Full opinion text
OPINION AND ORDER SCHEINDLIN, District Judge. A group of investors brings this action to recover losses stemming from the liquidation of two British Virgin Islands (“BVI”) based hedge funds in which they held shares: Lancer Offshore, Inc. and the OmniFund Ltd. (“Funds”). The Funds were managed by Michael Lauer (“Lauer”) through Lancer Management Group, LLC (“Lancer Management”). Plaintiffs bring claims for violations of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against three former directors of Lancer Offshore, Anthony J. Stocks, Kieran Conroy, Declan Quilligan (collectively, “Citco Directors”), and a former administrator of the Funds, Citco Fund Services (Curacao) N.V. (“Cit-co NV,” and together with the Citco Directors, “Citco Defendants”). Plaintiffs also bring a claim under section 20(a) of the Securities and Exchange Act against The Citco Group Limited (“CGL”), based on CGL’s alleged status as a control person of Citco NV. Plaintiffs also bring various common-law claims under New York law against the Citco Defendants, International Fund Services (Ireland) Limited (“IFSI”), a former administrator of the Funds, and Banc of America Securities, LLC (“BAS”), the former prime broker and custodian of the Funds. The Citco Defendants, CGL, IFSI, and BAS now move to dismiss all claims against them. I. BACKGROUND A. The Parties Plaintiffs are eighty-seven investors from a variety of countries, four of whom are located in New York. Each plaintiff invested money in the Funds during the period from 1997 until 2002, with the amount invested ranging from fifty thousand to fifty million dollars. Virtually all of the money invested in the Funds, upwards of five hundred eighty million dollars, has been lost. Citco NV is allegedly a division and wholly-owned and controlled subsidiary of CGL. Citco NV is a business entity organized under the laws of the Netherlands Antilles, with places of business in Curacao, Netherlands Antilles, and Tortola, British Virgin Islands. Citco NV performs fund administration services for hundreds of hedge funds throughout the world, including many in the United States, and receives substantial revenue from sources in the United States, including New York. Citco NV acted as administrator of the Funds until September 2002, at which time it was replaced by IFSI, a business entity organized under the laws of Ireland, with a principal place of business in Ireland. Citco NV assigned three officers, the Citco Directors, to serve as directors of the Funds “in furtherance of their duties on behalf of Citco NV.” Stocks, who resides in London, England, served as a director of Lancer Offshore from 1995 until July 2001, during which time he was also a director of CGL’s International Fund Services division. Conroy, who resides in Dublin, Ireland, served as a director of Lancer Offshore from 1998 until early 2002, during which time he was also a managing director of Citco NV. Quilli-gan, who resides in Curacao, Netherlands Antilles, was a director of Lancer Offshore from 2001 until early 2002, during which time he was also a managing director of Citco NV. The Citco Directors participated in fund administration activities by Cit-co NV directed to the United States and New York. BAS is a New York limited liability corporation with a principal place of business in New York. BAS acted as the prime broker and custodian for the Funds, holding the Funds’ securities in custody “at least through December 3, 2001.” B. The Alleged Scheme All of the claims asserted in the Complaint derive from the same set of operative facts related to mismanagement of the Funds by Lauer and Lancer Management and Lauer in the United States. Plaintiffs allege that their losses were caused by a fraudulent scheme known as “marking the close.” To execute this scheme, Lauer and Lancer Management acquired substantial and sometimes controlling stakes in thinly-traded stocks on behalf of the Funds. Then, prior to the end of the Funds’ reporting periods, Lauer would purchase additional shares of these stocks at significantly higher prices, with the intent of raising the closing market price of the stocks. Each Fund would report its net asset value (“NAV”) based on the artificially high prices, creating the appearance of a portfolio value vastly higher than its true value, and generating large fees for Lauer and Lancer Management. Plaintiffs contend that this scheme was successful due to misrepresentations in the Funds’ private placement memoranda (“PPMs”), monthly newsletters, and other materials. These misrepresentations pertained to the types of investments that would be made by the Funds, the processes for determining the values of securities held by the Funds, and the performance of the Funds’ portfolios. Plaintiffs also allege that “from at least March 2000” they received monthly statements of the Funds’ NAVs which included fraudulently manipulated month-end closing prices of securities held by the Funds. Lancer Offshore’s annual reports for 2000, 2002, and 2003 also contained fraudulent NAV figures. Plaintiffs allege that defendants, as the Funds’ directors and service providers, were pivotal to this fraudulent scheme. 1. Citco Defendants As the Funds’ administrator, Citco NV was responsible for providing various services, including maintenance of the Funds’ corporate records and books of accounts, preparation and dissemination of the Funds’ annual financial statements and quarterly reports, and communication with shareholders and the general public. The PPMs represented that the Citco Directors would fairly and reasonably report the values of securities held by the Funds. The restated audited financial statements for 2000, and audited financial statements for 2001 state that the Funds’ “Board of Directors in conjunction with the investment manager determine at what value the investment securities are reported for the determination of the [NAV] of the Fund.” Plaintiffs claim that the Citco Defendants breached their obligations by failing to conduct a fair and independent valuation of the Funds and failing to disclose irregularities in the conduct of the Funds to investors. Plaintiffs allege that the Citco Defendants are responsible for false statements of the Funds’ NAVs. Citco NV provided materials to investors stating that “Citco NV itself prepares monthly NAV calculations for the Funds” and “each month, Citco NV distributed to each shareholder of the Funds a statement setting forth the NAVs of the Funds.” Plaintiffs allege that the Citco Defendants knew or recklessly disregarded the fact that the “NAV statements, monthly newsletters and offering materials sent to the plaintiffs” included fraudulently inflated NAV figures. Plaintiffs also allege that the Citco Defendants made false statements about their procedures for ensuring accurate valuations of the Funds. Plaintiffs allege that “Citco NV’s marketing materials” and “materials prepared by Citco NV and provided to certain investors” stated that Cit-co followed procedures to ensure accurate valuation of the Funds, such as reconciling manager’s reports with third-party information on pricing. Plaintiffs allege that the Citco Directors made similar misstatements in the PPMs and other offering materials. Plaintiffs allege that these statements were materially false because “Citco NV failed to independently value the portfolios and instead slavishly adhered to the valuations provided by Lauer.” Citco NV “knew or should have known of the fraud because, among other things, three of its employees were also members of the Funds’ Board of Directors.” The Citco Directors, and therefore Citco NV, had “intimate involvement” in the “affairs of the Funds” and “access to non-public information concerning the Funds’ financial affairs and business practices, including periodic internal reports detailing revenues, holdings, and other financial information.” Thus, the Citco Defendants “knew, or should have known, that the valuations provided by Lauer and Lancer Management to Citco NV were false.” 2. IFSI Plaintiffs claim that IFSI, Citco NV’s successor as administrator to the Funds, also negligently disseminated misleading NAV statements based upon Lauer’s false valuations. Plaintiffs also claim that IFSI breached its duty to independently value the portfolios. 3. BAS BAS, as prime broker and custodian to the Funds, allegedly aided and abetted Lauer’s fraud and breach of duty by providing Lauer with dial-in access to its computer network and allowing him to generate false position statements (“BAS Position Reports”) of the Funds’ holdings. BAS employees created BAS Position Reports using valuation information sent to them by Lauer, sometimes by facsimile, without verifying the accuracy of Lauer’s information. These false BAS Position Reports, captioned “Banc of America Securities, LLC; Client Position Summary by Asset Class,” were printed and provided to third parties, including investors and Citco NV, who relied on them to value the Funds. Plaintiffs allege that BAS knew or should have known that Lauer would use the position reports for these purposes. C. Defendants’ Motions to Dismiss The Citco Defendants now move to dismiss the federal securities claims against them on the grounds that plaintiffs have not alleged that those defendants are primarily liable for any misrepresentation or fraudulent act, that plaintiffs have failed to plead scienter, and that the claims are not pled with particularity. CGL joins that motion, arguing that plaintiffs failed to plead that it is a control person under section 20(a), and that it is not liable in the absence of a primary violation of the securities laws by Citco NV. The Citco Defendants also move to dismiss the common-law claims against them, arguing that BVI, not New York law applies. In the alternative, the Citco Defendants argue that plaintiffs have failed to plead their claims under New York law. BAS and IFSI move to dismiss the common-law claims against them on the grounds that those claims are deficient under New York law. The Citco Defendants and CGL move to dismiss all claims against them on the grounds of improper venue and forum non conveniens. Because plaintiffs have failed to plead the scienter of any Citco Defendant, the Citco Defendants and CGL’s motions to dismiss the federal securities law claims are granted. On similar grounds, the Citco Defendants motions to dismiss plaintiffs’ claims against them for common-law fraud, aiding and abetting fraud, and aiding and abetting breach of fiduciary duty are also granted. BAS’s motion to dismiss the claims against it is granted. All other motions are denied. Plaintiffs are given leave to replead to correct the deficiencies identified by this Opinion and Order. II. STANDARD OF REVIEW Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a motion to dismiss should be granted only if “ ‘it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’ ” When deciding a motion to dismiss, courts must accept all factual allegations in the complaint as true, and draw all reasonable inferences in plaintiffs’ favor. Courts generally do not consider matters outside the pleadings but may consider documents attached to, referenced in, or integral to the pleadings. Courts may also take judicial notice of stock prices and press articles, for the fact of their publication. III. DISCUSSION A. Venue CGL and the Citco Defendants move to dismiss for improper venue. Under section 27 of the Securities Exchange Act of 1934, venue is proper in any district “wherein any act or transaction constituting the violation occurred” or “wherein the defendant is found or is an inhabitant or transacts business.” Courts have interpreted the statutory language to mean that the commission of “any non-trivial act in the district establishes venue.” Moreover, “courts in this circuit have been willing to find that venue is appropriate even where based solely on communications (involving the dispute) directed by a party to the forum state.” The valuation fraud underlying plaintiffs’ claims originated and was executed from Lauer and Lancer Management’s offices in New York. Plaintiffs allege that all defendants, including the Citco Defendants, communicated regularly with Lauer and Lancer Management, and that the Citco Defendants distributed misstatements to plaintiffs, including investors in New York. CGL’s liability is premised on the theory that it controlled Citco NV, and therefore, it is sufficient that acts or transactions by Citco NV in furtherance of the scheme occurred in this district. Thus, venue is proper. B. Forum Non Conveniens CGL and the Citco Defendants also move to dismiss based on forum non conveniens, arguing that the action should have been brought in the BVI. The Second Circuit has established a framework for resolving a motion to dismiss based on forum non conveniens. Initially, the court must determine the degree of deference to be afforded to the plaintiffs choice of forum. Deference towards a plaintiffs choice of forum extends even to foreign plaintiffs, where those plaintiffs are not forum shopping, but rather have selected the forum for valid reasons, such as convenience. The greater the degree of deference afforded to the plaintiffs’ choice of forum, the heavier the burden on the defendant to establish first, that an adequate and available alternative forum exists; and second, that the private and public interest factors set forth by the Supreme Court in Gulf Oil Corp. v. Gilbert militate in favor of dismissal. Gilbert’s private interest factors relate to convenience for litigants, and the public interest factors involve the administration of justice. Here, I afford significant deference to the choice of forum of “nearly ninety investors,” including four located in New York, who represent “the overwhelming majority of the Funds’ net investment capital.” CGL argues that the presumption in favor of plaintiffs’ choice of forum does not apply because the case involves investments in BVI funds by predominantly non-U.S. residents. But CGL fails to demonstrate that plaintiffs are engaged in any improper purpose such as forum shopping. Plaintiffs have legitimate reasons for selecting New York, such as convenience' — the majority of the events in this case occurred in New York, and the bulk of relevant evidence and witnesses are Jo-cated here. Moreover, the Second Circuit has held that the interest of the United States in enforcing its securities laws is a “quite valid reason” for suing in federal court. Even assuming that the BVI is an adequate forum, the public and private interest factors weigh in favor of this district. Defendants make no attempt to argue that the private interest factors support the choice of the BVI. With respect to the public interest factors, I have already held that “[t]his case, involving a large number of plaintiffs and defendants from many jurisdictions, can be efficiently heard in the federal court in New York and this Court has a good deal of experience adjudicating complex cases.” Therefore, the motion to dismiss based on forum non conveniens is denied. C. Section 10(b) and Rule 10-b5 1. Prima Facie Case To state a prima facie case for securities fraud under section 10(b) and Rule 10b-5, a plaintiff must allege that “ ‘the defendant, in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that plaintiffs reliance on defendant’s action caused injury to the plaintiff.’ ” The requisite state of mind, or scienter, in a securities fraud action is “ ‘an intent to deceive, manipulate or defraud.’ ” 2. Central Bank In Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., the Supreme Court held that there is no private cause of action under the federal securities laws against aiders and abettors of section 10(b) violations. “The statute prohibits only the making of a material misstatement (or omission) or the commission of a manipulative act. The proscription does not include giving aid to a person who commits a manipulative or deceptive act.” The Second Circuit interpreted Central Bank in Wright v. Ernst & Young LLP, holding that “substantial participation” in the deception is not enough; “a defendant must actually make a false or misleading statement in order to be held liable under Section 10(b).” Furthermore, the defendant “must ‘know or should know" that [its] representation would be communicated to investors.” “[A] secondary actor cannot incur primary liability under the Act for a statement not attributed to that actor at the time of its dissemination [ — ] that is, in advance of the investment decision.” It is not enough for a plaintiff to allege that a defendant merely “knew of the purported fraud through transactions with the defrauders, but failed to expose the deception.” Wright emphasized, however, that Central Bank “did not hold that secondary actors are always free from liability under the Act. Rather, secondary actors like accountants may be held liable as primary violators if all the requirements for primary liability are met.” Wright also held that “[t]here is no requirement that the alleged violator directly communicate misrepresentations to [investors] for primary liability to attach.” It is sufficient to allege that the person communicating the misrepresentations “was speaking on behalf of and at the behest of defendants.” 3. Rule 9(b) and the PSLRA Securities fraud actions are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), and the Private Securities Litigation Reform Act of 1995 (“PSLRA”). To plead a material misrepresentation or omission under the PSLRA “the complaint [must] specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information or belief, the complaint shall state with particularity all facts on which that belief is formed.” Rule 9(b) requires that the complaint “identify the speaker” of the alleged misstatements and also “state where and when the statements were made.” The Second Circuit has held that “[e]ven with the heightened pleading standard under Rule 9(b) and the Securities Reform Act we do not require the pleading of detailed evidentiary matter in securities litigation.” The “group pleading doctrine” allows a plaintiff to rely on “ ‘a presumption that statements in ... press releases, or other group-published information, are the collective work of those individuals with direct involvement in the everyday business of the company.’ ” However, this doctrine is “ ‘extremely limited in scope, applying only to clearly cognizable corporate insiders with active daily roles in the relevant companies or transactions.’ ” The doctrine may apply to out- side directors, who “although almost by definition [are] excluded from the day-today management of a corporation, can fall within the group pleading presumption when, by virtue of their status or a special relationship with the corporation, ... have access to information more akin to a corporate insider.” But a bare allegation that a defendant has inside information, in the absence of any allegation to support a reasonable inference that the defendant had control over the content of the allegedly fraudulent statement, is not sufficient. 4. Scienter The PSLRA requires that a securities fraud complaint “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” “Although speculation and conclusory allegations will not suffice, neither do we require ‘great specificity’ provided the plaintiff alleges enough facts to support ‘a strong inference of fraudulent intent.’ ” Facts giving rise to a strong inference of scienter can be alleged by one of two methods: the plaintiff may plead “motive and opportunity to commit fraud” or “strong circumstantial evidence of conscious misbehavior or recklessness.” a. Motive and Opportunity “Motive [entails] concrete benefits that could be realized by one or more of the false statements and wrongful non-disclosures alleged,” while “[opportunity [entails] the ... likely prospect of achieving concrete benefits by the means alleged.” “Motives ... generally possessed by most corporate directors and officers do not suffice; instead, plaintiffs must assert a concrete and personal benefit to the individual defendants resulting from the fraud.” Specifically, insufficient motives include “the desire for the corporation to appear profitable and ... the desire to keep stock prices high to increase officer compensation.” Regarding the “opportunity” prong, courts often assume that corporations, corporate officers, and corporate directors would have the opportunity to commit fraud if they so desired. b. Conscious Misbehavior or Recklessness When plaintiffs have failed to plead motive and opportunity, “it is still possible to plead scienter by identifying circumstances indicating conscious behavior [or recklessness] by defendant, though the strength of the circumstantial allegations must be correspondingly greater.” Conscious misconduct is relatively easy to identify, “since it encompasses deliberate illegal behavior, such as securities trading by insiders privy to undisclosed and material information ... or knowing sale of a company’s stock at an unwarranted discount.” “Recklessness is harder to identify with ... precision and eonsistency.” To allege recklessness, plaintiff must allege facts showing that the defendant’s conduct was “highly unreasonable, representing an extreme departure from the standards of ordinary care to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it.” A strong inference of recklessness may arise where plaintiffs point to “facts demonstrating that defendants failed to review or check information that they had a duty to monitor, or ignored obvious signs of fraud.” Recklessness is adequately alleged when a plaintiff “specifically alleges defendants’ knowledge of facts or access to information contradicting their public statements.” A purposeful failure to follow an announced policy may also form the basis for an inference of recklessness. B. Analysis of Section 10(b) and Rule 10-b5 Claims Against the Citco Defendants 1. Primary Liability under Central Bank The Citco Defendants argue that plaintiffs’ allegations amount, at best, to a claim that those defendants aided and abetted Lauer’s violation of section 10(b), not that they “actively participated in the alleged fraud or made any false statements as to the NAY of the Funds.” a. Citco NY Citco NV is correct that under Central Bank, it is not enough for plaintiffs to allege that it merely “disseminated,” “assisted,” or “permitted” misleading statements by Lauer and Lancer Management. But paragraph 7 of the Complaint states that “Citco NV used Lauer’s fraudulent valuations in preparing the NAV statements.” Paragraph 9 pleads that Citco NV “create[ed] and/or confirmed] false valuations of the Funds’ assets.” Paragraph 112 provides that plaintiffs relied on “the NAV statements, audit reports, PPMs, performance reports and other communications from Lauer and the Funds’ service providers.” Construing these allegations in the light most favorable to plaintiffs, I conclude that plaintiffs have alleged that Citco NV actually prepared the false statements. The Citco Defendants also argue that “[e]ven if Plaintiffs did allege that [Citco NV] prepared the NAV statements,” Citco NV’s role was only to calculate the NAV based on valuations supplied by Lauer, and Citco NV had no obligation to independently value the funds. However, Citco NV’s duties are not relevant to the issue here — whether the fraudulent NAV statements are directly attributable to Cit-co NV. Plaintiffs allege that Citco NV knew Lauer’s valuations were false, but used those valuations nonetheless to prepare false NAV statements, and distributed those statements directly to plaintiffs. This goes beyond an allegation that Citco NV was a mere conduit of Lauer. Citco NV may ultimately prevail if plaintiffs are unable to demonstrate that Citco NV prepared the false statements, but at this stage, plaintiffs’ allegations are sufficient to survive under Central Bank, b. Citco Directors Although it is a closer question, plaintiffs’ allegations against the Citco Directors are also sufficient under Central Bank. Plaintiffs allege that they would not have purchased the securities if they had known that “the statements made and/or caused to be made by the Director Defendants” were misleading. It is not clear exactly what “statements” this paragraph refers to, but the immediately preceding paragraphs discuss “NAV statements, monthly newsletters and offering materials,” and “the Funds’ audited financial statements.” This lack of specificity is a problem, but one which pertains to the particularity of the allegation and whether plaintiffs may avail themselves of the group pleading doctrine, not to the sufficiency of the allegations under Central Bank. Under Central Bank, it is sufficient that the allegation can be fairly interpreted as stating that the Funds and/or Citco NV communicated the misrepresentations at the behest of the Citco Directors. 2. Particularity of Pleading with Respect to Misstatements The Citco Defendants argue that plaintiffs have failed to specify “each statement alleged to have been misleading,” because plaintiffs have not provided the exact names, authors, dates, quantities, and locations of each of the misleading documents. Plaintiffs need not plead all of these details to withstand a motion to dismiss, but they are required to provide enough information to give defendants notice of the “specific statements or sets of statements believed to be materially false and misleading.” a. Citco NY The Complaint makes frequent reference to amorphously described “financial information,” “periodic reports,” and “marketing materials.” These allegations could be referring to any number of documents and do not provide enough identifying information. But plaintiffs do provide enough specificity with respect to monthly NAV statements issued by Citco NV. Plaintiffs allege that “each month, Citco NV distributed to each shareholder of the Funds a statement setting forth the NAVs of the Funds.” Although the Complaint does not state the exact time period of these statements, it can be inferred that plaintiffs are referring to those statements issued between March 2000 and September 2002. Plaintiffs specify that the statements were distributed to shareholders by Citco NV. Plaintiffs explain how these statements were fraudulent using specific examples of stocks that were assigned false values by defendants, and allege that the NAV statements were systematically infected by such faulty valuations. Therefore, plaintiffs have pled with sufficient particularity that the monthly NAV statements prepared by Cit-co NV were misleading. b. Citco Directors Plaintiffs allege that the Citco Directors are responsible for misstatements in “NAV statements, monthly newsletters and offering materials,” and “the Funds’ audited financial statements.” The Cit-co Directors argue that plaintiffs’ claims against them should be dismissed because plaintiffs fail to specify which misstatements, if any, are attributable to each of them. Plaintiffs urge this Court to apply a “relaxed” pleading standard, because the alleged misstatements were found in corporate reports prepared by insiders. But the cases plaintiffs cite hold only that, in certain circumstances, a plaintiff may plead scienter based on the presumption that a corporate defendant had access to internal documents. Cases from the scienter context are not relevant here, because the PSLRA sets forth specific requirements for pleading the misstatement element of a securities fraud claim. More germane is plaintiffs’ argument that under the group pleading doctrine, they are not required to plead the role each Citco Director played, because the misstatements were found in group-published materials and the Citco Directors are corporate insiders. But plaintiffs’ attempts to avail themselves of this doctrine are defeated by their failure to identify the “group” that published the documents. It is possible to interpret the Complaint as alleging that the documents containing the misstatements “made and/or caused to be made by the Director Defendants” were published by Citco NV, Lauer, Lancer Management, both Funds, and/or the Funds’ auditor. Plaintiffs have not pled that the Citco Directors were insiders of any of these groups at the time of any alleged misstatement, with the exception of Citco NV. Although plaintiffs do allege that the Citco Directors were insiders of both “Funds,” no factual allegations connect the Citco Directors, who served on the board of Lancer Offshore, to any fraud related to Omnifund. Accordingly, insofar as plaintiffs allege that the Citco Directors are liable for losses stemming from Omni-fund, those claims are dismissed. Plaintiffs have adequately alleged that the Citco Directors were insiders of Lancer Offshore. Plaintiffs allege the specific time periods during which each Citco Director served on the board of Lancer Offshore. Plaintiffs also allege that the Citco Directors had “intimate involvement ... in the affairs of the Funds” and “access to non-public information concerning the Funds’ financial affairs and business practices, including periodic internal reports detailing revenues, holdings and other financial information.” Plaintiffs do not allege that the Citco Directors took part in the day-to-day operations of Lancer Offshore, but they do allege, based on the fund’s PPMs and annual financial statements, that the Citco Directors were responsible for reviewing the valuations of Lancer Offshore’s securities to determine that fund’s NAV. Although it is a close question, these allegations are sufficient to support the inference that the Citco Directors had control over the content of Lancer Offshore’s reports of its NAV at the times they served on that fund’s board. However, plaintiffs have not specified the timing of any allegedly fraudulent statements by Lancer Offshore. It cannot be inferred that Lancer Offshore published any misstatement while any Citco Director was serving on its board. By the time Lancer Offshore’s audited financial statements for 2000 and 2001 were published, the Citco Directors had resigned. Although plaintiffs argue that the Citco Directors “are responsible” for misstatements in the PPMs and other offering materials, plaintiffs have not argued, or pled, that those directors made the misstatements, nor that these offering materials were published while any Citco Director served on the board of Lancer Offshore. Plaintiffs concede that each Citco Director may only be charged “with misstatements made while he served as director” but plaintiffs argue that they cannot be expected to know the precise dates of the Citco Directors’ employment. This is beside the point. Plaintiffs must allege “when the statements were made” with particularity. Plaintiffs allege date ranges for each of the Citco Directors’ service on Lancer Offshore’s board, but do not allege that any misstatements were made by Lancer Offshore during that time period. Nonetheless, as previously discussed, plaintiffs have alleged with particularity that the monthly NAV statements published by Citco NV contained misstatements. Plaintiffs allege that the Citco Directors served on Lancer Offshore’s board on behalf of Citco NV and participated in Citco NV’s fund administration activities on behalf of that Fund, including dissemination of monthly NAV statements. Plaintiffs allege that Conroy and Quilligan were managing directors of Citco NV. Plaintiffs allege that Stocks was a director of CGL’s International Fund Services division, and that CGL controlled Citco NV. These allegations are also sufficient to support the inference that the Citco Directors were insiders of Citco NV who participated in its misstatements of Lancer Offshore’s NAV. Thus, the section 10(b) claims survive against the Citco Directors with respect to the monthly NAV statements for Lancer Offshore published by Citco NV during each director’s respective term. 3. Scienter a. Motive and Opportunity i. Citco NV Plaintiffs argue that Citco NV had a motive to commit fraud because its fees were tied to the Funds’ NAVs, and it had the opportunity to commit fraud because it was the “last line of defense between the Funds and the investors.” Unlike a motive to increase stock prices, shared by all corporate insiders, a motive to generate increased fees based on inflated NAV figures would be “a concrete and personal benefit to the individual defendants resulting from the fraud.” Plaintiffs argue that, “[a]s a service provider, rather than a corporate insider, Citco NV had no interest in increasing the profitability of the Funds. Rather, Citco NV’s only possible motive to affect the Funds’ NAVs was an illicit one — to inflate its own fees.” But the Complaint contains no allegations with respect to Citco NV’s fees, and thus plaintiffs fail to plead scienter based on motive and opportunity. ii. Citco Directors Even if plaintiffs had alleged Citco NV’s scienter based on motive and opportunity, the group pleading doctrine does not allow plaintiffs to automatically impute the scienter of Citco NV to the Citco Directors. Plaintiffs must “state with particularity facts giving rise to a strong inference” that each defendant acted with scienter. b. Recklessness i. Citco Directors Plaintiffs argue that the Citco Directors acted recklessly because they did not prevent Lauer and Lancer Management from falsely reporting the Fund’s NAV. Plaintiffs also allege that the Citco Directors failed to follow their own stated policies of independent review of valuations. But allegations such as these, without more, describe negligent conduct and do not establish a strong inference of recklessness. Plaintiffs do not allege that the Citco Directors ignored red flags or failed to review any particular information that would have revealed the fraud. Plaintiffs allege only that the Citco Directors had access to “information about the Funds’ positions” and the Funds’ “periodic internal reports detailing revenues, holdings and other financial information.” These allegations are too conclusory to support the inference that the Citco Directors should have discovered Lauer’s scheme to manipulate stock prices. Plaintiffs do not allege, for example, that the Citco Directors had access to information revealing that most of the issuers in which the Funds were heavily invested had virtually no operations or earnings or that the stocks held by the Funds were thinly traded and illiquid. Therefore, plaintiffs have failed to allege that the Citco Directors acted with scienter. ii. Citco NY Plaintiffs allege “upon information and belief’ that Citco NV knew of the fraud at the time it resigned as administrator. This allegation is insufficient, because under the PSLRA, “if an allegation is made on information or belief, the complaint must state with particularity all facts on which that belief is formed.” Plaintiffs request that this Court consider scienter allegations made by the Funds’ court-appointed receiver (“Receiver”) in its complaint in the United States District Court for the Southern District of Florida against, inter alia, CGL and the Citco Defendants. Plaintiffs argue that the Receiver’s Complaint contains “lengthy verbatim quotations from e-mails sent and received by the Citco Defendants which demonstrate their knowledge of and participation in the fraud.” Plaintiffs’ motion papers also raise the allegation, not contained in the Complaint, that Citeo NV’s recklessness is demonstrated by monthly account statements it received from BAS that contained “obvious and alarming discrepancies” regarding the composition and valuation of the Funds’ portfolios. Although these types of allegations, if included in an amended complaint, would be likely to withstand a motion to dismiss, I will not evaluate the sufficiency of these allegations at this time. The Citeo Defendants also argue that even if plaintiffs had pled that the Citeo Directors were reckless, the scienter of the Citeo Directors may not be imputed to Citeo NV. Plaintiffs argue that the Citeo Directors’ knowledge may be imputed to Citeo NV because they were Citeo NV employees sitting as directors of Lancer Offshore “in furtherance of their duties on behalf of Citeo NV and to help Citeo NV retain the Funds as clients.” Plaintiffs are correct that this allegation distinguishes the case from those in which a corporate officer “ ‘change[s] hats’ and adopts distinct roles in order to represent two different corporations.” Therefore, although I dismiss the claims against all Citeo Defendants due to the failure to plead scienter under either a theory of motive and opportunity or a theory of recklessness, I do not dismiss on the ground that the Citeo Directors’ scienter may not be imputed to Citeo NV. 4. Section 10(b) Claims Based on Retention of Shares Plaintiffs allege that their section 10(b) claim “is brought on behalf of only those plaintiffs who purchased all or part of their shares in the Funds after March 2000,” but also that plaintiffs were damaged by the decision “to purchase and hold ... and/or to retain those shares.” Defendants argue that plaintiffs may only bring a section 10(b) claim with respect to actual purchases or sales of securities, and may not bring any claims that relate to the retention of securities. Defendants are correct. To the extent that plaintiffs who invested prior to March 2000 assert claims under section 10(b), those claims are dismissed. C. Section 20(a) Claim Against CGL Section 20(a) states, in pertinent part: Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly induce the act or acts constituting the violation or cause of action. “The elements of a claim under Section 20(a) include both a primary violation and control over the primary violator.” “Control over a primary violator may be established by showing that the defendant possessed ‘the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.’ ” “A plaintiff is required to prove actual control, not merely control person status. Naked allegations of control, however, will typically suffice to put a defendant on notice of the claims against her.” A claim under section 20(a) must be pleaded in accordance with Rule 8(a) of the Federal Rules of Civil Procedure. Rule 8(a) requires that the plaintiff provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 8(a) does not require “a plaintiff to plead the legal theory, facts, or elements underlying his claim.” “To comply with Rule 8, plaintiffs need not provide anything more than sufficient notice to permit defendant to file an answer.” CGL moves to dismiss the section 20(a) claim, arguing that the statute requires plaintiffs to provide more than conclusory allegations that CGL was a “culpable participant” in the alleged fraud. But the statutory language places “the burden ... on defendants ... to ‘exculpate’ themselves by proving either good faith or due diligence.” As this Court has previously held, a plaintiff need not affirmatively plead scienter on the part of a control person under section 20(a). Moreover, under Rule 8, plaintiffs are not required to plead facts to demonstrate culpable participation. Under Rule 8, a claim “[may] not be dismissed on the ground that it is conclusory or fails to allege facts.” Plaintiffs have adequately alleged CGL’s status as a control person of Citco NV. Nonetheless, because plaintiffs’ section 10(b) claims are dismissed (albeit without prejudice), plaintiffs have failed to plead a primary violation of the securities laws. Therefore I must also dismiss plaintiffs’ section 20(a) claim against CGL, again without prejudice. D. Common-Law Claims 1. Choice of Law a. New York Choice-of-Law Rules In diversity actions, federal courts follow the choice-of-law rules of the forum state to determine the controlling substantive law. Under New York choice-of-law rules, the first step of the analysis is to determine whether there is a substantive conflict between the laws of the relevant choices. “In the absence of substantive difference ... a New York court will dispense with choice of law analysis; and if New York law is among the relevant choices, New York courts are free to apply it.” New York follows the internal affairs doctrine, which generally requires that “questions relating to the internal affairs of corporations are decided in accordance with the law of the place of incorporation.” This doctrine “recognizes that only one State should have the authority to regulate a corporation’s internal affairs— matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders — because otherwise a corporation could be faced with conflicting demands.” However, “the New York Court of Appeals has rejected ‘any automatic application of the so-called “internal affairs” choice-of-law rule.’ ” “[I]n certain circumstances ‘application of the local law of some other state is required by reason of the overriding interest of that other state in the issue to be decided.’ ” “The principles compelling a forum state to apply foreign law come into play only when a legitimate and substantial interest of another state would thereby be served.” Thus, to resolve conflicts in tort cases, New York applies an “interest analysis” to identify the jurisdiction that has the greatest interest in the litigation based on the occurrences within each jurisdiction, or contacts of the parties with each jurisdiction, that “relate to the purpose of the particular law in conflict.” When the law is one which regulates conduct, “the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.” A tort occurs in “the place where the injury was inflicted,” which is generally where the plaintiffs are located. b. New York Law Applies to the Common-Law Claims Plaintiffs argue that New York law governs their common-law claims against the Citeo Defendants, and those defendants, in turn, argue that BVI law applies. As noted above, the first question is whether there is a conflict between the laws of the New York and the BVI. The Citco Defendants argue that there is a conflict of law regarding the claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and aiding and abetting fraud. The Citco Defendants argue that under BVI law, plaintiffs would have no claims against them for breach of fiduciary duty because, inter alia, the BVI would require plaintiffs to prove more facts to establish a fiduciary relationship than would New York. The Citco Defendants also argue that unlike New York, the BVI would not recognize causes of action for aiding and abetting fraud or aiding and abetting breach of fiduciary duty. To resolve these conflicts, I now turn to the law of the jurisdiction where the plaintiffs are located. But here, plaintiffs are an international group, located in jurisdictions including both New York and the BVI. As in Cromer Finance Ltd. v. Berger, “injury has occurred in locations with only limited connection to the conduct at issue.” Thus, the plaintiffs’ location is not a dispositive factor, and I will also analyze other occurrences and contacts within each jurisdiction that relate to the conflict of law. Plaintiffs argue that New York law should apply because the underlying valuation fraud and breach of fiduciary duty were originated and executed by Lauer and Lancer Management in New York. Lauer and .Lancer Management conducted the day-to-day operations of the Funds from their offices in New York. The Citco Defendants could not have carried out their obligations to compute the Funds’ NAVs without extensive interaction with the Funds’ managers in New York, who were responsible for the purchases and sales of securities on behalf of the Funds. Plaintiffs argue that all defendants, including the Citco Defendants, communicated regularly with the Fund managers’ New York offices, and that the torts at issue stemmed from those communications. The Citco Defendants argue that the BVI has the greatest interest in litigation over investments organized under its laws. In a similar vein, the Citco Directors argue BVI law should apply to the claims against them under the internal affairs doctrine. The purpose of the internal affairs doctrine is to prevent a corporation and its current directors from being “faced with conflicting demands.” Here, the Funds are defunct and the Citco Directors no longer serve on their boards. Moreover, the allegedly tor-tious conduct of the Citco Directors and Citco NV in relation to the management of the Funds had little more than a nominal connection to the BVI. Because occurrences in New York and the parties’ contacts with that forum bear the most relation to the torts at issue here, New York has the greatest interest in applying its law. New York has a strong interest in applying its law with respect to defendants who aid and abet torts masterminded and executed by hedge fund managers from within the state, and who breach their fiduciary duties, to serve as a check against such misconduct. The breach of fiduciary duty relates to the Citco Defendants’ failure to independently verify false information issued to them from Lauer and Lancer Management in New York. The Citco Defendants should reasonably have expected to face suit in New York due to Lauer’s location, the nature of their international practices, and their alleged misrepresentations to international investors, including investors within this state. 2. Common-Law Fraud Because the elements of common-law fraud in New York are “substantially identical to those governing § 10(b), the identical analysis applies.” Plaintiffs’ common-law fraud claims against the Citco Defendants suffer from the same deficiencies as their federal securities law claims. However, this claim is dismissed without prejudice as plaintiffs are granted leave to replead. 3. Breach of Fiduciary Duty The elements of a claim for breach of fiduciary duty under New York law are “breach by a fiduciary of a duty owed to plaintiff; defendant’s knowing participation in the breach; and damages.” Generally, no fiduciary duties arise where parties deal at arm’s length in conventional business transactions. However, a fiduciary relationship may arise where the parties to a contract specifically agree to such a relationship, or if “one party’s superior position or superior access to confidential information is so great as virtually to require the other party to repose trust and confidence in the first party.” The plaintiff must demonstrate that the defendant was “under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation.” “While the ‘exact limits’ of what constitutes a fiduciary relationship are ‘impossible of statement,’ a fiduciary relationship may be found in any case ‘in which influence has been acquired and abused, in which confidence has been reposed and betrayed.’ ” Contractual relations or formal writings are not required to establish a fiduciary duty. “Rather, the ongoing conduct between parties must be considered.” Whether a party reposed confidence in another and reasonably relied on the other’s superior expertise or knowledge is a “fact-specific inquiry.” Where a plaintiff alleges a breach of fiduciary duty by conduct not amounting to fraud, such as breach of a duty of care, disclosure, or loyalty, the general pleading standards set out by Rule 8(a) of the Federal Rules of Civil Procedure, not the heightened standards of Rule 9(b), apply. a. Citco Directors Although the Citco Directors argue that the breach of fiduciary duty claims against them are deficient under BVI law, as previously discussed, New York law applies. The Citco Directors do not argue that these claims are deficient under New York law, and therefore, their motions to dismiss are denied. b. Citco NY Citco NV argues that as the Funds’ administrator, it did not have any fiduciary duty to investors to ensure the accuracy of reports concerning the valuation of the Funds’ assets. Plaintiffs allege that Citco NV had superior access to confidential information regarding the Funds’ NAV by virtue of its role as the Funds’ administrator. Although “[fiduciary duties do not arise solely because one party has expertise that is superior to another,” here, plaintiffs also allege that Citco NV held itself out to investors as having policies and procedures to ensure that the Funds’ valuations would be accurate and fair, and that they relied on these representations. Moreover, the heightened pleading standards of Rule 9(b) do not apply because plaintiffs’ claim rests on Citco NV’s breach of its duty of care to ensure the accuracy of reports to investors, not necessarily on any allegedly fraudulent conduct. These allegations are sufficient, under Rule 8, to plead that Citco NV had a fiduciary duty. In support of its argument, Citco NV cites Fraternity Fund Ltd. v. Beacon Hill Asset Management, LLC, where the court found that a fund administrator had no fiduciary duty because the offering memorandum required the fund administrator only to compute the NAV, and not to independently value the fund’s portfolio, a role reserved for the fund manager. But here, the Administration Agreement states that Citco NV is responsible for “computing the monthly [NAV] of [Lancer Offshore’s] shares” and “independently pricing the fund by reference to data supplied by ... independent pricing sources, or as agreed by the Board of Directors.” Plaintiffs also allege that Citco NV’s duties derive from the duties of the Citco Directors to independently review the Funds’ NAVs under the PPMs. Citco NV has not proffered any document relegating it to solely ministerial functions or establishing that the Funds’ manager was exclusively charged with determining the value of the Funds’ portfolio. Therefore, Citco NV’s motion to dismiss the breach of fiduciary duty claim against it is denied. c. IFSI IFSI also argues that it did not have any fiduciary duty to investors to ensure the accuracy of reports concerning the valuation of the Funds’ assets. Plaintiffs allege that IFSI assumed Citco NV’s role as Fund administrator, and therefore owed the same fiduciary duties to shareholders. IFSI argues that plaintiffs must allege facts to plead a fiduciary duty, and that plaintiffs do not allege that they reposed trust and confidence in IFSI, or that IFSI accepted any such responsibility. But because plaintiffs do not allege fraudulent conduct by IFSI, Rule 8 applies to this claim. IFSI may ultimately prevail if plaintiffs cannot demonstrate the existence of a fiduciary duty, but plaintiffs’ allegation that IFSI stepped into Citco NV’s role as administrator is sufficient at this stage. IFSI also argues that plaintiffs cannot prevail on their claim because IFSI’s agreements with the Funds demonstrate that it had no fiduciary duties to shareholders. The Administration Agreements between IFSI and the Funds charged IFSI with pricing the Funds’ portfolios in accordance with the Funds’ PPMs, and reviewing statements to investors “for accuracy, completeness and presentation.” Although these agreements do not conclusively establish any fiduciary duty, neither do they demonstrate that plaintiff cannot prevail on its claim. Therefore, IFSI’s motion to dismiss the breach of fiduciary duty claim is denied. 4. Negligence, Negligent Misrepresentation, and Professional Malpractice Plaintiffs allege claims for negligence and negligent misrepresentation against the Citco Defendants, and claims for professional malpractice against Citco NV and IFSI. To prevail on a negligence claim, a plaintiff must demonstrate “(1) that the defendant owed him or her a cognizable duty of care; (2) that the defendant breached that duty; and (3) that the plaintiff suffered damage as a proximate result of that breach.” “Under New York law, professional malpractice is a species of negligence.” Thus, to prevail on such a claim, a plaintiff must demonstrate the elements of negligence, and the breach of duty must be by a professional in a “departure from accepted standards of practice.” A claim of negligent misrepresentation must satisfy the following five elements: (1) the defendant had a duty, as a result of a special relationship, to give correct information; (2) the defendant made a false representation that he or she should have known was incorrect; (3) the defendant knew that the plaintiff desired the information supplied in the representation for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment. Each of these causes of action requires that the plaintiff demonstrate a duty of care. A duty of care may arise where the parties are in contractual privity or have a relationship “ ‘so close as to approach that of privity.’” The New York Court of Appeals has held that to demonstrate that a non-privy relationship gave rise to a duty to give correct information, a party must show “(1) an awareness by the maker of the statement that it is to be used for a particular purpose; (2) reliance by a known party on the statement in furtherance of that purpose; and (3) some conduct by the maker of the statement linking it to the relying party and evincing its understanding of that reliance.” These “indicia, while distinct, are interrelated and collectively require a third party claiming harm to demonstrate a relationship or bond with the once-removed [maker of the statement].” a. Plaintiffs’ Pleading of Negligence Theories in One Count Does Not Violate Rule 10(b) of the Federal Rules of Civil Procedure The Citco Defendants argue that plaintiffs have improperly pled three distinct claims against them in one count, in violation of Rule 10(b) of the Federal Rules of Civil Procedure, which requires that “[e]ach claim founded upon a separate transaction or occurrence ... shall be stated in a separate count ... whenever a separation facilitates the clear presentation of the matters set forth.” On the same page of their brief, the Citco Defendants argue that these claims “arise from the same alleged breach of duty and involve no distinct damages” and should therefore be dismissed as “duplicative.” These technical complaints are merely formalistic. Plaintiffs’ claims are presented with sufficient clarity. At this early stage of the proceedings, it is not necessary to require plaintiffs to choose the cause of action that best supports their negligence claim. b. Plaintiffs Have Alleged a Duty of Care i. Citco Defendants The Citco Defendants argue that plaintiffs fail to allege contractual privity or a bond “ ‘so close as to approach that of privity.’ ” However, it is reasonable to infer from the Complaint that the Citco Defendants were aware that plaintiffs would rely on their statements of the Funds’ NAVs. Plaintiffs allege that the NAV was the only measure by which they could evaluate shares in the Funds in order to make investment decisions. Plaintiffs also allege that Citco NV’s marketing materials evinced the understanding that as fund administrator, Citco NV would “serve the interests of investors by providing them with the independent, accurate and timely information they need to make informed decisions about their investments.” These allegations are adequate under Credit Alliance to allege a relationship which may give rise to a duty of care. The Citco Defendants also argue that plaintiffs fail to plead that fund administrators are “professionals.” I do not reach this issue at this time because plaintiffs have sufficiently pled a claim against the Citco Defendants on an alternative theory of negligence. ii. IFSI IFSI argues that plaintiffs have not alleged a duty of care sufficient to support a claim for professional malpractice, for the same reasons that plaintiffs failed to plead their claim for breach of fiduciary duty. For the reasons previously discussed, the Complaint sufficiently alleges that IFSI had a duty of care to plaintiffs, and therefore, IFSI’s motion to dismiss the professional malpractice count is denied. c. Plaintiffs Allegations of Negligent Misrepresentation Are Sufficient Under Rule 9(b) of the Federal Rules of Civil Procedure The Citco Defendants argue that Rule 9(b) applies to plaintiffs’ claim for negligent misrepresentation, and plaintiffs have failed to plead that claim with sufficient particularity. For the reasons previously discussed, plaintiffs have pled with sufficient particularity that the monthly NAV statements prepared by the Citco Defendants were misleading. Therefore, the Citco Defendants and IFSI’s motions to dismiss the negligence, negligent misrepresentation, and professional malpractice claims are denied. 5. Aiding and Abetting Fraud and Breach of Fiduciary Duty To state a claim for aiding and abetting fraud under New York law, a plaintiff must plead facts showing the existence of a fraud; defendant’s knowledge of the fraud; that the defendant provided substantial assistance to advance the fraud’s commission, and damages. The elements for a claim of aiding and abetting a breach of fiduciary duty under New York law are a breach by a fiduciary of obligations to another, that the defendant knowingly induced or participated in the breach, and damages. These causes of action are parallel in several respects. First, both causes of action require the putative secondary violator to have actual knowledge of the primary violator’s wrongdoing. Second, aiding and abetting liability may attach when a defendant “ ‘affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed.’ ” When a plaintiff adequately pleads such assistance, concealment, or failure to act, she fulfills both the “substantial assistance” element of the fraud-based claim and the “participation” element of the breach of fiduciary duty-based claim. Third, the plaintiff must allege that the aiding and abetting defendant proximately caused the harm on which the primary liability is predicated. “But-for” causation is insufficient; aider and abettor liability requires the injury to be a direct or reasonably foreseeable result of the conduct. At least with respect to an aiding and abetting fraud claim, the “substantial assistance” and “causation” elements are interrelated— “[wjhether the assistance is substantial or not is measured ... by whether the action of the aider and abettor proximately caused the harm on which the primary liability is predicated.” a. BAS Plaintiffs allege that BAS aided and abetted Lauer’s fraud, as well as Lauer’s breach of his fiduciary duty to plaintiffs. Plaintiffs allege that BAS assisted Lauer by providing him with dial-in access to its compu