Post-Filing Assignment Does Not Moot, Redundant Conspiracy Claims Are Dismissable, and “Actual Knowledge” Means Actual: The Second Circuit’s Summary Order in Fezzani v. Dweck

Post-Filing Assignment Does Not Moot, Redundant Conspiracy Claims Are Dismissable, and “Actual Knowledge” Means Actual: The Second Circuit’s Summary Order in Fezzani v. Dweck

Decision: Fezzani v. Dweck, Nos. 24-2478(L), 24-2536(Con), 24-2538(Con) (2d Cir. Nov. 3, 2025) (summary order, nonprecedential)

Note: This is a summary order of the U.S. Court of Appeals for the Second Circuit. Under Federal Rule of Appellate Procedure 32.1 and Local Rule 32.1.1, summary orders do not have precedential effect, though they may be cited.

Introduction

This long-running investor litigation—filed in 1999—arises from a fraudulent scheme by the defunct broker-dealer A.R. Baron. The plaintiffs are a group of investors who allege they were harmed by Baron's manipulation and deceptive trading practices. After extensive proceedings, including multiple prior trips to the Second Circuit, the case narrowed to New York state-law theories against two sets of defendants: members of the Dweck family and members of the Wolfson family. Plaintiffs claimed these individuals were favored customers and insiders who aided and abetted Baron's fraud and conspired to perpetrate it.

On appeal in 2025, plaintiffs challenged two dispositive district court rulings: (1) dismissal of their civil conspiracy claim under Federal Rule of Civil Procedure 12(c) as duplicative of their aiding-and-abetting claim; and (2) summary judgment for defendants on aiding and abetting, based on plaintiffs’ failure to raise a genuine dispute of material fact regarding defendants’ “actual knowledge” of the fraud. Defendants filed cross-appeals contesting subject-matter jurisdiction, arguing that plaintiffs lacked standing or that their claims had become moot due to the assignment of claims to Baron's bankruptcy trustee and other post-filing events.

The Second Circuit affirmed across the board, resolving jurisdictional challenges first and then endorsing both the Rule 12(c) dismissal and the summary judgment ruling.

Summary of the Opinion

  • Subject-Matter Jurisdiction: The court rejected defendants’ argument that plaintiffs’ post-filing assignment of claims to the A.R. Baron bankruptcy trustee mooted the case or divested the court of jurisdiction. Relying on Second Circuit authority and Rule 25(c), the court explained that an assignment does not erase injury, break causation, or undermine redressability. It also rejected the notion that restitution payments or an obligation to remit litigation proceeds to a trustee mooted the case, citing the collateral source rule and Sprint Communications.
  • Rule 12(c) Dismissal of Conspiracy: The court held that the district court properly dismissed the civil conspiracy claim as duplicative of the aiding-and-abetting claim, because New York does not recognize conspiracy as an independent tort and the conspiracy allegations overlapped entirely with the aiding-and-abetting theory. The court also rejected arguments based on the mandate rule and waiver, clarifying that Rule 12(h)(2) permits a Rule 12(c) motion asserting failure to state a claim after other Rule 12 motions.
  • Summary Judgment on Aiding and Abetting: The court affirmed summary judgment for defendants because plaintiffs failed to adduce evidence that defendants had “actual knowledge” of the fraud alleged in the complaint. Declarations that defendants were favored customers, arranged trades, or engaged with Baron's management did not establish knowledge of the specific fraudulent scheme alleged (misrepresentations and market manipulation creating false impressions of legitimate, liquid trading). The court also held the district court acted within its discretion in declining to consider plaintiffs’ expanded theory of fraud first raised at summary judgment.
  • Disposition: With these holdings, the court concluded that plaintiffs’ appeal of the dismissal of claims by one plaintiff, Adam Cung, was moot; the court otherwise affirmed the judgment in full.

Detailed Analysis

Precedents Cited and Their Influence

  • Standing/Mootness and Assignments
    • Wynn v. AC Rochester, 273 F.3d 153 (2d Cir. 2001): Courts must ensure subject-matter jurisdiction before reaching the merits.
    • Rogers v. Petroleo Brasileiro, S.A., 673 F.3d 131 (2d Cir. 2012): Standard for reviewing jurisdictional determinations—de novo for legal issues, clear error for facts.
    • Doe v. McDonald, 128 F.4th 379 (2d Cir. 2025); Stafford v. IBM, 78 F.4th 62 (2d Cir. 2023): Where jurisdictional challenges arise from post-filing events, they are treated as mootness issues; “mootness is standing set in a time frame.”
    • Fund Liquidation Holdings LLC v. Bank of America, 991 F.3d 370 (2d Cir. 2021): An assignment does not erase injury, disrupt causation, or impair redressability; thus, it does not eliminate Article III standing.
    • Rule 25(c): If an interest is transferred, the action may be continued by the original party. The court cited Wright & Miller to confirm Rule 25(c) applies to ordinary transfers and assignments.
    • Southern New England Tel. Co. v. Global NAPs, 624 F.3d 123 (2d Cir. 2010): A release is an affirmative defense; even if valid, it does not oust subject-matter jurisdiction. This addressed defendants’ argument that the trustee released claims.
    • In re State Street Bank & Trust Co. ERISA Litig., 579 F. Supp. 2d 512 (S.D.N.Y. 2008), and Barkanic v. GA of Civil Aviation, 923 F.2d 957 (2d Cir. 1991): The collateral source rule permits recovery from a tortfeasor notwithstanding third-party compensation; such payments do not moot claims.
    • Sprint Communications Co. v. APCC Services, 554 U.S. 269 (2008): An assignee has standing even if required to remit proceeds, underscoring that Article III does not demand that plaintiffs keep the recovery.
  • Rule 12(c), Mandate Rule, and Duplicative Conspiracy
    • L-7 Designs, Inc. v. Old Navy, 647 F.3d 419 (2d Cir. 2011): De novo review of Rule 12(c) judgments.
    • Callahan v. County of Suffolk, 96 F.4th 362 (2d Cir. 2024); In re Coudert Bros., 809 F.3d 94 (2d Cir. 2015): The mandate rule controls only as to issues within the scope of the prior mandate; on remand, courts may address open issues.
    • Aetna Cas. & Sur. v. Aniero Concrete, 404 F.3d 566 (2d Cir. 2005), and American Baptist Churches v. Galloway, 271 A.D.2d 92 (1st Dep’t 2000): New York recognizes no stand-alone civil conspiracy; conspiracy allegations may connect actors to an underlying tort but cannot duplicate existing tort theories.
    • In re Platinum-Beechwood Litig., 427 F. Supp. 3d 395 (S.D.N.Y. 2019): Observes overlap between civil conspiracy and aiding-and-abetting elements.
    • Federal Rule of Civil Procedure 12(g) and 12(h)(2): Failure-to-state-a-claim defenses are not waived and may be raised in a Rule 12(c) motion after earlier Rule 12 practice, so long as the motion does not delay trial.
  • Summary Judgment and “Actual Knowledge” for Aiding and Abetting
    • Souza v. Exotic Island Enterprises, 68 F.4th 99 (2d Cir. 2023): De novo review of summary judgment with inferences in favor of the non-movant.
    • Lerner v. Fleet Bank, 459 F.3d 273 (2d Cir. 2006): Under New York law, aiding-and-abetting liability requires “actual knowledge” of the primary wrong, not just negligence or suspicion.
    • Krys v. Pigott, 749 F.3d 117 (2d Cir. 2014): “Actual knowledge” may be proven by direct or circumstantial evidence gleaned from surrounding circumstances.
    • Heinert v. Bank of America, 835 F. App’x 627 (2d Cir. 2020): Awareness of misrepresentations or improper conduct is not the same as actual knowledge of the specific overarching fraud on which the aiding-and-abetting claim is predicated.
    • Lyman v. CSX Transp., 364 F. App’x 699 (2d Cir. 2010): Courts may decline to consider new theories of liability raised for the first time in opposition to summary judgment, especially late in litigation.

Legal Reasoning

I. Subject-Matter Jurisdiction: Assignments, Collateral Sources, and Releases

The Second Circuit first discharged its duty to confirm jurisdiction. Defendants argued that plaintiffs lacked Article III standing or that the case had become moot after plaintiffs assigned their claims to the A.R. Baron bankruptcy trustee in 2000, and because some restitution had been paid by Baron's clearing broker (Bear Stearns Securities Corp.), with plaintiffs allegedly obligated to remit any winnings to the trustee.

The court treated the assignment-based challenge as a question of mootness—because the events occurred after the suit was filed—citing Doe v. McDonald and Stafford v. IBM for the principle that mootness is standing “set in a time frame.” The panel then invoked Fund Liquidation Holdings to make three critical points that together preserve jurisdiction despite an assignment:

  • An assignment does not erase the plaintiff’s injury.
  • An assignment does not sever causation between the injury and the defendant’s conduct.
  • Redressability is not undermined by assignment.

Rule 25(c) reinforced this outcome: even after a transfer of interest, the original party “may” continue the action. The opinion also addressed two additional defense contentions:

  • Release: A release is an affirmative defense under Rule 8(c), not a jurisdictional defect. Even a valid release does not divest the court of subject-matter jurisdiction (Southern New England Tel. Co.).
  • Third-Party Compensation/Remittance: The collateral source rule allows recovery against a tortfeasor notwithstanding third-party reimbursements (State Street Bank ERISA; Barkanic). Moreover, a plaintiff need not be entitled to retain the proceeds of the litigation to satisfy Article III (Sprint Communications). Thus, restitution funds or an obligation to remit proceeds do not moot the case.

With these principles, the court held jurisdiction secure and proceeded to the merits.

II. Rule 12(c) Dismissal: Conspiracy as Redundancy Under New York Law

Plaintiffs argued that the district court’s dismissal of their civil conspiracy claim under Rule 12(c) was barred by the prior Second Circuit mandates in earlier phases of this litigation, that defendants waived the defense by not raising it earlier, and that the dismissal was wrong on the merits. The court rejected all three contentions.

  • Mandate Rule: The prior remands concerned pleading particularity, not the duplicative nature of the conspiracy claim. Under Callahan and Coudert Bros., a lower court may address issues not within the compass of an appellate mandate. Because neither the Second Circuit nor the district court had previously considered duplicativeness, the issue was open on remand.
  • No Waiver: Under Rules 12(g) and 12(h)(2), failure-to-state-a-claim defenses can be raised by a Rule 12(c) motion even after other Rule 12 motions. The “early enough not to delay trial” timing constraint was not shown to have been violated.
  • Merits—Redundancy: New York recognizes no standalone tort of civil conspiracy. Conspiracy merely connects defendants to an underlying tort; it cannot be used to multiply liability theories where the same facts underlie another secondary-liability claim. Because the conspiracy allegations relied on the same factual predicate as the aiding-and-abetting claim, the district court properly dismissed the conspiracy count as duplicative (American Baptist Churches; Aetna v. Aniero). The court noted the recognized overlap between conspiracy and aiding-and-abetting claims (In re Platinum-Beechwood) and found plaintiffs’ suggestion of distinct “overt acts” unsupported by the complaint.

III. Summary Judgment on Aiding and Abetting: “Actual Knowledge” Is a High Bar

Under New York law, aiding-and-abetting fraud generally requires: (1) the existence of an underlying fraud; (2) the defendant’s actual knowledge of that fraud; and (3) substantial assistance by the defendant in its commission. The panel focused on the second element: actual knowledge.

Two central holdings frame the analysis:

  • Scope of the Fraud Theory Is Fixed by the Complaint: Plaintiffs’ complaint alleged that Baron induced investors to believe that the securities at issue traded in legitimate, competitive, liquid markets at bona fide, non-manipulated prices. At summary judgment, plaintiffs tried to expand the fraud theory to contend that Baron’s entire operation was illegitimate and that defendants knew as much. The court held the district court did not abuse its discretion in declining to entertain a new theory of liability first advanced in opposition to summary judgment—especially in a case more than twenty years old (Lyman).
  • No Triable Issue on “Actual Knowledge”: The record failed to raise a triable dispute that defendants had actual knowledge of the specific fraud alleged in the complaint. Declarations stating that the Wolfsons were favored customers who received special treatment, pre-arranged trades, or “parked” house stocks, and that Isaac Dweck consulted frequently with Baron's CEO, did not equate to knowledge of the particular manipulative misrepresentations alleged (i.e., the deception of investors about market legitimacy and price integrity). The court distinguished knowledge of impropriety or participation in transactions from knowledge of the specific fraudulent scheme (Heinert; Lerner). While actual knowledge can be circumstantial (Krys), the circumstances shown here did not allow a reasonable inference of the requisite knowledge.

Because plaintiffs failed to raise a material dispute on this essential element, summary judgment for defendants was appropriate (Souza).

Impact and Practical Implications

  • Assignments to Bankruptcy Trustees Do Not Moot Pending Cases: The decision marshals authoritative sources to clarify that post-filing assignments neither negate injury nor defeat causation or redressability. Coupled with Rule 25(c), this provides a robust response to defendants who attempt midstream jurisdictional challenges based on claim transfers. While a summary order, the court’s analysis is anchored in precedential decisions (Fund Liquidation; Sprint), making it a persuasive template for future cases.
  • Collateral Source and Remittance Arrangements Will Not Defeat Article III: Defendants cannot moot tort claims by pointing to restitution funds or agreements to remit proceeds. The collateral source rule and Sprint together foreclose those tactics at the jurisdictional stage (though such payments may have implications for damages allocation as between payors, trustees, or claimants).
  • Conspiracy Claims That Mirror Aiding-and-Abetting Are Vulnerable to Early Dismissal: In New York practice, civil conspiracy survives only to connect actors to an underlying tort. Where conspiracy “adds nothing,” Rule 12(c) provides a vehicle to streamline duplicative counts, even after earlier Rule 12 motions, so long as trial is not delayed. Litigants should draft with care to ensure non-duplicative allegations or abandon conspiracy where aiding-and-abetting covers the ground.
  • “Actual Knowledge” Remains a Demanding Standard: For aiding-and-abetting fraud, courts require proof that the defendant knew of the specific, operative fraud—not merely that the defendant was a favored participant, engaged in pre-arranged trading, or was aware of irregularities. Plaintiffs must marshal concrete evidence—direct admissions, communications evidencing awareness of the deceptive nature of specific statements/omissions, or powerful circumstantial indicia—from which actual knowledge can reasonably be inferred. Generalized “badges” of proximity or benefit will not suffice.
  • Do Not Expand Theories at Summary Judgment: Plaintiffs who shift their theory late in the case risk exclusion. The Second Circuit endorsed the district court’s refusal to consider a materially broadened theory at the summary judgment stage, reinforcing the importance of aligning proof and theory with the pleadings or timely seeking leave to amend.
  • Nonprecedential but Instructive: Although this is a summary order, the court’s reasoning rests on binding authority. Practitioners can rely on the cited precedents to replicate the same results.

Complex Concepts Simplified

  • Article III Standing vs. Mootness
    • Standing asks whether the plaintiff had a concrete injury fairly traceable to the defendant that is redressable by the court at the time the case was filed.
    • Mootness asks whether post-filing events have eliminated the live controversy. The court treated the assignment to the trustee as a post-filing event, hence a mootness question.
  • Assignment of Claims and Rule 25(c)
    • An assignment transfers legal rights to another (here, to a bankruptcy trustee). It does not eliminate the fact of injury or break causation. Rule 25(c) lets the original party continue litigating after a transfer.
  • Collateral Source Rule
    • Payments from third parties (insurance, restitution funds) do not reduce a tortfeasor’s liability as a matter of substantive law. They also do not moot the case for purposes of federal jurisdiction.
  • Release as an Affirmative Defense
    • A release is a merits defense (Rule 8(c)), not a jurisdictional bar. Courts can have subject-matter jurisdiction even if a release might defeat the claim on the merits.
  • Civil Conspiracy Under New York Law
    • New York does not recognize conspiracy as a standalone tort. Conspiracy allegations are permitted to link defendants to an underlying tort, but if they duplicate another claim (e.g., aiding-and-abetting), courts may dismiss them as redundant.
  • Aiding and Abetting Fraud (New York)
    • Requires: (1) a primary fraud; (2) the aider’s actual knowledge of that fraud; and (3) the aider’s substantial assistance. “Actual knowledge” means real awareness of the specific fraud, not mere negligence, suspicion, or even willful blindness. Evidence can be direct (admissions) or circumstantial (documents showing awareness), but it must support a reasonable inference of knowledge of the particular scheme alleged.
  • Mandate Rule
    • On remand, a district court must comply with the appellate court’s mandate as to issues actually decided. Issues not addressed remain open for the district court to decide.
  • Rule 12(c) vs. Rule 12(b)
    • Rule 12(c) (judgment on the pleadings) can be used to raise failure-to-state-a-claim after the pleadings close. Under Rule 12(h)(2), the defense is not waived by earlier Rule 12 motions. The timing caveat is that the motion should not come so late as to delay trial.
  • Summary Judgment and New Theories
    • At summary judgment, parties must support the claims pleaded. Courts often refuse to consider materially new theories first raised in opposition to summary judgment without proper amendment, especially late in the litigation.

Conclusion

Fezzani v. Dweck delivers three clear takeaways:

  • Jurisdiction endures despite post-filing assignments to a bankruptcy trustee, collateral source payments, or remittance obligations. Assignments do not erase injury, break causation, or defeat redressability; Rule 25(c) allows the original plaintiffs to continue litigating; and releases are merits defenses, not jurisdictional defects.
  • Conspiracy adds nothing if it mirrors aiding-and-abetting in New York. A civil conspiracy count that is coextensive with aiding-and-abetting may be dismissed under Rule 12(c) without violating the mandate rule or waiver principles.
  • “Actual knowledge” is a stringent requirement for aiding-and-abetting fraud. Proximity to wrongdoers, favored status, and even participation in suspicious trading arrangements do not suffice without evidence that the defendant knew of the specific fraud alleged. Plaintiffs must keep their theory consistent with the pleadings and assemble concrete proof of knowledge.

While nonprecedential, the court’s reasoning is anchored in binding authority and offers a reliable roadmap. For plaintiffs, the message is to plead the fraud theory precisely, move to amend if it evolves, and gather hard proof of actual knowledge. For defendants, Rule 12(c) remains a potent tool to pare redundant conspiracy claims, and summary judgment is apt where the evidence does not rise to actual knowledge of the specific fraud. As this protracted litigation comes to a close, the order reinforces durable principles of federal jurisdiction, New York secondary liability, and disciplined summary judgment practice.

Case Details

Year: 2025
Court: Court of Appeals for the Second Circuit

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