Daniel J. Devaney, as Tr. Under Chapter 11 of the Bankr. Code for Cb & R (Holdings) Ltd. v. A.P. Chester, 813 F.2d 566 (2d Cir. 1987). · Go Syfert
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Daniel J. Devaney, as Tr. Under Chapter 11 of the Bankr. Code for Cb & R (Holdings) Ltd. v. A.P. Chester, 813 F.2d 566 (2d Cir. 1987). Cases Citing This Book View Copy Cite
“the degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts”
170 citation events (57 in the last 25 years) across 30 distinct courts.
Strongest positive: Moy v. Adelphi Institute, Inc. (nyed, 1994-10-14)
Treatment trajectory · 1987 → 2026 · click a year to view as-of
1987 2006 2026
Top citers, strongest first. 50 distinct citers. How cited ↗
examined Cited as authority (verbatim quote) Moy v. Adelphi Institute, Inc.
E.D.N.Y · 1994 · signal: see · quote attribution · 1 verbatim quote · confidence high
the degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts
discussed Cited as authority (quoted) The Roman Catholic Diocese of Rockville Centre, Ne (2×) also: Cited as authority (rule)
Bankr. S.D.N.Y. · 2023 · signal: see · quote attribution · 1 verbatim quote · confidence high
a complaint like plaintiff's, which fails to adduce any specific facts supporting an inference of knowledgeable participation in the alleged fraud, will not satisfy even a relaxed standard.
discussed Cited as authority (rule) Christopher Allen Brogan, et al. v. Vanderbilt Mortgage & Finance, Inc., et al.
S.D.W. Va · 2026 · confidence medium
While the Fourth Circuit has adopted a relaxed standard for such allegations of fraud, such a “standard ‘does not eliminate the particularity requirement.’” Id. (quoting Devaney v. Chester, 813 F.2d 566, 569 (4th Cir. 1987)); see also id. at 403 (explaining that Rule 9(b) requires a plaintiff to “allege a particular starting point,” as well as identify defendants who committed the fraudulent omissions or concealment with particularity “to enable a particular defendant to determine with what it is charged,” or “explain why [the plaintiff] lack[s] sufficient information to do s…
discussed Cited as authority (rule) Aaron J. Conrardy, as Creditor Trustee v. Endeavor Advisory Group, LLC
Bankr.D. Colo. · 2025 · confidence medium
As such, “[t]he degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts.” Id. (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)).
cited Cited as authority (rule) Sarrubbo v. Svensson
Bankr. N.D.N.Y. · 2025 · confidence medium
E.D.N.Y. 2015) (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)).
cited Cited as authority (rule) Abbott v. Svensson
Bankr. N.D.N.Y. · 2025 · confidence medium
E.D.N.Y. 2015) (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)).
cited Cited as authority (rule) Nideffer v. Svensson
Bankr. N.D.N.Y. · 2025 · confidence medium
E.D.N.Y. 2015) (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)).
cited Cited as authority (rule) Lacey v. Mercedes-Benz USA, LLC
D. Maryland · 2025 · confidence medium
This “relaxed standard,” however, “does not eliminate the particularity requirement.” /d. (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)).
discussed Cited as authority (rule) IN RE SOLAREDGE TECHNOLOGIES, INC. SECURITIES LITIGATION
S.D.N.Y. · 2025 · confidence medium
“Thus, a complaint ‘which fails to adduce any specific facts supporting an inference of knowledgeable participation in the alleged fraud, will not satisfy even a relaxed standard.’” Faulkner v. Verizon Commc’ns, Inc., 156 F. Supp. 2d 384, 393 (S.D.N.Y. 2001) (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987)).
cited Cited as authority (rule) Miller Compressing Company v. John E. Busby
Wis. Ct. App. · 2025 · confidence medium
Cir. 1994); Scheidt v. Klein, 956 F.2d 963, 967 (10th Cir. 1992); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987); see also Cattau v. National Ins.
discussed Cited as authority (rule) IN RE PAYSAFE LIMITED f/k/a FOLEY TRASIMENE ACQUISITION CORP. II SECURITIES LITIGATION
S.D.N.Y. · 2025 · confidence medium
Nov. 28, 2000) (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)). �e Second Circuit has held that, “[a]t least four circumstances may give rise to a strong inference of the requisite scienter [under the second prong]: where the complaint sufficiently alleges that the defendants (1) ‘benefitted in a concrete and personal way from the purported fraud’; (2) ‘engaged in deliberately illegal behavior’; (3) ‘knew facts or had access to information suggesting that their public statements were not accurate’; or (4) ‘failed to check information they had a duty to monitor.…
discussed Cited as authority (rule) Petro v. FCA US LLC
D. Del. · 2024 · confidence medium
“Although Rule 9(b) permits knowledge to be averred generally, plaintiffs must still plead the events which they claim give rise to an inference of knowledge.” Devaney v. Chester, 813 F.2d 566, 568 (2d Cir. 1987).
discussed Cited as authority (rule) Wooten v. The Boppy Company, LLC
D. Maryland · 2024 · confidence medium
The particularity requirement is not waived, but a plaintiff alleging fraudulent concealment “may partly rely on information and belief without running afoul of Rule 9(b).” Id. (citing Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987)).
discussed Cited as authority (rule) Chester Park View LLC v. Schlesinger
S.D.N.Y. · 2024 · confidence medium
“Although Rule 9(b) permits knowledge to be averred generally, plaintiffs must still plead the events which they claim give rise to an inference of knowledge.” Devaney v. Chester, 813 F.2d 566, 568 (2d Cir. 1987).
discussed Cited as authority (rule) Geron, as Chapter 7 Trustee of the Estate of Nanob v. Central Park Realty Holding Corp.
Bankr. S.D.N.Y. · 2024 · confidence medium
However, “even the so-called relaxed standard does not eliminate the particularity requirement. . . the degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts.” Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987).
cited Cited as authority (rule) Gerald Corder v. Antero Resources Corporation
4th Cir. · 2023 · confidence medium
Cir. 1994); Scheidt v. Klein, 956 F.2d 963, 967 (10th Cir. 1992); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987).
cited Cited as authority (rule) Corder v. Antero Resources Corporation
4th Cir. · 2023 · confidence medium
Cir. 1994); Scheidt v. Klein, 956 F.2d 963, 967 (10th Cir. 1992); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987).
discussed Cited as authority (rule) Manes v. JPMorgan Chase Bank, N.A.
S.D.N.Y. · 2022 · confidence medium
Although leave to amend should be denied if amendment is unlikely to allow the claim to survive a motion to dismiss, Martin v. Dickson, 100 F. App’x 14, 16 (2d Cir. 2004), plaintiffs are typically only denied leave to amend fraud claims when they have already had an “opportunity to replead fraud with greater specificity,” Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987) (citing Armstrong v. McAlpin, 699 F.2d 79 , 93–94 (2d Cir. 1983); Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir. 1982)).
cited Cited as authority (rule) William M. Anderson - Adversary Proceeding
Bankr. D. Conn. · 2020 · confidence medium
S.D.N.Y. 2011) (internal quotations omitted) (citing Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987)).
discussed Cited as authority (rule) Joel I. Sher, Chapter 11 Trustee v. JP Morgan Chase Funding Inc.
Bankr. D. Md. · 2019 · confidence medium
S.D.N.Y. 1983) (trustee “must plead fraud on secondhand knowledge for the benefit of the estate and all of its creditors”). “[T]he degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts.” Devaney v. Chester, 813 F.2d 566, 569 (2d Cir. 1987).
cited Cited as authority (rule) Messer v. Collins (In re Collins)
Bankr. E.D.N.Y. · 2015 · confidence medium
Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
discussed Cited as authority (rule) Hosking v. TPG Capital Management, L.P. (In re Hellas Telecommunications (Luxembourg) II SCA
Bankr. S.D.N.Y. · 2015 · confidence medium
(Reply at 12-13.) Courts relax, but do not eliminate, the particularity requirement for pleading fraud where the plaintiff is a bankruptcy trustee or a “third party[ ] who is pleading fraud on secondhand information.” Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987) (quoting Hassett v. Zimmerman (In re O.P.M.
discussed Cited as authority (rule) Schwartzco Enterprises LLC v. TMH Management, LLC
E.D.N.Y · 2014 · confidence medium
Mar. 10, 2004) (“A complaint ... which fails to adduce any specific facts supporting an inference of knowledgeable participation in the alleged fraud, will not satisfy even a relaxed standard.”) (citing Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987)).
discussed Cited as authority (rule) DeAngelis v. Corzine
S.D.N.Y. · 2014 · confidence medium
“In a case involving multiple defendants, plaintiffs must plead circumstances providing a factual ba sis for scienter for each defendant; guilt by association is impermissible.” In re DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677 , 695 (2d Cir.2009) (citing Devaney v. Chester, 813 F.2d 566, 568 (2d Cir.1987)); see also In re CRM Holdings, Ltd.
discussed Cited as authority (rule) Krys v. Pigott
2d Cir. · 2014 · confidence medium
Thus, “[ajlthough Rule 9(b) permits knowledge to be averred generally, plaintiffs must 3 still plead the events which they claim give rise to an inference of knowledge.” Devaney v. Chester, 813 F.2d 566, 568 (2d Cir.1987).
discussed Cited as authority (rule) United States ex rel. Kirk v. Schindler Elevator Corp.
S.D.N.Y. · 2013 · confidence medium
These heightened pleading requirements are “intended to provide a de fendant with fair notice of a plaintiffs claim, to safeguard a defendant’s reputation from improvident charges of wrongdoing, and to protect a defendant against the institution of a strike suit.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir.1994) (citation and quotation marks omitted). “[T]he degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts.�…
discussed Cited as authority (rule) Industrial Technology Ventures, L.P. v. Pleasant T. Rowland Revocable Trust
W.D.N.Y. · 2012 · confidence medium
Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987) (“the degree of particularity required [under Rule 9(b) ] should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts”); Billard v. Rockwell Int’l Corp., 683 F.2d 51, 57 (2d Cir.1982) (“[t]he policies underlying Rule 9(b) call upon us to require greater precision than is found in this complaint when full discovery has been had in a case”).
cited Cited as authority (rule) Picard Ex Rel. Liquidation of Bernard L. Madoff Investment Securities LLC v. Madoff (In Re Bernard L. Madoff Investment Securities LLC)
Bankr. S.D.N.Y. · 2011 · confidence medium
Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
discussed Cited as authority (rule) Meijer, Inc. v. Ferring B.V. (2×) also: Cited "see"
2d Cir. · 2009 · confidence medium
The district court also granted Aventis’s separate motion to dismiss, concluding that the plaintiffs had not alleged fraud with sufficient particularity to satisfy Rule 9 of the Federal Rules of Civil Procedure. ‘Although Rule 9(b) permits knowledge to be averred generally, plaintiffs must still plead the events which they claim give rise to an inference of knowledge.” Devaney v. Chester, 813 F.2d 566, 568 (2d Cir.1987).
cited Cited as authority (rule) Official Committee of Unsecured, Creditors v. JP Morgan Chase Bank, N.A. (In Re M. Fabrikant & Sons, Inc.)
Bankr. S.D.N.Y. · 2008 · confidence medium
Devaney v. Chester, 813 F.2d 566, 568-69 (2d Cir.1987); Elemary v. Holzmann, A.G., 533 F.Supp.2d *737 116, 132 (D.D.C.2008); see Sunbeam, 284 B.R. at 372-73 .
discussed Cited as authority (rule) Federal Treasury Enterprise Sojuzplodoimport v. Spirits International N.V.
S.D.N.Y. · 2006 · confidence medium
Plaintiffs are required to set forth a detailed pleading about “the time, place, speaker, and sometimes even the content of the alleged misrepresentations.” Luce v. Edelstein, 802 F.2d 49, 54 (2d Cir.1986). “[A] complaint ... which fails to adduce any specific facts supporting an inference of knowledgeable participation in the alleged fraud ... will not satisfy even a relaxed standard.” Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987) (citations omitted).
cited Cited as authority (rule) Morrone v. CSC Holdings Corp.
E.D.N.Y · 2005 · confidence medium
See, e.g., Ronzani v. Sanofi S.A, 899 F.2d 195, 198 (2d Cir.1990); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); Pross v. Katz, 784 F.2d 455, 459-60 (2d Cir.1986).
cited Cited as authority (rule) Doucette v. Vibe Records, Inc.
E.D.N.Y · 2005 · confidence medium
See, e.g., Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d Cir.1990); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); Pross v. Katz, 784 F.2d 455, 459-60 (2d Cir.1986).
discussed Cited as authority (rule) Official Committee of Unsecured Creditors of Grumman Olson Industries, Inc. v. McConnell (In Re Grumman Olson Industries, Inc.)
Bankr. S.D.N.Y. · 2005 · confidence medium
Since a bankruptcy trustee rarely has personal knowledge of the events preceding his appointment, he can plead fraud upon information and belief, provided that he pleads “specific facts supporting an inference of knowledgeable participation in the alleged fraud.” See Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); accord Nisselson v. Drew Indus., Inc. (In re White Metal Rolling & Stamping Corp.), 222 B.R. 417, 428 (Bankr.S.D.N.Y.1998).
cited Cited as authority (rule) Faulkner v. Verizon Communications, Inc.
S.D.N.Y. · 2001 · confidence medium
Nov. 28, 2000) (quoting Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987)).
cited Cited as authority (rule) Elliott Associates, L.P. v. Hayes
S.D.N.Y. · 2000 · confidence medium
Chester, 813 F.2d 566, 569 (2d Cir.1987). 2.
cited Cited as authority (rule) Fromer v. Yogel
S.D.N.Y. · 1999 · confidence medium
See also, Cosmas, 886 F.2d at 12-13; Devaney v. Chester, 813 F.2d 566, 568 (2d Cir.1987).
discussed Cited as authority (rule) Emery v. American General Finance, Inc.
7th Cir. · 1998 · confidence medium
Katz v. Household Int'l, Inc., 91 F.3d 1036, 1040 (7th Cir.1996); In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1418 (3d Cir.1997); Kowal v. MCI Communications Corp., 16 F.3d 1271 , 1279 n. 3 (D.C.Cir.1994); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
cited Cited as authority (rule) Barcher v. New York University School of Law
S.D.N.Y. · 1998 · confidence medium
Chester, 813 F.2d 566, 569 (2d Cir.1987).
discussed Cited as authority (rule) Emery v. American General Finance, Inc.
7th Cir. · 1998 · confidence medium
Katz v. Household Int'l, Inc., 91 F.3d 1036, 1040 (7th Cir.1996); In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1418 (3d Cir.1997); Kowal v. MCI Communications Corp., 16 F.3d 1271 , 1279 n. 3 (D.C.Cir.1994); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
cited Cited as authority (rule) John P. Villano Inc. v. CBS, Inc.
S.D.N.Y. · 1997 · confidence medium
Plan v. Philip Morris Cos., 75 F.3d 801, 813 (2d Cir.1996); O’Brien v. National Property Analysts Partners, 936 F.2d 674 , 676 (2d Cir.1991); Devaney v. Chester, 813 F.2d 566, 568 (2d Cir.1987).
cited Cited as authority (rule) Greene v. WCI Holdings Corp.
S.D.N.Y. · 1997 · confidence medium
Cortec Indus., 949 F.2d at 48; see also Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d Cir.1990); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
discussed Cited as authority (rule) Old Republic Insurance v. Hansa World Cargo Service, Inc. (2×) also: Cited "see"
S.D.N.Y. · 1997 · confidence medium
Cortec Indus., 949 F.2d at 48; see also Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d Cir.1990); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
cited Cited as authority (rule) Heathcote Associates v. Chittenden Trust Co.
D. Vt. · 1997 · confidence medium
De Jesus v. Sears, Roebuck & Co., 87 F.3d 65, 71-72 (2d Cir.), cert. denied, — U.S. -, 117 S.Ct. 509 , 136 L.Ed.2d 399 (1996); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987).
discussed Cited as authority (rule) United States Ex Rel. DeCarlo v. Kiewit/AFC Enterprises, Inc.
S.D.N.Y. · 1996 · confidence medium
At any rate, the degree of particularity required should be determined “in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts.” Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); accord Billard v. Rockwell Int’l Corp., 683 F.2d 51, 57 (2d Cir.1982) (greater precision required “when full discovery has been had in a prior case”).
discussed Cited as authority (rule) De Jesus v. Sears, Roebuck & Co.
2d Cir. · 1996 · confidence medium
See San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 815 (2d Cir.1996); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); Luce v. Edelstein, 802 F.2d 49, 57 (2d Cir.1986); Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir.1983).
discussed Cited as authority (rule) De Jesus v. Sears, Roebuck & Co.
2d Cir. · 1996 · confidence medium
See San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 815 (2d Cir.1996); Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); Luce v. Edelstein, 802 F.2d 49, 57 (2d Cir.1986); Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir.1983).
cited Cited as authority (rule) Shearson Lehman Hutton, Inc. v. Schulman (In Re Schulman)
Bankr. S.D.N.Y. · 1996 · confidence medium
Devaney v. Chester, 813 F.2d 566, 568 (2d Cir. 1987).
discussed Cited as authority (rule) Pahmer v. Greenberg
E.D.N.Y · 1996 · confidence medium
Chester, 813 F.2d 566, 568 (2d Cir.1987) (allegation that Salomon Brothers was retained to assist in the sale of the AMI company and distributed the allegedly misleading AMI prospectus did not adequately state scienter for Rule 9(b) purposes, absent allegations of when, how, or why anyone at Salomon Brothers should have known that the statements in the prospectus were false or misleading).
cited Cited as authority (rule) Kolbeck v. LIT America, Inc.
S.D.N.Y. · 1996 · confidence medium
Devaney v. Chester, 813 F.2d 566, 569 (2d Cir.1987); Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir.1983).
Retrieving the full opinion text from the archive…
Daniel J. DEVANEY, as Trustee Under Chapter 11 of the Bankruptcy Code for CB & R (Holdings) Ltd., Et Al., Plaintiffs-Appellants,
v.
A.P. CHESTER, Et Al., Defendants-Appellees
497, Docket 86-7744.
Court of Appeals for the Second Circuit.
Mar 9, 1987.
813 F.2d 566
Gabriel B. Schwartz, New York City (Hahn & Hessen, Steven J. Mandelsberg and Joseph A. Vogel, New York City, of counsel), for plaintiffs-appellants., Peter D. McKenna, New York City (Wachtell, Lipton, Rosen & Katz; Richard H. Weiss and Karen B. Shaer, New York City, of counsel), for defendant-appellee Salomon Bros.
Pierce, Altimari, Stewart.
Cited by 121 opinions  |  Published
1 passage pin-cited by 1 case
Pinpoint authority: bottom 78%
Citer courts: S.D. New York (1)
ALTIMARI, Circuit Judge:

Daniel J. Devaney, as the trustee in bankruptcy for CB & R (Holdings), Ltd.[*567] and its subsidiaries, appeals from an order of the United States District Court for the Southern District of New York (John F. Keenan, Judge), dismissing appellants’ claims against appellee Salomon Brothers Inc and denying leave to amend, pursuant to Fed.R.Civ.P. 9(b). We affirm the district court’s dismissal of the claims for failing to plead fraud with sufficient particularity, but we reverse the court’s denial of leave to amend, and remand with instructions to grant appellants leave to replead their fraud claims against Salomon Brothers.

BACKGROUND

Between June and November of 1982, CB & R (Holdings), Ltd. (“CB & R”) negotiated with the majority shareholders of American Marine Industries, Inc. (“AMI”) to purchase the shares of AMI. CB & R was controlled by Erik K. Klaussmann, III and David Lindsay. The First Boston Corporation acted as CB & R’s advisor and investment banker in this transaction.

In August 1982, AMI retained Salomon Brothers Inc as its exclusive agent to assist in the sale of the company. In late September 1982 Salomon Brothers sent a prospectus on AMI to Klaussmann, Lindsay and First Boston. This prospectus was accompanied by a cover sheet dated “September, 1982,” which states in pertinent part:

AMERICAN MARINE INDUSTRIES, INC. CONFIDENTIAL MEMORANDUM
Salomon Brothers Inc has been appointed exclusive agent by American Marine Industries, Inc. (“AMI”) to assist in the sale of the Company.
This Confidential Memorandum has been prepared by Salomon Brothers Inc from information furnished to it by the management of AMI____
This Confidential Memorandum has been prepared for the purpose of providing prospective buyers with general business, financial and other information concerning AMI. While the information contained herein is believed to be accurate, Salomon Brothers Inc and AMI expressly disclaim any and all liability for representations, expressed or implied, contained in, or for omissions from, this Confidential Memorandum or any other written or oral communication transmitted to any interested party in the course of the evaluation of AMI.

The prospectus itself contained, inter alia, the following statements:

Over the past two years, after a lengthy period of generally consistent profits, AMI has come to face a situation of declining profits and cash shortages. The Company [AMI] believes this situation is wholly transitory, and has resulted from a depressed world economy, difficulty in controlling costs, and also disagreements among senior management.
AMI believes that its American Atlantic subsidiary [AAS] has a unique franchise to capitalize on an impending pooling agreement covering all trade between the U.S. and the North Coast of Brazil, including the Amazon region.

The sale of AMI’s shares was closed on November 24, 1982, at which time CB & R purchased 99.5% of AMI’s outstanding common stock for over nine and one-half million dollars. Although CB & R believed it had purchased a viable operation, AMI remained unable to pay its debts. In June 1983, both AMI and CB & R filed for Chapter 11 bankruptcy.

In November 1983, appellant Daniel J. Devaney, as the Chapter 11 Trustee for CB & R and its subsidiaries, brought suit against the former majority shareholders of AMI and other defendants. The complaint alleged, in essence, that AMI had defrauded CB & R by leading Klaussmann and Lindsay to believe that AMI had the potential for continuing financial success when in fact, AMI management knew that the company was on the verge of bankruptcy and would not survive.

On June 11, 1984, appellants filed a “second amended and supplemental complaint” which added Salomon Brothers as a defendant in the action. The amended complaint set forth the two previously quoted state-[*568] merits from the AMI prospectas which Salomon Brothers had sent to CB & R in September 1982. The complaint then went on to allege:

Salomon’s late September 1982 Confidential Memorandum on AMI was false and misleading in that: at the time when it was prepared and distributed, the management of AMI, to the knowledge of Salomon, had concluded that the fiscal problems of AMI were fundamental and more than transitory and that the survival of AMI was, therefore, extremely doubtful.

Complaint H 40(B)(i) (emphasis added).

The complaint then quoted portions of several internal AMI memoranda to support the contention that AMI management knew the company was in “deep trouble.” The latest and grimmest of these memoranda was dated September 28, 1982. The complaint did not, however, allege any additional facts pertaining to Salomon Brothers.

The first through fifth claims for relief charged that Salomon Brothers’ allegedly fraudulent conduct was in violation of section 12(2) of the Securities Act of 1933, 15 U.S.C. § 771(2); section 17 of the 1933 Act, 15 U.S.C. § 77q; section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.-10b-5, promulgated thereunder; section 352-c of the New York General Business Law; and the New York common law of deceit.

In two separate memorandum opinions dated April 29, 1986 and July 23, 1986, Judge Keenan granted Salomon Brothers’ motion to dismiss all claims against it, holding that the complaint failed to plead fraud with sufficient particularity, as required by Fed.R.Civ.P. 9(b). The court denied appellants leave to amend and replead.

DISCUSSION

I. Compliance with Rule 9(b)

Fed.R.Civ.P. 9(b) provides, “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.” We agree with the district court’s finding that appellants failed to plead their fraud claims against Salomon Brothers with sufficient particularity. Although Rule 9(b) permits knowledge to be averred generally, plaintiffs must still plead the events which they claim give rise to an inference of knowledge. See, e.g., Goldman v. Belden, 754 F.2d 1059, 1070 (2d Cir.1985); Ross v. A.H. Robins Co., 607 F.2d 545, 558 (2d Cir.1979), ce rt. denied, 446 U.S. 946, 100 S.Ct. 2175, 64 L.Ed.2d 802 (1980). This court has recently observed:

The absence of a requirement that scienter be alleged with “great specificity” is based on the premise that a plaintiff realistically cannot be expected to plead a defendant’s actual state of mind____ This does not mean, however, that plaintiffs are relieved of their burden of pleading circumstances that provide at least a minimal factual basis for their conclusory allegations of scienter.

Connecticut National Bank v. Fluor Corp., 808 F.2d 957, 962 (2d Cir.1987) (citations omitted).

Appellants’ complaint contains nothing more than the sort of conclusory allegations of knowledge which were found to be insufficient in Connecticut National Bank, id. After stating that Salomon Brothers was retained by AMI to assist in the sale of the company, and that Salomon distributed to CB & R a prospectus on AMI which contained allegedly false and misleading information, the complaint simply alleges that Salomon Brothers knew that AMI management did not subscribe to the optimistic outlook reflected in the prospectus. The complaint does not allege any facts to suggest who at Salomon Brothers possessed such knowledge, when and how they obtained the knowledge, or even why anyone at Salomon Brothers should have known that the views expressed in the prospectus did not represent the true beliefs of AMI management.

Thus, the district court was correct in finding that “[t]he conclusory statements that Salomon knew that AMI did not sub[*569] scribe to the beliefs reported in the Confidential Memorandum do not allow for any inference, let alone a strong one, regarding Salomon’s knowledge.”

Appellants argue that a more relaxed standard of pleading should apply to their fraud claims, citing several bankruptcy cases which have required less particularity in pleading when claims were asserted by a trustee. See, e.g., In Re O.P.M. Leasing Services, Inc., 32 B.R. 199 (Bkrtcy.1983). The rationale for relaxing the particularity requirement in such cases is that the trustee is a “third party, who is pleading fraud on secondhand information,” id. at 202. However, even the so-called relaxed standard does not eliminate the particularity requirement, although we recognize that the degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts. A complaint like plaintiff’s, which fails to adduce any specific facts supporting an inference of knowledgeable participation in the alleged fraud, will not satisfy even a relaxed standard. See Glusband v. Fittin Cunningham Lauzon, Inc., 582 F.Supp. 145, 151 & n. 13 (S.D.N.Y.1984).

The district court also found that appellants failed adequately to plead CB & R’s reliance on the allegedly misleading prospectus. The court based this conclusion on its observation that no investor with CB & R’s level of sophistication could reasonably have relied on the prospectus, in light of Salomon Brothers’ “broad disclaimers as to the source of information contained therein.” The court should not, however, have considered the reasonableness of appellants’ reliance; that issue went to the merits of appellants’ claims and thus was not properly before the court on Salomon’s 9(b) motion. Nevertheless, the court was fully justified in dismissing the claims at issue, based on the inadequacy of appellants’ pleadings relating to scienter.

II. Leave to replead

Although we agree with the district court that appellants’ claims against Salomon Brothers failed to comply with Rule 9(b), we conclude that the court abused its discretion by not granting appellants leave to replead. See Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962) (outright refusal to grant leave to amend without any justifying reason for the denial is abuse of discretion); see also Luce v. Edelstein, 802 F.2d 49, 56-57 (2d Cir.1986); Raster v. Modification Systems, Inc., 731 F.2d 1014, 1018 (2d Cir.1984).

Fed.R.Civ.P. 15(a) provides that leave to amend “shall be freely given when justice so requires.” In Luce, 802 F.2d at 56, this court observed that in cases where the denial of leave to replead after a 9(b) dismissal has been affirmed, there was a legitimate justification for the denial. Typically, the plaintiff had already been granted a prior opportunity to replead fraud with greater specificity. See, e.g., Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir.1983); Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir.1982). In one such case, the deficient pleadings were made after full discovery in a related case. Billard v. Rockwell International Corp., 683 F.2d 51, 57 (2d Cir.1982).

Neither of those situations applies'to appellants in this case. The “second amended and supplemental complaint” was the first pleading to assert claims against Salomon Brothers; and appellants have had no discovery of Salomon Brothers as yet.

The district court’s order is hereby affirmed in part and reversed in part, and remanded with instructions to grant appellants leave to amend their complaint by repleading their claims against Salomon Brothers with greater particularity.