) is directed to answer the second amended complaint on or before October 18, 2017. The parties are directed to file a joint status report using this court's form on or before October 20, 2017. The status set for October 5, 2017, at 10:00 a.m. is stricken. This matter is set for a report on status on October 26, 2017, at 9:00 a.m. ENTER: October 3, 2017 __________________________________________ Robert W. Gettleman United States District Judge 3