Citations
- 53 F. Supp. 3d 279
Full opinion text
MEMORANDUM AND ORDER
DOUGLAS P. WOODLOCK, District Judge.
Amorim Holding Financeira S.G.P.S., S.A. (“Amorim Holding”) filed this suit against C.P. Baker & Co., Ltd. and its principal, Christopher P. Baker (collectively, “Baker”), alleging violations of the Massachusetts Securities Act, fraud, negligent misrepresentation, breach of fiduciary duty, and unfair and deceptive trade practices in violation of Massachusetts General Laws chapter 93A in connection with certain investments Amorim made with Baker. Baker answered the complaint with counterclaims for misrepresentation, breach of warranty, and indemnification against Amorim. The parties have presented cross motions for summary judgment as to each other’s claims.
I. BACKGROUND
A. Amorim’s Introduction to Baker
Amorim Holding Financeira S.G.P.S., S.A. (“Amorim Holding”)is a family-owned company located in Portugal. In 2003, the president of Amorim Holding, Americo Amorim (“Amorim”), had fallen short on an investment in a company called FiNet. Bob Beuret, an employee of C.P. Baker & Co., Ltd., a Delaware investment management company with a principal place of business in Boston, suggested that Amor-im meet with Christopher Baker, the president and CEO of C.P. Baker & Co for help making up the deficit in the FiNet investment. Baker specialized in venture capital and private equity investments. After meeting Amorim and his representatives, Baker agreed to help Amorim with the FiNet investment.
In a February 2004 meeting with Amor-im, Baker explained his investment philosophy of leveraging his managerial expertise to create value in private companies. He highlighted his investment experience and successes, such as his investment of a few million dollars in a company called Zone Perfect that turned into a $165 million sale in 2003. Baker also gave Amorim a tour of his office in Boston. Amorim was impressed, and agreed to invest with Baker. Baker mentioned during the meeting that he was starting an.investment fund, called the Anasazi III Offshore Fund (“Anasazi III”). By the end of the meeting, Amorim agreed to invest in Anasazi III.
1. Moms Holdings Invests with Baker
Shortly thereafter, a Gibraltar-based entity, Morris Holdings Ltd., invested $5 million in Anasazi III. Morris Holdings is a holding company for two Lichtenstein trusts, the beneficiaries of which are individual members of the Amorim family. Morris Holdings was represented by counsel for each of its investments, but is not a named plaintiff in this case.
From 2004 through 2006, Morris Holdings also invested in a number of start-ups and other privately held companies through Baker. It invested in On-Card Inc., a direct-mailing company; ZForce Partners LLC, a children’s action cartoon production company; American Entertainment Holding Company, LLC, a movies-cript intellectual property licensing company; and Chime Entertainment LLC, a music production company.
Each investment was subject to a purchase or subscription agreement, and Amorim Holding alleges that Baker made misrepresentations about each and every investment Morris Holdings made. Morris Holdings continues to hold some of the investments, has sold some, and has transferred others to other Amorim-affiliated entities. I summarize below the purchase or subscription agreements associated with each individual investment, along with the misrepresentations Baker allegedly made in connection with those investments. I also note the status of the investment as of the briefing and argument of the summary judgment motions. The parties have not further supplemented this information.
a. Anasazi III
i. The Investment
The Application Form Morris Holdings signed on April 2, 2004 as a part of its investment of $5 million in Anasazi III represented that it possessed “the knowledge, expertise and experience in financial matters to evaluate the risks of investing” in Anasazi III and understood “the risks inherent in investing” in Anasazi III, including “the risk of loss of [its] entire investment.” Morris Holdings also received a private placement memo which, among other things, warned Morris Holdings that it could lose everything it invested in Anasazi III, and could not rely on any representation or warranty not contained in the written documents it had received or any representation or warranty relating to the economic return of Anasazi III.
The Application Form contained a section titled “Indemnification,” wherein Morris Holdings acknowledged that it would indemnify “the Fund, the Manager, the Administrator and their respective directors, officers and employees against any loss, liability, cost or expense (including without limitation attorneys’ fees, taxes and penalties) which may result directly or indirectly, from any misrepresentation or breach of any warranty, condition, covenant or agreement set forth herein or in any other document delivered by the Investor to the Fund.” Baker was listed as the “Manager” of Anasazi III.
ii. Alleged Misrepresentations
The private placement memo also represented that the value of the companies which Anasazi III had an interest in would be valued at a “fair value as determined in good faith by [Baker], in consultation with the Administrator” of the Fund. Amorim Holding contends that Baker did not consult the Administrator of Anasazi III in valuing the companies Anasazi III had an interest in, nor did he provide a fair valuation in good faith.
iii. Transfer of Interest
Morris Holdings sold its shares of Anasazi III to Amorim Alternative Investments, a wholly-owned subsidiary of Amor-im Holding, for $1.8 million in the fall of 2008.
b. On-Card
i. The Investment
Morris Holdings made four separate investments in On-Card. These were in the amounts of $700,000 on November 23, 2004; $900,000 on December 9, 2004; $200,000 on November 3, 2005; and $100,000 on January 31, 2006.
Each investment involved execution of a Subscription Agreement with On-Card. By signing the On-Card Subscription Agreement, Morris Holdings “recognize[d] that the [investment] involve[d] a high degree of risk.” The Agreement warned that the investments were illiquid, because “transferability [was] extremely limited.” It also warned that Morris Holdings could lose its entire investment. Morris Holdings warranted that it was “sufficiently experienced in financial and business matters to be capable of evaluating the merits and risks of an investment in the company” and that it had, in fact, “evaluated the merits and risks of [its] proposed investment.” The Subscription Agreement also noted that Morris Holdings would have to hold the shares for an indefinite period of time.
Like many of the other agreements, the On-Card Subscription Agreement included an integration clause, stating that the “Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. This agreement supersedes all prior negotiations, letters and understandings relating to the subject matter hereof.” It also included an indemnification clause, wherein Morris Holdings agreed to indemnify On-Card “and its affiliates, directors, officers, trustees, managers, employees and representatives ... from and against any Losses suffered, sustained, incurred or required to be paid by any such [party] due to, based upon or arising out of any material inaccuracy in, or any material breach of, a representation or warranty of the Subscriber contained in this Agreement.” Baker was defined in the agreement as On-Card’s “Placement Agent.”
ii. Alleged Misrepresentations
On October 25, 2004, Baker sent Amor-im Holding an email suggesting that it invest in On-Card because On-Card’s “product margins are extremely attractive.” That email represented that Baker and the Anasazi Funds had already invested $900,000 in OnCard, and suggested that Amorim Holding and Baker “should ... jointly invest a total of $1.4 million ($700k/ $700k)” more in OnCard. On June 11, 2005, Baker sent Amorim Holding an email suggesting that On-Card was “exploding,” and on October 21, 2005, continued to assert that On-Card had “great potential.”
Amorim Holding alleges that in a May 2006 meeting, Baker told it that On-Card would have an initial public offering within two years, and that such an offering would lead to a two to five times return on its initial investment. In late 2006, Baker also allegedly assured Amorim Holding that he would replace On-Card’s CEO with a more experienced one to improve the management of the company. Amorim Holding contends that all of these representations were false.
iii. No Transfer of Interest
Morris Holdings continues to hold the interest it purchased in On-Card in the four investments from 2004 through, 2006.
c. Z-Force
i. The Investment
As with the Anasazi III investment, Morris Holdings signed a Subscription Agreement for a $900,000 investment in Z-Force on December 28, 2004. By signing the Agreement, Morris Holdings acknowledged that its investment “involves an extremely high degree of risk and is suitable only for sophisticated investors.” It agreed that it would “continue to bear the economic risk of [the] investment for an indefinite period” because the stock was not registered and thus could not be sold. The Agreement also warned that Baker could have potential and actual conflicts of interest arising from the investment as a result of his managerial role with the company, and Morris Holdings acknowledged those potential conflicts by signing the Agreements. Unlike many of the other investment agreements, the Morris Holdings Z-Force agreement did not include an indemnification clause.
ii. Alleged Misrepresentations
In e-mails to Amorim, Baker suggested that the two were “partners” and that Baker would match some of Amorim’s investments dollar for dollar. Amorim Holding claims that although it invested $900,000, Baker invested only between $800,000 and $500,000 in Z-Force, when Baker had said that the investment would be “[i]n keeping with our ‘full partner’ philosophy,” which Baker stated at his deposition meant that “[generally speaking, we would invest similar amounts of money in the deals.”
Amorim Holding claims that Baker represented to it in December 2004 that the minimum return on its investment in ZForce would be double its initial investment within two to three years, but that such a return has not come to light.
iii.Transfer of Interest
In 2007, Morris Holdings transferred its Z-Force shares for face value to AHFB-IV, a wholly owned subsidiary of Amorim Holding, through a simultaneous redemption/repurchase transaction.
d. American Entertainment Holding
i. The Investment
Morris Holdings invested $2.5 million in American Entertainment Holding on June 15, 2005. In a Subscription Agreement executed on that date, Morris Holdings represented that it carefully reviewed and understood all of the documents and records pertaining to the investment that it needed; that it had a reasonable opportunity to ask questions about the investment; and that it was sufficiently experienced in financial and business matters to make its own judgment about the investment. The American Entertainment Agreement also included an integration clause in which Morris Holdings agreed that the Subscription Agreement “sets forth the entire agreement and understanding among the parties hereto ... and supersedes any and all prior agreements and understandings relating to the subject matter hereof.”
Under a provision titled “Indemnification,” Morris Holdings agreed to indemnify American Entertainment Holding “and its Managers against any and all Damages incurred in connection with.or arising out of or resulting from (i) any inaccuracy or breach of any representation or warranty made by [Morris Holding] in or pursuant to this Agreement....” Damages is defined in the agreement as “costs, losses (including, without limitation, diminution in ■value), liabilities, damages, lawsuits, deficiencies, claims, taxes and expenses ... including, without limitation, interest, penalties, reasonable attorneys’ fees and all amounts paid in investigation, defense or settlement of any of the foregoing.” Baker signed the agreement on behalf of American Entertainment Holding as its Managing Member, and is defined in the agreement as one of the “Managers” of the Company.
ii. Alleged Misrepresentations
In an email dated October 6, 2004, Baker said that American Entertainment was “one of those truly great investments.” Amorim Holding alleges that Baker told it in June 2005 that American Entertainment was the type of deal that always makes money, and that a film fund of $100 million was being arranged. It also alleges that during a meeting in July 2006, Baker represented that American Entertainment was expected to have an initial public offering “in the very short term.” Amorim Holding contends that all of these statements were false.
iii. Transfer of Interest
On September 28, 2011, after the initial discovery deadlines in this case, Morris Holdings transferred its intgrest in American Entertainment Holding to AHFB-I, Inc., a wholly-owned subsidiary of Amorim Holding, for $250,000.
e. Chime
i. The Investment
Morris Holdings wired $1.5 million to Chime in installments between June 28, 2005 and September 6, 2005, and signed a purchase agreement on August 28, 2005. In the Chime Purchase Agreement, Morris Holdings acknowledged that it was “a sophisticated investor” that “could bear the economic risk of the investment, and has such knowledge and experience in financial or business matters in general and in particular with respect to this type of investment as to be capable of evaluating the merits and risks of an investment” in Chime. Morris Holdings explicitly acknowledged that its investment in Chime was “highly speculative and involve[d] numerous risks and uncertainties,” and that it “evaluated and understood] the risks and terms of investing” in Chime. The agreement also included an integration clause.
The Chime Purchase Agreement also included an exhibit titled “Risk Factors” disclosing the risks of investing in Chime. That exhibit began by warning Morris Holdings that it would “be required to bear the financial risks of [the Chime investment] for [an] indefinite period of time,” and that the investment was “highly speculative and involve[d] a high degree of risk.” The risk factors included things such as that the shares could not be transferred or resold except under a few exceptions; that the company had “no operating history” and thus “there can be no assurance that the business of [Chime] will, over the long term, be a viable commercial enterprise”; and that the company’s revenues came from a small number of properties and was seasonal, mainly dependant upon holiday sales, among other risks.
The Chime Purchase Agreement included an indemnification clause wherein Morris Holdings agreed to indemnify Chime “and the Managers from and against all losses or liabilities (including, without limitation, reasonable attorneys’ fees) asserted by, or on behalf of, the Investor or any beneficiary thereof against the Managers, its members, or partners, or any of their respective controlling persons, shareholders, members, principals, directors, officers, employees and other agents, in connection with this Agreement, for any act taken or omitted in good faith in discharging its obligations hereunder to the extent that such act or omission does not involve gross negligence, willful default, fraud, dishonesty, reckless disregard of a material obligation or duty, or violation of applicable law.” Baker signed the Chime Purchase Agreement on behalf of Chime as its “Managing Member.”
ii. Alleged Misrepresentations
Amorim Holding contends that in August 2005, Baker assured Amorim that any investment in Chime would have a minimum return of five times the initial investment -within two to three years. On December 13, 2005, Baker sent Amorim Holding an email stating that it “[ljooks like Chime will be working with Coca-Cola, Starbucks, and Starwood Hotels.” On January 18, 2006, Baker sent another email to Amorim Holding suggesting that it “consider increasing [its] investment” in Chime because the company “is flying” and has been having “a large number of very positive things happening.” Amorim Holding contends that these statements were false.
iii. Transfer of Interest
In 2007, Morris Holdings transferred its Chime shares to AHFB-I, Inc., for face value, through a simultaneous redemption/repurchase transaction.
2. Sotomar Invests with Baker
Morris Holdings was not the only company affiliated with Amorim to invest with Baker. A company named Sotomar Em-preendimentos Industriáis E Imobiliarios, SA, invested through Baker in á voice-over-IP telephony company called One IP Voice, then known as Farmstead Telephone Group. Amorim is on the board of Sotomar. Sotomar, however, is not a named plaintiff in this case.
2. The Investment
The February 8, 2006 One IP Voice Purchase Agreement, signed by Sotomar, contained a section of warranties made by Sotomar to One IP Voice. In that section, Sotomar acknowledged that it understood that the shares it was purchasing were not registered and therefore it would have to hold them “indefinitely unless they are registered,” and that “no public market now exists for any of the securities issued by [One IP Voice].”
The Purchase Agreement also contained an integration clause, which stated that the Purchase Agreement “constitute^] the entire agreement between the parties ... and any and all other written or oral agreements existing between the parties” were thereby “expressly canceled, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants, expect as specifically set forth herein.” Sotomar also agreed that it was “not relying upon any person, firm or corporation, other than [One IP Voice] and its representatives, in making its investment or decision to invest in [One IP Voice].”
Unlike a number of the other purchase agreements, the One IP Voice agreement did not include an indemnification clause. It did include a provision specifying that “[i]f any action at law or in equity ... is necessary to enforce or interpret the terms .of any of the Transaction Documents, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.”
2. Alleged Misrepresentations
Amorim Holding alleges that Baker told it that its investment in One IP Voice would yield a five-fold return within ten months, because another investor was lined up to redeem Amorim Holding’s investment. Amorim Holding contends that this statement was false.
3. No Divestment
Sotomar continues to hold its interest in One IP Voice.
D. Amorim Holding Invests with Baker
Amorim Holding invested through Baker in two additional ways: by purchasing shares redeemed by Morris Holdings and through direct investments in four companies.
1. Purchases of Shares Redeemed by Morris Holdings
As noted above, in 2007, Morris Holdings redeemed its interests in Chime and Z-Force for face value. Simultaneously, Amorim Holding, represented by counsel, purchased the redeemed shares by executing new purchase contracts. Although the shares of both Chime and Z-Force were illiquid, it appears that those companies permitted simultaneous redemptions ■ and repurchases on the grounds that they were essentially just paper transfers from one Amorim-related entity to another.
The new purchase agreements executed by Amorim Holdings contained essentially the same warnings, disclosures, and agreements as the original purchase agreements. Supplemental disclosure memo-randa were included, providing up-to-date disclosures concerning risks of the investment and the companies’ financial conditions at the time of the new purchase agreements.
2. Direct Investments
In addition to purchasing shares redeemed by Morris Holdings, Amorim Holding directly invested in four companies during this time period through Baker: MySky Communications, Inc., a weather satellite software company; Chime; Z-Force; and Remote MDx, a medical bracelet company.
a. MySky
On December 30, 2005, Amorim Holding signed a Purchase Agreement to invest $500,000 in MySky. In that Agreement, Amorim Holding represented that it had an opportunity to discuss MySky’s business, management, and financial affairs, as well as the terms and conditions of the Purchase Agreement, with MySky’s management and that it understood that no public market existed for the MySky shares. The Purchase Agreement contained an integration clause which stated that the Purchase Agreement “constitute[d] the entire agreement between the parties” and expressly canceled “any and all other written or oral agreements existing between the parties.” That clause also stated that “no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants, except as specifically set forth herein.” The Agreement does not include an indemnification provision, though it does provide that “[i]f any action at law or in equity ... is necessary to enforce or interpret the terms of any of the Transaction Documents, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.”
Amorim Holding alleges that in January 2007, Baker represented to it that by 2009, its investment in MySky would double. It contends that this statement was false.
b.Chime
On December 15, 2006, Amorim Holding directly invested in Chime in a similar manner as Morris Holdings had done earlier. The investment agreement contained an indemnification clause promising that Amorim Holding will indemnify Chime and its Managers (of which Baker was one) “from and against any and all loss, damage, liability, cost or expense due to or arising from a breach of any representation, warranty or agreement contained” in the purchase agreement.
Amorim Holding alleges that in July 2006, Baker represented to it that he had secured additional sources of investment for Chime, which would improve the company. In an email on January 16, 2007, Baker proclaimed that Chime had “[l]ots of potential this year.” Amorim Holding contends this was false, because in February 2007, Baker had learned through an email that as of January 2007 Chime would not have enough cash to continue operating past February 2007.
c. Z-Force
In May 2007, Amorim Holding directly invested $900,000 in ZForce in a similar manner as Morris Holdings had done previously. Amorim Holding alleges that in July and October of 2006, Baker represented that he would replace Z-Force’s management to improve the company. Unlike the Morris Holdings investment, the 2007 ZForce purchase agreement included an indemnification clause. That clause stated that Amorim Holding would hold harmless ZForce, “its managers, employees, consultants, affiliates and any employees thereof, and all past, current and future members of the Company ... from and against any and all payments, costs, liabilities, penalties, fines, taxes, damages, losses and other expenses (including, without being limited to, reasonable attorneys’ and accountants’ fees) ... that are a result of the transaction contemplated in this Agreement.”
d. Remote MDx
By 2007, a number of Amorim Holding’s investments had failed or substantially decreased in value, and Amorim Holding lost most of its investment in the various companies. Around this time, Baker offered Amorim an additional opportunity which he thought gave Amorim a chance to make up for his losses. That investment was to purchase $18.5 million of shares in a publicly-traded company, Remote MDx, and then sell a “put” option to a third company, Yatas Holding GmbH. The put option required Vatas to purchase the Remote MDx shares for $21.5 million on July 31, 2008, if Amorim Holding desired to sell the stock on that date. Baker estimated that the return from selling the put would be $3 million, approximately offsetting some of the losses Amorim had already incurred from other investments Baker had recommended.
Before purchasing the Remote MDx shares, Amorim Holding employees reviewed financial data about Vatas and investigated the company’s connections with some South African companies, including diamond mining operations. Amorim hired the law firm of Goodwin Procter LLP to review the put contract. After evaluating the information he had obtained, Amorim thought that Vatas was “an extremely solid group.”
Amorim Holding alleges that Baker assured it that the Remote MDx investment was going to be risk-free with a virtually guaranteed return. It also contends that Baker instructed it not to mention the investment to anyone else because it was such a good opportunity. Amorim Holding claims that Baker’ was offering Amorim Holding the Remote MDx investment to compensate it for its losses on the other investments Baker had suggested.
Amorim Holding claims that Baker omitted to inform it that a “market-maker” in Remote MDx was preparing to sell a “huge block” of Remote MDx shares and thus dilute the value of Amorim Holding’s interest in Remote MDx. It also alleges that Baker failed to disclose that he knew that Vatas would not be able to honor the put because it was over-extending itself in the market. However, there is virtually no evidence in the record regarding Baker’s knowledge—at the time he sold the Remote MDx investment to Amorim—of the prospective activity of the “market-maker” or the inability of VATAS to honor the put.
Amorim Holding purchased the shares and sold the put option to Vatas. Vatas, however, declared insolvency and did not honor the Amorim put. Consequently, Amorim did not make any profit on its purchase of the Remote MDx shares and indeed, after, a drop in the price of the stock, Amorim lost most of its $18.5 million investment.
II. STANDARD OF REVIEW
A moving party is entitled to summary judgment when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.Civ.P. 56(a). “A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party,” and “[a] fact is material if it has the potential of determining the outcome of the litigation.” Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777, 782 (1st Cir.2011) (citation omitted). However, “eonclusory allegations, improbable inferences, and unsupported speculation” are insufficient to create a genuine issue of material fact to survive summary judgment. Sullivan v. City of Springfield, 561 F.3d 7, 14 (1st Cir.2009) (quotation and citation omitted).
I “view the facts in the light most favorable to the party opposing summary judgment.” Rivera-Colon v. Mills, 635 F.3d 9, 10 (1st Cir.2011). Because I am addressing cross-motions for summary judgment, I “must view each motion, separately, through this prism.” Estate of Hevia v. Portrio, 602 F.3d 34, 40 (1st Cir.2010).
III. BAKER’S MOTION FOR SUMMARY JUDGMENT
Amorim Holding’s complaint asserts five causes of action: violation of the Massachusetts Securities Act, Massachusetts General Laws chapter 110A section 410 (Count I); fraud (Count II); negligent misrepresentation (Count III); breach of fiduciary duty (Count IV); and violation of Massachusetts General Laws chapter 93A (Count V). Baker has moved for summary judgment on all of Amorim Holding’s counts.
Baker contends that (A) all claims arising from purchases of securities by Morris Holdings or Sotomar fail because Amorim Holding is not the real party in interest. He further argues that (B) the Massachusetts Securities Act claims fail because (i) Amorim Holding has not tendered or sold its Remote MDx shares; (ii) if any misrepresentations were made with regard to Remote MDx, Amorim Holding knew they were false, and (iii) Amorim Holding was not the original purchaser of the Morris Holdings and Sotomar investments in Anasazi III, Chime, Z-Foree, American Entertainment Holding, or On-Card. In addition, Baker contends that (C) the fraud and negligent misrepresentation claims fail because (i) no misrepresentations were made as to Remote MDx; (ii) Amorim Holding did not reasonably rely on representations Baker did make with regard to Remote MDx; (iii) the Purchase and Subscription Agreements fully disclosed the risks of each investment that Amorim Holding made; and (iv) many of the alleged misrepresentations post-dated the investments and are therefore not actionable. Baker also argues that (D) the breach of fiduciary duty claims fail because they are derivative and the complaint fails to meet the requirements of Federal Rule of Civil Procedure 23.1. Finally, Baker contends that (E) the chapter 93A claim fails because all the other claims of deception or unfair practices have failed. I address each of Baker’s multifold arguments in turn.
A. Real Party in Interest
1. Legal Background
Baker contends that Amorim Holding is not the real party in interest with respect to investments made between 2004 and 2006 by Morris Holdings and Sotomar. Under Federal Rule of Civil Procedure 17, “[a]n action must be prosecuted in the name of the real party in interest,” that is, in the name of the person who is entitled to enforce the right asserted under the governing substantive law. Fed.R.Civ.P. 17(a)(1); 6A Charles Alan Wright & Arthur R. Miller, Federal Practioe & Prooedure § 1543 (3d ed.). Because I sit in diversity in this case, I look to the state substantive law governing Amorim Holding’s claims of violations of the Massachusetts Securities Act, fraud, negligent misrepresentation, breach of fiduciary duty, and violation of Massachusetts General Laws chapter 93A, to shape determination of the federal procedural question whether Amorim Holding is the real party in interest. See generally Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Ultimately, real party in interest status and the consequences which flow from that are procedural matters of federal law. See University of Rhode Island v. A.W. Chesterton Co., 2 F.3d 1200, 1205 n. 8 (1st Cir.1993) (citing Moor v. Alameda Cnty., 411 U.S. 693, 720, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973)).
2. Analysis
a. Massachusetts Securities Act Claims
The Massachusetts Securities Act provides in part that “any person who ... offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact ... is liable to the person buying the security from him.... ” Mass. Gen. Laws ch. 110A § 410(a)(2) (emphasis added). Here, Baker contends that “the person[s] buying the security” were Morris Holdings and Sotomar for the 2004-2006 investments in Anasazi III, Chime, Z-Force, American Entertainment Holding and On-Card, and Sotomar for One IP Voice, because Morris Holdings or Sotomar, not Amorim Holding, signed the purchase and subscription agreements for those investments and paid for the securities. Amorim Holding claims that the misrepresentations at issue in this lawsuit were made to its employees, who then acted on them by making investments through Morris Holdings and Soto-mar, and accordingly, Amorim Holding is the real party in interest for its Massachusetts Securities Act claim.
It is undisputed that Morris Holdings and Sotomar were the formal parties to the 2004-2006 purchase and subscription agreements through which the Anasazi III, Chime, Z-Force, American Entertainment Holding, On-Card, and One IP Voice investments were made. The record also demonstrates that the funds for each of those investments came from Morris Holdings or Sotomar, or from one of their parent companies, Foundation Pamalu or Foundation Lumapa. Thus, Morris Holdings and Sotomar were the “buyers” for purposes of the Massachusetts Securities Act, and Morris Holdings and Sotomar, not Amorim Holding, are the real parties in interest with regard to the listed 2004-2006 investments.
This deficiency, however, is not fatal to Amorim Holding’s claim. Authorized representatives of Morris Holdings, Sotomar, and various other holding companies, have ratified this action by Amorim Holding and thus Amorim Holding contends that it is a real party in interest under Fed.R.Civ.P. 17(a)(3). Rule 17(a)(3) provides that a “court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify ... the action.” Fed.R.Civ.P. 17(a)(3).
Baker contends that the ratifications did not come within a reasonable time and consequently should be treated as ineffective. This issue comes as no surprise to Amorim Holding. Baker first objected that Amorim Holding was not the real party in interest in his motion to dismiss filed in mid-2009. Baker maintained its objection in its motion for summary judgment, filed January 9, 2012. The ratifications provided by Morris Holdings and others were not filed until March 2012, after the close of discovery, in the middle of summary judgment motion practice, and close to three years after Baker first objected that Amorim Holding was not the real party in interest.
As the Wright & Miller section on Rule 17(a)(3) notes, “Rule 17(a)(3) is designed to avoid forfeiture and injustice when an un-derstandáble mistake has been made in selecting the party in whose name the action should be brought....” 6A Weight & Miller, Federal Practice & Prooedure § 1555. Baker claims that Amorim Holding did not make an “understandable mistake,” but instead deliberately avoided bringing suit Morris Holdings as a plaintiff. This choice was made because as Maria Amorim disclosed at her deposition, “Morris [Holdings] works as a cash safeguard, as an equity safeguard” for the Amorim family. Baker claims Amorim did not bring suit in Morris Holdings’ name to protect personal assets from counterclaims.
When Baker first argued that Amorim Holding was not the real party in interest in its motion to dismiss, Judge Gertner denied the motion by margin note, ruling that Amorim was the real party in interest to all claims raised in the complaint. After the case was transferred to my docket in anticipation of Judge Gertner’s retirement, Baker revived the argument through its summary judgment motion in 2012, and Amorim Holding produced the challenged ratifications. In light of Judge Gertner’s ruling, which Amorim Holding might reasonably have regarded as obviating the need for any ratification, I will allow the ratifications as having been filed within a reasonable time. Thus, Baker’s first defense to Amorim Holding’s claims fails.
b. Fraud, Negligent Misrepresentation, and 9SA Claims
As to the fraud and negligent misrepresentation claims, under Massachusetts law “[o]ne who makes a fraudulent misrepresentation is subject to liability to the persons or class of persons whom he intends or has reason to expect to act or to refrain from action in reliance upon the misrepresentation....” Reisman v. KPMG Peat Marwick LLP, 57 Mass.App.Ct. 100, 787 N.E.2d 1060, 1067 (2003) (emphasis added); see also Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 809 N.E.2d 1017, 1031 n. 25 (2004) (“A defendant is liable for negligent misrepresentation if in the course of his business, he supplies false information for the guidance of others in their business transactions-”). Here, all of the alleged misrepresentations relating to the 2004-2006 investments were directed to Amorim Holding employees and Amorim himself, who then allegedly acted on them by making investments through various affiliated entities. Thus, as to the fraud and negligent misrepresentation claims based on the Morris Holdings and Sotomar investments, Amorim Holding is a proper real party in interest under Rule 17(a). Because the chapter 93A claim is based on the fraud and negligent misrepresentation claims, Amorim Holding is a real party in interest on that claim as well.
c. Breach of Fiduciary Duty Claims
As to the breach of fiduciary duty claim, under Massachusetts law, a plaintiff must show (1) the existence of a duty of a fiduciary nature, based upon the relationship of the parties, (2) breach of that duty, and (3) a causal relationship between that breach and some resulting harm to the plaintiff. Hanover Ins. Co. v. Sutton, 46 Mass.App.Ct. 153, 705 N.E.2d 279, 288-89 (1999). Amorim Holding contends' that Baker was acting as its investment advisor ánd thus owed it a fiduciary duty, which Baker breached in the various misrepresentations and omissions it alleges he made. Under these circumstances, as with the fraud and misrepresentation claims, Amorim Holding is a proper real party in interest under Rule 17(a) for its breach of fiduciary duty claim.
B. Massachusetts Securities Act Claims
1. Legal Background
The Massachusetts Uniform Securities Act provides that any person who
offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading, the buyer not knowing the untruth or omission, and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission, is liable to the person buying the security from him.
Mass. Gen. Laws ch. 110A § 410(a)(2). Thus, for a plaintiff to recover under § 410, he must show (1) that the defendant offered or sold a security in Massachusetts; (2) by (a) making an untrue statement of material fact, or (b) omitting a material fact necessary to make a statement not misleading; (3) that the plaintiff (a) did not know was false or (b) did not know was omitted; and (4) the defendant knew or should have known in the exercise of reasonable care was untrue or misleading. Id.
Once the prima facie case has been made, the statute employs a burden-shifting mechanism whereby the defendant must prove (1) he did not know of the statement’s falsity or that its omission would make his statement misleading, or (2) he could not in the exercise of reasonable diligence have discovered either the statement’s falsity or the misleading-causing nature of the omission. See, e.g., Adams v. Hyannis Harborview, Inc., 838 F.Supp. 676, 688 (D.Mass.1993) (noting that under the Massachusetts Securities Act the seller bears the burden to establish his lack of negligence).
2. Analysis
Baker raises three defenses to Amorim Holding’s Massachusetts Securities Act claim. To the extent it is based on the Remote MDx investment, Baker argues it fails because (i) Amorim Holding has not tendered or sold its Remote MDx shares, and (ii) if any misrepresentations were made with regard to Remote MDx, Amor-im Holding knew they were false and therefore cannot make out a Massachusetts Securities Act violation. As to the Morris Holdings and Sotomar investments in Anasazi III, Chime, Z-Force, American Entertainment Holding, On-Card, and One IP Voice, Baker argues the Securities Act claim fails because (iii) Amorim Holding is not the original purchaser. Baker also implicitly makes a fourth argument: that many of the alleged misrepresentations were made post-investment, and thus cannot give rise to Massachusetts Securities Act liability. I address each argument in turn. I also take up the timing of the misrepresentations in connection with the fraud and misrepresentation claims in Section III.C.2.d, infra.
a. Lack of Tender or Sale
Baker contends that Amorim Holding’s Massachusetts Securities Act claim fails with regard to the Remote MDx shares because Amorim Holding has not tendered or sold its shares as required by Massachusetts General Laws ch. 110A § 410(a)(2). While he is correct that Amorim Holding has not yet tendered or sold its shares, and it appears that such tender or sale is required to recover under section 410(a)(2), the statute provides that “[a]ny tender specified in [section 410] may be made at any time before entry of judgment.” Mass. Gen. Laws ch. 110A § 410(c). Because Amorim Holding still has time to tender or sell its shares, Baker’s first defense to Amorim Holding’s Securities Act claim fails at this point.
b. Amorim Knew Remote MDx Misrepresentations were False
Under the Massachusetts Securities Act, if a buyer knows the alleged misrepresentations are false, his claim is barred. Mass. Gen. Laws ch. 110A § 410(a) (requiring that the buyer “not know[] of the untruth or omission” to make out a claim).
Amorim Holding points to a number of pre-investment misrepresentations that it alleges Baker made about Remote MDx as the basis for its Massachusetts Securities Act claim. Amorim Holding’s primary allegation with regard to Remote MDx is that Baker falsely assured it that the Remote MDx was a risk-free investment with a virtually guaranteed return, and concealed that Vatas could not honor the put.
Baker contends that Amorim Holding knew that the investment was not risk free and did not have a virtually guaranteed return. Baker also claims he did not know that Vatas could not honor the put. The record supports Baker’s contentions.
Amorim Holding acknowledged that on occasion before the Remote MDx investment, Baker had informed it that Baker “[could not] assure today an investment return in the future,” because of securities regulations. When asked at its 30(b)(6) deposition whether, Baker had ever “told [it] in so many words that [Remote MDx] was a risk free investment,” Amorim Holding’s representative said “No, I don’t think he ever said this was a risk free investment.” While the Amorim Holding representative went on to say that Baker had suggested that he offered the Remote MDx investment as an opportunity to make up Amorim Holding’s losses, that statement does not support Amorim Holding’s claim that Baker represented that the investment was “risk free” or “guaranteed.” In his deposition, Baker confirmed this, and stated “that under securities law ... we never guarantee investments.” Given this record, I find as a matter of law no buyer would understand that this investment was risk free.
The record also contradicts the omissions and concealed facts Amorim Holding alleges. At his deposition, the managing director of Vatas stated repeatedly that he never talked to Baker about whether Va-tas was giving other put options to investors holding Remote MDx stock. He directly stated that he did not talk to Baker about Vatas’s ability to honor the puts given to Amorim Holding, and that such information was not otherwise publicly available to Baker. Finally, in a single footnote, Amorim Holding contends that Baker concealed that “a market maker in Remote MDx stock was preparing to sell a huge block” which would dilute the market. That allegation is unsupported by the record, and is inadequately briefed in any event.
Thus, because the record is devoid of a misrepresentation or omission respecting the Remote MDx investment, or if a misrepresentation existed, one that Amorim Holding knew to be false, Amorim Holding’s Massachusetts Securities Act claim with regard to its investment in Remote MDx fails.
c. Not the Original Purchaser
Related to the real party in interest issue above, but distinct, is the requirement under the Massachusetts Securities Act that the plaintiff be “the person buying the security” from the defendant. Mass. Gen. Laws ch. 110A § 410(a). The parties agree that this language has been interpreted to mean that the plaintiff must be the immediate purchaser, not a remote subsequent purchaser, of the security. See Joseph C. Long, 12A Blue Sky Law § 9:40 h. 1.
Relying on this construction, Baker argues that Amorim Holding’s Massachusetts Securities Act claim fails as to investments made between 2004 and 2006 by Morris Holdings and Sotomar, since they, not Amorim Holding, were “the person[s] buying the securit[ies].” Amorim Holding argues that because it is made up of the same individuals to whom Baker made the alleged misrepresentations that form the basis of its Massachusetts Securities Act claim, Amorim Holding as well as Morris Holdings and Sotomar should be treated as “the person buying the security.”
In support of its position, Amorim Holding cites an example from Joseph Long’s Blue Sky Law treatise which states that where “a parent corporation pays for the securities and, for unrelated business reasons, elects to have the title pass to one of its subsidiaries,” then both the parent corporation and the subsidiary should be treated as original purchasers (people “buying the security”) for purposes of the Massachusetts Securities Act. Id. § 9:40. Although that particular example is distinguishable from the facts here because we are dealing here with a somewhat looser organizational affiliation than a strict parent-subsidiary relationship, I am nevertheless persuaded that the Amorim-affiliated entities that currently hold the investments should be treated as the original purchasers in the circumstances of this case.
In 2007, Morris Holdings redeemed its shares in Chime and ZForce for face value, and simultaneously Amorim Holding purchased those shares by executing new purchase and subscription agreements with Chime and Z-Force. Although the shares in both companies were illiquid and Morris Holdings had no right to redeem them, the parties agree that the simultaneous redemption/repurchase transactions were permitted as a courtesy to Mr. Amorim, who sought to transfer ownership of the securities between entities under his control, purportedly for tax reasons. In 2008, Morris Holdings sold its shares in Anasazi III to a company called Amorim Alternative Iñvestments for $1.8 million. On September 28, 2011, after the initial discovery deadlines had passed, Morris Holdings sold its shares of American Entertainment Holding to a wholly-owned Amorim Holding subsidiary for $250,000. Sotomar continues to hold the interest in One IP Voice, and Morris Holdings continues to hold the interest in On-Card.
As to the Chime and Z-Force shares that it redeemed in 2007, Morris Holdings was “the person buying the security,” and thus the party who could sue under the Massachusetts Securities Act. Baker contends that, assuming Amorim Holding could sue in Morris Holdings’ name as a result of the Rule 17(a)(3) ratification discussed above, Morris Holdings would be without a remedy because Morris Holdings’ damages are $0. But the circumstances of those “redemptions” indicate that they were not true redemptions as contemplated by the Massachusetts Securities Act. They were redemptions in form only, designed to procure Mr. Amorim some tax benefit in Portugal. Although not explicit from the record, the parties appear to agree that the redemptions would not have been allowed by the issuing companies absent the understanding that another Amorim-affiliated entity under Mr. Amorim’s control would simultaneously repurchase the shares at face value. It is therefore as if no redemption had occurred, and the Amorim-affiliated entities that now hold the shares are appropriately treated as the original purchasers for the purposes of the Massachusetts Securities Act claims. What ultimately matters is that the current holders of the shares are effectively indistinct from the “original purchasers” that were the subject of the misrepresentations alleged.
As to the Anasazi III, American Entertainment Holding, and On-Card shares, because Morris Holdings has ratified Amorim Holding’s claim and Morris Holdings was “the buyer of the security,” Amorim Holding’s Massachusetts Securities Act claim may go forward as to the On-Card shares. Although Baker suggests that there is evidence that a redemption of the On-Card shares was contemplated in 2007, there is no evidence in the record in the form of a redemption/repurchase agreement showing that such a redemption occurred.
Likewise, as to the One IP Voice shares, because Sotomar has ratified its claim and given Amorim Holding permission to sue on it, and Sotomar was “the buyer of the security,” Amorim Holding’s Massachusetts Securities Act claim may go forward as to the One IP Voice shares.
d. Not the “Means of’ the Securities Sales
As noted below, infra part III. C.2.d, some of the alleged misrepresentations that form the basis for Amorim Holding’s fraud and negligent misrepresentation claims were post-investment. The focus of the Massachusetts Securities Act is on pre-investment information disclosure. Cf. Marram, 809 N.E.2d at 1025-27. The language of the Act itself focuses on the sale and the information available to the buyer during that period in time. See Mass. Gen. Laws ch. 110A § 410(a)(2) (creating liability for any person who “offers or sells a security by means of any untrue statement of a material fact” or omission). Post-investment misrepresentations, unconnected to the offer or sale of a security, then, cannot give rise to liability under the Massachusetts Securities Act, and any claims based on such misrepresentations fail as a matter of law.
C. Fraud and Negligent Misrepresentation Claims
1. Legal Background
Under Massachusetts law, to make out a fraud claim a plaintiff must show that (1) he is a person or within the class of persons as to whom (2) the defendant intended, or had a reasonable expectation would act (3) in reasonable reliance upon (4) a knowingly false statement made by the defendant. Reisman, 787 N.E.2d at 1067. As to a claim for negligent misrepresentation, a defendant is liable “if in the course of his business, he supplies false information for the guidance of others in their business transactions, causing and resulting in pecuniary loss to others by their justifiable reliance on the information, with failure to exercise reasonable care or competence in obtaining or communicating the information.” Marram, 809 N.E.2d at 1031 n. 25. The two causes of action share common' elements: the plaintiff must show (1) that the defendant made a misrepresentation or omitted a fact; (2) that the statement was material; (3) that the defendant knew or should have known it was false; and (4) that the plaintiff reasonably relied on the misrepresentation. The two differ in that negligent misrepresentation “does not require a showing that the defendant even knew that the statements made were false or that the defendant actually intended to deceive the plaintiff.” Id. (quoting Kitner v. CTW Transp., Inc., 53 Mass.App.Ct. 741, 762 N.E.2d 867, 874 (2002)).
Some general observations may be made about the requirements of the fraud and negligent misrepresentation torts.
First, it is beyond debate that for a misrepresentation to be actionable, it must have, in fact, been false. Generally, then, it must be a statement of fact, not opinion. Zimmerman v. Kent, 31 Mass.App.Ct. 72, 575 N.E.2d 70, 75 (1991). Exceptions exist, however. An opinion, prediction, or projection may be actionable where the speaker knew or should have known it was false at the time he made it. See, e.g., Pearce v. Duchesneau Group, 392 F.Supp.2d 63, 74 (D.Mass.2005). Alternatively, a statement expressing a projection or opinion may give rise to liability if it is “not reasonably based on, or [is] inconsistent with, the facts at the time the forecast is made.” Glassman v. Computervision, 90 F.3d 617, 627 (1st Cir.1996).
Second, under Massachusetts law, “information is ‘material’ only if its disclosure would alter the ‘total mix’ of facts available to the investor and ‘if there is a substantial likelihood that a reasonable shareholder would consider it important’ to the investment decision.” Milton v. Van Dorn Co., 961 F.2d 965, 969 (1st Cir.1992) (quoting Basic, Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)). The inquiry is an objective one. Id. at 970. Puffery is not actionable because it is so vague and general as to be unimportant in the total mix of information. See, e.g., Glassman, 90 F.3d at 635-36.
Finally, both causes of action require a showing of reasonable reliance. The First Circuit has looked to a number of factors in determining whether reliance was reasonable, including:
(1) The sophistication and expertise of the plaintiff in financial and securities matters; (2) the existence of long standing business or personal relationships; (3) access to the relevant information; (4) the existence of a fiduciary relationship; (5) concealment of the fraud; (6) the opportunity to detect the fraud; (7) whether the plaintiff initiated the stock transaction or sought to expedite the transaction; and (8) the generality or specificity of the misrepresentations.
Kennedy v. Josephthal & Co., Inc., 814 F.2d 798, 804 (1st Cir.1987). The First Circuit has held that no reasonable investor would rely on “optimistic predictions of future potential,” as long as the predictions are not, in fact, promises about certain future performance. Suna v. Bailey, 107 F.3d 64, 70-72 (1st Cir.1997); see Computervision, 90 F.3d at 626 (“Forecasts are not guarantees of, or insurance policies for, a firm’s future performance, nor are they understood as such by reasonable investors.”).
2. Baker’s Asserted Defenses
Baker contends that Amorim Holding’s fraud and negligent misrepresentation claims fail. As to those claims based on the investment in Remote MDx, Baker claims (i) no misrepresentations were made, or (ii) if any were made, Amorim Holding did not reasonably rely on them. Third, for claims arising out of the investments in Anasazi III, Chime, Z-Force, American Entertainment Holding, On-Card, and One IP Voice, Baker seeks shelter in the risk disclosures of the Purchase and Subscription Agreements. Finally, he argues that any misrepresentations that were made post-dated the investments and are therefore not actionable. I address each argument in turn.
a. No Misrepresentations Made as to Remote MDx
Amorim Holding’s fraud and misrepresentation claims based on the Remote MDx investment must fail for the same reason that the Massachusetts Securities Act claim arising from that investment fail: that the record discloses that Baker did not represent that the investment would be free of risk.
b. Amorim Holding did not Reasonably Rely on Statements Regarding Remote MDx or Knew They Were False
Even if a misrepresentation was made, Baker argues that Amorim Holding did not rely on it because it made its own investigation into the Remote MDx investment and agreed thereafter to invest. As noted above, before purchasing the Remote MDx shares, Amorim Holding employees reviewed financial data about Vatas and its connection to the Hersov family, a■ wealthy diamond-mining family in South Africa. After reviewing the information they had uncovered, Amorim Holding employees and Amorim himself felt comfortable that Vatas was a legitimate business with substantial levels of equity, in excess of $200 million. An Amorim Holding employee expressed the company’s comfort with Vatas to Baker directly in an email, stating that Amorim Holding “already gathered information about Vatas and feel comfortable about their role as guarantors of the put.” In other words, as the January 24, 2008 Amorim Holding meeting minutes revealed, Amorim Holding felt that Vatas’s “credibility was assured” after Amorim Holding had done the work “necessary to ensure” its credibility.
Amorim Holding’s meeting minutes also disclose that Amorim Holding explicitly contemplated and created a contingency plan in the event that Vatas did not honor the put. The meeting minutes reveal that Amorim himself contemplated that a lawsuit would need to be brought in Germany against Vatas if it failed to purchase the shares at the agreed-upon price in July 2008.
Baker thus argues that Amorim Holding cannot now claim that it' relied on any statements Baker made about the return on the investment being guaranteed, or Vatas being able to honor the put, since Amorim Holding performed its own investigation of the facts it thought were necessary to make its investment decision and explicitly contemplated the possibility that Vatas would not honor the put. Amorim Holding claims that its investigation did not, and could not, have uncovered the information Baker allegedly knew that Va-tas could not have honored the put.
As noted above, a number of factors are relevant in determining whether a plaintiffs reliance was reasonable under the circumstances of the case: “(1) The sophistication and expertise of the plaintiff in financial and securities matters; (2) the existence of long standing business or personal relationships; (3) access to the relevant information; (4) the existence of a fiduciary relationship; (5) concealment of the fraud; (6) the opportunity to detect the fraud; (7) whether the plaintiff initiated the stock transaction or sought to expedite the transaction; and (8) the generality or specificity of the misrepresentations.” Kennedy, 814 F.2d at 804.
Although Amorim claims that it is not sophisticated, its namesake is one of the wealthiest men in Portugal and it controls millions of dollars in investments. No reasonable juror could find that Amorim was not a sophisticated investor. While Baker and Amorim Holding had a longstanding, arguably fiduciary relationship as of the time of the Remote MDx investment, it is undisputed that Baker did not and could not have known that Vatas was not going to be able to honor the put. Thus, Baker did not have any information that Amorim Holding did not have as a result of its investigation, did not conceal any alleged fraud, and Amorim Holding had the same opportunity to detect it as Baker did. Furthermore, Amorim Holding explicitly contemplated that Vatas would not honor the put, and under the above factors no reasonable jury could conclude that Amor-im Holding reasonably relied on Baker’s alleged misrepresentation that the investment was a risk-free, virtually guaranteed return.
Thus, because no reasonable jury could find that Amorim Holding reasonably relied on the alleged affirmative misrepresentations or omissions of Baker, summary judgment is appropriate regarding Remote MDx.
c. Risks were Fully Disclosed in Purchase Agreements
Baker next argues that the risk disclosures and integration clauses in the purchase and subscription agreements make any reliance by Amorim Holding on any alleged misrepresentations unreasonable as a matter of law. Thus, Baker contends, Amorim Holding’s fraud and negligent misrepresentation claims must fail.
Generally, an integration or merger clause will not bar a fraud claim, Sound Techniques, Inc. v. Hoffman, 50 Mass.App.Ct. 425, 737 N.E.2d 920, 924 (2000), but will be enforced against a negligent misrepresentation claim, id. at 926-27. However, in the securities context, the Massachusetts Supreme Judicial Court has held that where a purchase or subscription “agreement implicitly acknowledges [the defendant’s] pre-investment oral statements to be part of the mix of pre-investment information available for the prospective buyer to weigh,” then also “[i]mplicit ... is the guarantee that whatever information ... [is] provide[d] will be reliable.” Marram, 809 N.E.2d at 1032. Thus, where a purchase or subscription agreement states that the defendant (an offshore fund in that case) “ ‘will make available to each prospective investor ... the opportunity to ask questions of, and receive answers’ from the offshore fund administrator concerning ‘the terms and conditions of this offering of Shares,’ and from the offshore fund manager concerning ‘the investment program of the Fund’ ” and the “private offering memorandum further states that the administrator will provide the investor, on request, with such additional information ‘necessary to verify the accuracy’ of the memorandum as the administrator ‘could acquire ... without unreasonable effor