DECISION and ORDER I. INTRODUCTION On May 13, 2024, plaintiff Mark S. O’Dell (“O’Dell” or “plaintiff”) filed this putative class action against Berkshire Bank (“Berkshire” or “defendant”) alleging a single claim of aiding-and-abetting common law fraud. Berkshire has moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure (“Rules”) 12(b)(6) and 9(b). Dkt. No. 27-1. The motion has been fully briefed and will be considered on the basis of the submissions without oral argument. Dkt. Nos. 42, 43. II. BACKGROUND This case arises out of O’Dell and the putative class members’ loss of significant savings stemming from a pyramid scheme (the “Ponzi scheme”) orchestrated and conducted by non-party M. Burton Marshall (“Marshall”). For three decades, Marshall operated a series of businesses and owned several properties in Madison County, New York. Compl. 1. Marshall’s business activities included the preparation of tax returns, self-storage, printing, insurance brokering, property maintenance, and real estate rentals. Id. But Marshall’s primary business endeavor was soliciting money to invest in a fund he originated (the “Marshall Fund” or the “Fund”) by offering promissory notes (“Notes”); i.e., written documents promising to repay investors a guaranteed eight percent annual return. Compl. 2. Marshall solicited friends, neighbors, and clients to invest in the Marshall Fund. Id. Marshall paid investors their promised returns and raised new funds by soliciting new investors. Id. 3. Marshall operated the Fund with a single personal checking account that he maintained at Berkshire (the “Berkshire Account”). Compl. 5. Deposits from new investors were credited to this account and distributions to existing investors were debited from it. Id. In other words, Marshall was running a textbook Ponzi scheme. Id. 3. On April 20, 2023, after running into trouble with his sham business operation when he became ill and required hospitalization, Marshall filed a Petition for relief under Chapter 11 of the Bankruptcy Code (the “Bankruptcy Action”). Compl.
4, 25. Marshall’s inability to solicit new investors during this time crippled the Ponzi scheme. Id. 25. At that time, the Marshall Fund owed approximately 900 Notes to investors valued at over $90 million. Id. 4. Believing that Marshall’s investors will never receive full restitution from the Bankruptcy Action, O’Dell’s class action lawsuit followed. Compl. 10. III. LEGAL STANDARD To survive a Rule 12(b)(6) motion to dismiss, the complaint’s factual allegations must be enough to elevate the plaintiff’s right to relief above the speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). So while legal conclusions can provide a framework for the complaint, they must be supported with meaningful allegations of fact. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). In short, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. To assess this plausibility requirement, the court must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in the non-movant’s favor. Erickson v. Pardus, 551 U.S. 89, 94 (2007). In doing so, the court generally confines itself to the facts alleged in the pleading, any documents attached to the complaint or incorporated into it by reference, and matters of which judicial notice may be taken. Goel v. Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016) (quoting Concord Assocs., L.P. v. Ent. Props. Tr., 817 F.3d 46, 51 n.2 (2d Cir. 2016)). IV. DISCUSSION O’Dell’s complaint alleges one claim for aiding and abetting fraud in violation of New York State law. Compl. 10. Berkshire has moved to dismiss plaintiff’s complaint on the basis that it fails to state a plausible claim for relief under the heightened pleading requirements articulated under Rule 9(b). Def.’s Mem., Dkt. No. 27-1 at 5. A. Aiding and Abetting Fraud “To establish liability for aiding and abetting fraud, a plaintiff must show (1) the existence of a fraud; (2) the defendant’s knowledge of the fraud; and (3) that the defendant provided substantial assistance to advance the fraud’s commission.” Rosner v. Bank of China (“Rosner I”), 2008 WL 5416380, at *4 (S.D.N.Y. Dec. 18, 2008), aff’d 349 F. App’x 637 (2d Cir. 2009) (summary order) (“Rosner II”) (cleaned up); Lerner, 459 F.3d at 292. As relevant here, the “actual knowledge” element of a claim for aiding and abetting fraud is a distinct requirement from the scienter required to allege the underlying fraud itself. Agape II, 773 F. Supp. 2d at 308 (citing Anwar v. Fairfield Greenwich Ltd., 728 F. Supp. 2d 372, 442 (S.D.N.Y. 2010)). In other words, a plaintiff “must allege that the defendant had actual knowledge of the wrongful conduct committed, not simply that the defendant should have known of the conduct.” Anwar, 728 F. Supp. 2d at 442-43 (citing Rosner II, 349 F. App’x at 639). Further, a plaintiff asserting a fraud claim in a federal forum must satisfy the heightened pleading requirement of Rule 9(b). Specifically, under Rule 9(b), “[m]alice, intent, knowledge, and other condition of mind of a person may be averred generally.” Lerner, 459 F.3d at 290 (quoting FED. R. CIV. P. 9(b)). However, because “we must not mistake the relaxation of Rule 9(b)’s specificity requirement regarding condition of mind for a license to base claims of fraud on speculation and conclusory allegations[,]…plaintiffs must allege facts that give rise to a strong inference of fraudulent intent.” Id. (quoting Acito v. IMCERA Grp., Inc., 47 F.3d 47, 52 (2d Cir. 1995) (internal quotation marks and citation omitted)). The requisite “strong inference” of fraud can be demonstrated “either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). To prove that defendant aided and abetted the fraud, plaintiff must also show the defendant “provided substantial assistance to advance the fraud’s commission.” Rosner I, 2008 WL 5416380, at *4. Substantial assistance can be ascertained where “(1) a defendant affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed; and (2) the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated.” Agape II, 773 F. Supp. 2d at 322 (quoting Rosner I, 2008 WL 5416380, at *5 (S.D.N.Y. Dec. 18, 2008) (internal citations omitted). Importantly, “[w]here a defendant has no affirmative duty to act, their failure to act may not serve as the basis for claiming that the defendant provided substantial assistance.” Id. Berkshire argues that O’Dell has failed to state a plausible claim for aiding and abetting fraud because plaintiff has failed to (1) plead facts giving rise to a “strong inference” that Berkshire possessed “actual knowledge” of Marshall’s Ponzi scheme;1 and (2) plausibly allege that defendant “substantially assisted” Marshall with the fraud. Def’s. Mem. at 13-14. Plaintiff argues in opposition that Berkshire had actual knowledge for several reasons. First, Marshall’s Berkshire Account was the largest and most transactionally active account at Berkshire’s Oriskany Falls branch prior to the branch’s shutdown in 2021.2 Compl.
