                              In the

United States Court of Appeals
               For the Seventh Circuit

No. 12-3105

S HAILJA G ANDHI, R EVOCABLE T RUST
(N OVEMBER 6, 2002), et al.,
                                                Plaintiffs-Appellants,
                                  v.


S ITARA C APITAL M ANAGEMENT, LLC and R AJIV P ATEL,

                                               Defendants-Appellees.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
             No. 1:09-cv-3141—Joan B. Gottschall, Judge.



        A RGUED A PRIL 2, 2013—D ECIDED JULY 9, 2013




  Before R OVNER, W ILLIAMS, and SYKES, Circuit Judges.
  W ILLIAMS, Circuit Judge. Plaintiffs, investors in a hedge
fund, filed suit against those responsible for managing
the fund, Defendants Sitara Capital Management, LLC
and Rajiv Patel, after a bad investment by the fund
resulted in significant financial losses for its investors.
The district court gave Plaintiffs multiple chances to
2                                                 No. 12-3105

select a legally cognizable theory of recovery; although
the court dismissed the Plaintiffs’ first two complaints, it
granted leave to amend following each dismissal. On
the day that dispositive motions were due, Plaintiffs
sought to file another amended complaint to introduce
various fraud-based causes of action arising out of pur-
ported newly discovered misrepresentations. The dis-
trict court awarded summary judgment to Defendants
on all outstanding claims and denied Plaintiffs leave to
submit a fourth complaint with new causes of action.
We affirm. The district court properly exercised its dis-
cretion in rejecting Plaintiffs’ new claims because they
suffered from deficiencies that rendered the proposed
amendment futile.


                    I. BACKGROUND
  After accumulating a personal fortune in the technology
business, Rajiv Patel thought he would try his luck as
a hedge fund manager. In 2005, Patel formed Sitara Part-
ners, L.P. (“Sitara Partners,” or the “Fund”). Patel also
formed another entity, Sitara Capital Management, LLC,
(“Sitara Capital”) to serve as an investment adviser to
the Fund. Patel installed himself as managing director of
Sitara Capital in order to implement his trading strategy
for the Fund. Soon after forming the Fund, Patel began
offering interests in it to his family, friends, and neighbors.
Many of them purchased limited partnership interests
in Sitara Partners using their own personal funds or
funds from their retirement plans.
  After enjoying some initial success in the market,
Patel made one unfortunate investment that resulted
No. 12-3105                                               3

in serious losses for interest holders in the Fund. Sitara
Partners invested $6.8 million, nearly all of its assets,
in Freddie Mac common stock. Although this investment
may appear innocuous when viewed in isolation, in
the stock market, as in most parts of life, timing is every-
thing. In this case, the Fund made its investment in
Freddie Mac in early September 2008, after the market
had already begun to feel the effects of the subprime
mortgage crisis. On September 8, 2008, Freddie Mac
stock suffered the largest single-day price drop in its
history and the Fund incurred a devastating loss.
  Some months later, Plaintiffs (owners of limited partner-
ship interests in Sitara Partners) filed an eighteen-
count complaint against Patel and Sitara Capital (collec-
tively, “Defendants”). The initial filing alleged various
acts of wrongdoing by Defendants arising out of the
Plaintiffs’ purchase of interests in Sitara Partners. Among
the causes of action Plaintiffs asserted were claims for
federal securities fraud and state securities fraud, as well
as common-law claims for fraudulent misrepresenta-
tion and fraudulent inducement.
  The Plaintiffs struggled to find a legally cognizable
theory to pursue against Defendants despite receiving
a commendable degree of latitude from the district court.
After granting Defendants’ motion to dismiss 16 of the
18 counts of the initial complaint, the court granted
leave to file an amended complaint. The Plaintiffs
then filed their First Amended Complaint in which
they reasserted most of the deficient claims from their
original filing. The district court dismissed these claims
4                                                No. 12-3105

as well. In dismissing Plaintiffs’ claims for securities
and common-law fraud, the district court relied upon
Plaintiffs’ failure to sufficiently allege reliance upon
the various alleged misrepresentations and to supply the
requisite specificity to substantiate Patel’s fraudulent
conduct under Federal Rule of Civil Procedure 9(b).
Despite these deficiencies, the district court again
granted Plaintiffs leave to amend. Plaintiffs’ Second
Amended Complaint asserted only three counts: failure
to register securities in violation of federal law, failure to
register as an investment advisor under Illinois law,
and breach of fiduciary duty under the Employee Re-
tirement Income Security Act (“ERISA”), 29 U.S.C.
§ 1109(a). The parties proceeded to discovery on these
three causes of action and the district court set a dead-
line for submission of dispositive motions by Decem-
ber 15, 2011.
  On that day, as Defendants filed their motion for sum-
mary judgment consistent with the court’s schedule,
Plaintiffs filed a motion for leave to file a third amended
complaint. In their motion, Plaintiffs attempted to assert
new securities fraud and common-law fraud claims
based upon purported misrepresentations that they
discovered while deposing Patel on December 12, just
three days earlier. Plaintiffs identified two misrepre-
sentations as the bases for these claims: (1) Defendants’
statement in an offering memorandum that Patel
“intends to contribute no less than one hundred
thousand dollars” to Sitara Partners; and (2) Patel’s oral
statement that he was investing some of the $18 million
he realized from the sale of a former business at the
No. 12-3105                                                   5

inception of the Fund. Plaintiffs alleged that they learned
that these statements were false or misleading at Patel’s
deposition when he admitted that he did not invest
any proceeds from the sale of his former technology
company at the Fund’s inception. The district court
ordered the parties to simultaneously brief both motions.
   On August 14, 2012, the district court granted Defen-
dants’ motion for summary judgment and denied Plain-
tiffs’ motion for leave to file a third amended complaint.
In denying leave to amend, the district court’s main
justification was the futility of the proposed amend-
ment. The court also relied upon the fact that the Plain-
tiffs had an opportunity to present these claims in
previous iterations of their complaint. In support of its
conclusion, the court cited discovery responses in-
dicating that Plaintiffs had known for some time before
Patel’s deposition that he had not invested as much in
the Fund as they originally believed. Plaintiffs now
appeal the district court’s denial of leave to amend.1




1
   Plaintiffs’ opening brief also asserts a purported challenge
to the district court’s summary judgment decision which we
need not address in this opinion. Essentially, Plaintiffs fault
the district court for granting summary judgment to Defen-
dants without first considering the new facts and legal theories
contained in their proposed amended complaint. Given that
this argument amounts to an awkward reformulation of their
principal contention that the district court incorrectly denied
leave to amend, we limit our analysis to the amendment
issue for purposes of this appeal.
6                                               No. 12-3105

                      II. ANALYSIS
  Plaintiffs maintain that the district court improperly
denied their motion for leave to file a third amended
complaint. As a general matter, a district court’s denial
of a request for leave to amend is subject to review under
an abuse of discretion standard. Foster v. DeLuca, 545
F.3d 582, 583 (7th Cir. 2008). “But where such motions
raise questions of law, our review is de novo.” Rivas-
Melendrez v. Napolitano, 689 F.3d 732, 736 (7th Cir. 2012).
  Although Federal Rule of Civil Procedure 15(a)(2) states
that courts “should freely give leave when justice so
requires[,]” courts may deny a proposed amended plead-
ing if, for example, the moving party unjustifiably
delayed in presenting its motion to the court, repeatedly
failed to cure deficiencies, or if the amendment would
be futile. Hukic v. Aurora Loan Servs., 588 F.3d 420, 432
(7th Cir. 2009).
   In this case, the district court cited multiple consider-
ations, including futility of the proposed amendment,
in rejecting Plaintiffs’ request to file a fourth amended
pleading. We believe that the district court properly
denied leave to amend based on a consideration that
it deemed “most important” to its decision: the futility
of the proposed amendment due to the inadequacies of
Plaintiffs’ putative fraud claims.
  In concluding that the proposed amendment would
be futile, the district court correctly determined that
Plaintiffs could not succeed on their fraud claims based
on Defendants’ statement in the Fund’s offering memo-
randum. To prevail on this category of claims, Plaintiffs
No. 12-3105                                                  7

had to prove that Defendants made a material misrepre-
sentation. See, e.g., Schleicher v. Wendt, 618 F.3d 679, 681-82
(7th Cir. 2010) (listing “falsehood in connection with
the purchase or sale of securities” among “canonical
elements” of claim under section 10(b) of Securities Ex-
change Act of 1934); Siegel v. Levy Org. Dev. Co., Inc., 607
N.E.2d 194, 198 (Ill. 1992) (noting that plaintiff must
prove “a false statement of material fact” in order to
succeed on common-law fraud claim); Foster v. Alex, 572
N.E.2d 1242, 1244-45 (Ill. App. Ct. 1991) (“untrue state-
ment of a material fact” required to prove claim under
section 12(G) of Illinois Securities Law). In asserting
their fraud claims, Plaintiffs relied in part upon Defen-
dants’ alleged false statement in the Fund’s offering
memorandum that “Patel intends to contribute no less
than one hundred thousand dollars to the Partnership.”
But Plaintiffs do not dispute that Patel actually invested
more than $100,000 of his own money in Sitara Partners.
Patel testified at his deposition that he invested between
$100,000 and $500,000 of the management and incentive
fees he earned as managing director of Sitara Capital
in the Fund. Plaintiffs have not provided any reason to
dispute the accuracy of Patel’s testimony on this point.
So the purported misrepresentation Plaintiffs identified
as one ground of their fraud claims was, in fact, a true
statement based on the record before us. Given that Plain-
tiffs’ fraud claims based on the offering memorandum
statement would not survive summary judgment with-
out proof that this statement was false, the district
court properly rejected Plaintiffs’ request to amend their
pleading to include this category of claims. See Sound
8                                                 No. 12-3105

of Music Co. v. 3M, 477 F.3d 910, 923-24 (7th Cir. 2007)
(holding that district court properly denied leave to
assert Illinois Consumer Fraud Act claim when “no
evidence in the record” supported allegation that defen-
dant’s deceptive statement was false).
  Moreover, the district court properly denied Plaintiffs
the opportunity to assert fraud claims based on Patel’s
alleged oral misrepresentations regarding his invest-
ments in the Fund because they did not state legally
cognizable fraud claims. District courts may refuse to
entertain a proposed amendment on futility grounds
when the new pleading would not survive a motion
to dismiss. Brunt v. SEIU, 284 F.3d 715, 720-21 (7th Cir.
2002). To state a claim for securities fraud or its common-
law counterpart, a plaintiff must “state with particularity
the circumstances constituting fraud or mistake.” Fed. R.
Civ. P. 9(b); see also Tellabs, Inc. v. Makor Issues & Rights,
Ltd., 551 U.S. 308, 313 (2007) (noting that securities fraud
plaintiffs must “state with particularity both the facts
constituting the alleged violation, and the facts evi-
dencing scienter, i.e., the defendant’s intention ‘to
deceive, manipulate, or defraud’ ” (quoting Ernst & Ernst
v. Hochfelder, 425 U.S. 185, 193 (1976))). In other words,
Plaintiffs needed to plead “the identity of the person
who made the misrepresentation, the time, place[,] and
content of the misrepresentation, and the method by
which the misrepresentation was communicated to the
[Plaintiffs].” Windy City Metal Fabricators & Supply, Inc. v.
CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 668 (7th Cir. 2008).
The degree of particularity required will necessarily
vary depending on the circumstances under which the
No. 12-3105                                                 9

plaintiff filed its complaint. AnchorBank, FSB v. Hofer,
649 F.3d 610, 615 (7th Cir. 2011).
   Despite having the benefit of discovery, including
a deposition of Patel, Plaintiffs’ third amended com-
plaint provided only general descriptions of Patel’s
purported misstatements instead of the detail required
by Rule 9(b). In the proposed amendment, Plaintiffs
asserted that “over the course of time while the Plain-
tiffs were members of Sitara Partners and made their
subsequent investments . . . Patel stated verbally that he
had invested proceeds from the sale” of his internet
businesses in the Fund. Plaintiffs also alleged that, over the
course of their membership in Sitara Partners, “Patel
assured each Plaintiff that he was investing some of” the
proceeds from the sale of his former companies into
the Fund. These conclusory assertions do not provide
any precision regarding, for example, the timing of Patel’s
statements, the place in which he uttered them, or the
manner by which he communicated them to Plaintiffs.
Why this information was not included is a mystery
since Plaintiffs had the opportunity to obtain these
facts through discovery. Moreover, the missing facts
implicated matters within the Plaintiffs’ knowledge—as
the purported audience for Patel’s alleged misstatements,
they should be able to provide at least some detail re-
garding the circumstances in which they heard them.
In this situation, Plaintiffs’ proposed complaint lacked
the requisite particularity required by Rule 9(b) and
would have been dismissed. See, e.g., Windy City, 536
F.3d at 668-69 (affirming dismissal of fraud claims based
on “fail[ure] to plead with particularity the who, when[,]
10                                              No. 12-3105

and how of the alleged frauds”); Lachmund v. ADM
Investor Servs., 191 F.3d 777, 784 (7th Cir. 1999) (affirming
dismissal under Rule 9(b) based in part on complaint’s
lack of “references to the specific times or places of [the]
alleged misrepresentations”). The district court properly
concluded that the proposed complaint, their fourth
attempt to state fraud-based claims, was futile. See
Brunt, 284 F.3d at 720-21.
  The district court provided Plaintiffs with three op-
portunities to choose which legal theories to pursue
against Defendants. When, after the close of discovery,
Plaintiffs asked for a fourth opportunity to assert claims
with fundamental pleading or factual deficiencies, the
district court properly denied their request.


                   III. CONCLUSION
  For the reasons stated above, we A FFIRM the judgment of
the district court.




                            7-9-13
