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In re Telexfree Securities Litigation

United States District Court, D. Massachusetts

January 29, 2019

In re TELEXFREE SECURITIES LITIGATION

          MEMORANDUM AND ORDER ON DEFENDANT'S NEHRA AND WAAK'S MOTIONS TO DISMISS (DOCUMENT # 187)

          TIMOTHY S. HILLMAN, DISTRICT JUDGE

         Introduction

         Attorneys Gerald P. Nehra and Richard W. Waak, two defendants in the multiple defendant TelexFree multi-district securities litigation move to dismiss all counts against them in the Second Consolidated Amended Complaints (SCAC) (Docket 141) pursuant Fed.R. Civ. P. 12 (b)(6). TelexFree, Inc., (TelexFree) was a pyramid scheme that operated from February 2012 to April 2014, and involved approximately two million participants worldwide, nearly one million of whom suffered a net financial loss. Several Plaintiffs filed actions in federal district courts across the United States seeking to recover their losses against dozens of defendants, including attorneys who represented the principals of the pyramid scheme. Because the actions involve common questions of fact, the Judicial Panel on Multi-District Litigation joined the actions into a multi-district litigation and ordered a transfer of actions to the District of Massachusetts for coordinated or consolidated pre-trial proceedings.

         The Plaintiffs' complaint seeks relief against the Defendants in the following Counts:

• First Claim for Relief: General Laws Chapter 93, §12 and 69.
• Second Claim for Relief: General Laws Chapter 93A §2 and 11.
• Third Claim for Relief: Aiding and Abetting General Laws Chapter 93§12 and 69 and Chapter 93A §2 and 11.
• Fourth Claim for Relief: Unjust enrichment.
• Fifth Claim for Relief: Civil Conspiracy.
• Sixth Claim for Relief: Professional negligence.
• Seventh Claim for Relief: Negligent misrepresentation.
• Eight Claim for Relief: Securities Fraud.
• Ninth Claim for Relief: Fraud.
• Tenth Claim for Relief: Tortious aiding and abetting.

         Background

         The Defendants, are attorneys licensed to practice law in the State of Michigan and are sued in their individual capacity, and as partners in the Nehra and Waak Law Firm. The Defendants and their law firm provided legal services to TelexFree in connection with TelexFree's multilevel marketing scheme. The Defendants advertised that they were experts in representing multilevel marketing and direct sales clients and that TelexFree used the attorneys to hide their pyramid scheme activity with “obfuscating phraseology.” The complaint further alleges that in July of 2013, the Defendants represented to the Plaintiffs and the putative class members in July 2013, that they had “vetted” and “blessed” TelexFree's business model. (SCAC ¶416). Further, Attorney Nehra was present at a “Super Weekend” promotion on behalf of TelexFree and he assured the attendees of the legitimacy of the TelexFree operation in the United States, and that “TelexFree's operation had been ‘vetted by the Nehra and Waak Law Firm' and that it is legally designed . . . you are on very solid legal ground.” (SCAC ¶423). The complaint alleges that these statements were made by Attorney Nehra with full knowledge that the TelexFree Brazilian operations had been shut down by the Brazilian Government and that all assets had been frozen.

         Discussion

         First Claim for Relief: General Laws Chapter ...


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