EDWARD M. CHEN, United States District Judge.
Pending before the Court are Defendants Bank of America, N.A.,
In March of 2014, Yamauchi sued Defendants John Cotterman ("Cotterman"), Citigroup, Inc. ("Citigroup"), and Bank of America, N.A. ("BANA").
The Court previously granted Defendant Cotterman and Citigroup's motions to dismiss, because Yamauchi's claims were time-barred, and he did not plead any exception to the statute of limitations. Docket No. 60. The Court granted leave to amend. Id.
When the Court dismissed the original complaint, the Court specifically cautioned Yamauchi that if he intended to plead fraud or concealment as an exception to the running of the ERISA statute of limitations, then Yamauchi would need to plead active concealment. The Court also advised Yamauchi that he must meet the heightened pleading standard of Rule 9 with respect to any allegations sounding in fraud. Id. The Court further advised Yamauchi that he would need to identify and plead a clear factual and legal basis as to the liability of the Bank Defendants. Id.
The Amended Complaint alleges that Yamauchi was the CEO of the now-defunct Echelon Mortgage Corporation ("Echelon") and was a beneficiary of Echelon's 401(k) Profit Sharing Plan ("Plan"). Amended Complaint ¶ 1. Yamauchi alleges that Defendant Cotterman was appointed as the trustee of the Plan by Judge Wilken in 1997 during his criminal prosecution. Id. ¶ 2 & Ex. 2.
At issue in the Amended Complaint is the disposition of Plan assets upon the termination of the Plan in 1998, approximately 16 years before Yamauchi brought suit. In June of 1991, Echelon entered into a Partial Purchase Agreement with Fleet Finance, assigning to Fleet Finance 10 residential mortgage notes, selling Fleet the right to 84% of the monthly payments on those notes, and retaining a subordinated interest in the remaining 16% of the monthly payments. Amended Complaint, Ex. 4. Yamauchi alleges that on February 18, 1998, he and Echelon's CFO at the time assigned Echelon's 16% interest to the Plan. Id. at ¶ 3 & Ex. 3. Under the terms of the purchase agreement, Fleet Finance was the servicer of the loans. Id., Ex. 4.
Around the same time, Cotterman sent a letter to an attorney named Albert J. Boro (Yamauchi's attorney) in Cotterman's capacity as Plan trustee. Amended Complaint, Ex. 2. In this letter, Cotterman identifies two types of assets owned by the Plan: (1) short term liquid assets (available for immediate distribution), and (2) long-term illiquid assets in the form of the mortgage participation interest retained through the Partial Purchase Agreement with Fleet Finance. Amended Complaint, Ex. 2. In the letter, Cotterman states that "[d]epending on the district court criminal proceedings, the remainder of Jonathan Yamauchi's and James Lee's account balances could be paid upon receipt of payments received from the long term assets." "Additional amounts received from the long term assets could then be allocated to all Plan Participants based on current account balances and thereafter distributed." Id.
The Amended Complaint alleges that Cotterman told Yamauchi that Cotterman planned to exercise his authority as the Plan Trustee and Plan Administrator to terminate the Plan and turn the remaining "illiquid" assets over to the Plaintiff. Id. at ¶¶ 18-19. Plaintiff alleges that Cotterman then closed the Plan's MassMutual account on June 15, 1998. Id. at ¶ 4. Plaintiff alleges that "[s]ince Cotterman did not turn the mortgages over to Plaintiff, [Yamauchi] assumed that Cotterman was keeping the Plan going." Id. at ¶ 18. Plaintiff alleges that Cotterman "had a duty to collect funds and make sure the Plan continued," but that, notwithstanding
Yamauchi does not allege in his Amended Complaint when and how he learned of the alleged fiduciary breaches and misrepresentations. Instead, in opposition to the motions to dismiss, Yamauchi's counsel reaches beyond the four corners of the Amended Complaint to refer back to a declaration that Yamauchi filed in connection with the previous motions to dismiss.
Cotterman, now joined by all the Bank Defendants, again argues that Yamauchi's claims are time-barred on the face of the Amended Complaint. The Defendants further argue that ERISA preempts Yamauchi's common law claims. In general, the Bank Defendants argue that Cotterman's claims are not adequately pled under Rule 8, and, where applicable, Rule 9.
For the reasons stated on the record, and as supplemented herein, the Court
A motion to dismiss for failure to state a claim tests the legal sufficiency of the claims in the complaint. See Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is proper where there is either "(1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal claim." Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984) (citation omitted). For the purposes of testing the legal sufficiency of the complaint, a court must "accept all material allegations of fact as true and construe the complaint in a light most favorable to the nonmoving
To survive a Rule 12(b)(6) motion, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has "facial plausibility" if the plaintiff pleads facts that "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. A plaintiff must allege "more than unadorned, the-defendant-unlawfully-harmed-me accusation[s]." Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955); Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009) ("conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal."). In sum, "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true." Id.
Cotterman and Citigroup argue that ERISA preempts Yamauchi's state law claims. The Court agrees that the claims against Cotterman are preempted by ERISA. In enacting ERISA, Congress set out to "protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b). To further ERISA's purpose to "provide a uniform regulatory regime over employee benefit plans ... ERISA includes expansive pre-emption provisions that are intended to ensure that employee benefit plan regulation would be exclusively a federal concern." Aetna Health v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (citations omitted).
Consequently, ERISA Section 514(a) preempts "any and all state laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The Supreme Court has given the phrase "relate to" a "broad common-sense meaning, such that a state law `relate[s] to' a benefit plan `in the normal sense of the phrase, if it has a connection with or reference to such a plan.'" Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) superseded by statute on other grounds as stated in Hunter v. Ameritech, 779 F.Supp. 419, 420 (N.D.Ill.1991) (citing Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985)). The essential purpose of the preemption clause "was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 657, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995). Consequently, "where the existence of an ERISA plan is a critical factor in establishing liability under a state cause of action, the state law claim is preempted." Wise v. Verizon Commc'ns, Inc., 600 F.3d 1180, 1190 (9th Cir. 2010) (citation omitted).
Specifically, ERISA's "comprehensive legislative scheme" includes "an integrated system of procedures for enforcement"
Here, all claims against Cotterman arise from Yamauchi's allegation that Cotterman breached his fiduciary duties as Trustee and Plan administrator regarding transfer and collection of certain Plan assets. See Amended Complaint ¶¶ 2, 4, 11, 18-19, 30, 40, 46. As a result, to pursue remedies for such claims, Yamauchi "must do so under ERISA." Bast, v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1008 (9th Cir. 1998), as amended (Aug. 3, 1998) (preempting claims that arise out of defendant's actions as the benefit plan administrator). Plaintiff's state law claims and declaratory judgment claim are therefore preempted as to Cotterman, because each claim against Cotterman "necessarily references an ERISA Plan." Wise, 600 F.3d at 1191; see also Lea v. Republic Airlines, Inc., 903 F.2d 624, 631-32 (9th Cir. 1990) (finding preempted claims for negligence, breach of contract, fraud, and equitable relief); Cox v. Eichler, 765 F.Supp. 601, 606 (N.D.Cal.1990) (concluding claims for relief based upon breach of fiduciary duty, fraud, deceit, negligent misrepresentation, negligence, negligent supervision, and breach of contract were preempted as "per se" related to administration of an ERISA plan).
On the other hand, common law claims against the Bank Defendants for breach of fiduciary duty, negligent misrepresentation, fraudulent misrepresentation, and fraud are not preempted by ERISA. Yamauchi's Amended Complaint is not a model of clarity. Nonetheless, it appears that Yamauchi's contentions as to the Bank Defendants arise from their alleged duties as loan servicers or as assignees/successors in interest to certain loans or loan proceeds. While there may be problems with Yamauchi's contentions against the Banks on the merits, Yamauchi's allegations as to the Banks do not necessarily reference an ERISA plan. Yamauchi's claims against the Banks would be the same if the loans were not alleged to be assets of the Plan and Yamauchi instead alleged that he was assigned the interest in the mortgage payments by operation of ordinary contract. Moreover, ERISA has a savings clause that provides that "ERISA does not exempt any person from `any law of any State which regulates insurance, banking, or securities.'" Bast, 150 F.3d at 1008 (citing 29 U.S.C. § 1144(b)(2)(A)). Allegations arising out of the Banks' fiduciary duties under banking law or common law trust principles would put such duties (and any related misrepresentations or fraud) outside of ERISA. Thus, ERISA does not preempt state law claims against the Banks, because such claims seek to remedy a violation of a legal duty independent of ERISA. Cf. Davila, 542 U.S. at 214, 124 S.Ct. 2488 (preemption proper for claim alleging wrongful denial of benefits promised under ERISA-regulated plans, because the claim "did not attempt to remedy any violation of a legal duty independent of ERISA").
A plaintiff fails to state a claim, and therefore dismissal is appropriate, where his failure to comply with the applicable statute of limitations is evident from the allegations of the complaint. Seven Arts
In this case, Cotterman contends that any breach of fiduciary duty claim premised on ERISA is time-barred. Yamauchi alleged that Cotterman
Amended Complaint ¶ 12. On the face of the Amended Complaint, the alleged wrongful acts by Cotterman took place in 1998, approximately 16 years before Yamauchi sued.
Section 413 of ERISA, 29 U.S.C. § 1113, sets forth the statute of limitations for a claim for breach of fiduciary duty under ERISA. Specifically, ERISA's statute of limitations provides:
ERISA § 413, 29 U.S.C. § 1113 ("Section 413") (emphasis added). Thus, except in cases of fraud or concealment, ERISA imposes a six-year limitations period, which runs from the date of the breach. The limitations period is shortened to three years in cases where the plaintiff has actual knowledge of the breach.
The language of Section 413 "suggests a judgment by Congress that when six years has passed after a breach or violation, and no fraud or concealment occurs, the value of repose will trump other interests, such as a plaintiff's right to seek a remedy." Tibble v. Edison Int'l, 729 F.3d 1110, 1120 (9th Cir. 2013), cert. granted in part on other grounds, ___ U.S. ___, 135 S.Ct. 43, 189 L.Ed.2d 895 (2014) (quoting Larson v. Northrop Corp., 21 F.3d 1164, 1172 (D.C.Cir. 1994)). In other words, Section 413(1) is intended to encourage "rapid resolution of disputes, repose for defendants, and avoidance of litigation involving lost or distorted evidence." Miller v. Fortis Benefits Ins. Co., 475 F.3d 516, 522 (3d Cir. 2007) (quoting Romero v. Allstate Corp., 404 F.3d 212, 233 (3d Cir. 2005)); see also David v. Alphin, 704 F.3d 327, 339 (4th Cir. 2013).
Under Section 413, "[t]he statute of limitations itself indicates a two-step analysis of accrual of an ERISA action:
Nonetheless, Section 413 also carves out an exception to the statute of limitations. It provides that "in the case of fraud or concealment, each action may be commenced not later than six years after the date of discovery of such breach or violation." 29 U.S.C. § 1113. This exception is, however, narrow. The Ninth Circuit in Barker v. American Mobil Power Corp. found that "the exception applies only when the defendant himself has taken steps to hide his breach of fiduciary duty." 64 F.3d 1397, 1402 (9th Cir. 1995), as amended (Nov. 15, 1995). In this way, Section 413 incorporates the common law doctrine of "fraudulent concealment." Id.
Barker concluded that "a statute of limitations may be tolled only if the plaintiff establishes affirmative conduct upon the part of the defendant which would, under the circumstances of the case, lead a reasonable person to believe that he did not have a claim for relief." Barker, 64 F.3d at 1402 (citations omitted) (emphasis in original).
Consequently, in the ERISA context, courts have concluded that affirmative steps of concealment, as opposed to mere failure to disclose, is necessary to toll the running of the statute of limitations. "The `fraud or concealment' exception . . . does not apply simply because an ERISA fiduciary fails to disclose material information." DeFazio v. Hollister, Inc., 636 F.Supp.2d 1045, 1057-58 (E.D.Cal.2009); Kanawi v. Bechtel Corp., 590 F.Supp.2d 1213, 1226 (N.D.Cal.2008) (concluding lack of disclosure of self-interest "does not rise to the level of active concealment"); see also Larson v. Northrop Corp., 21 F.3d 1164, 1173-74 (D.C.Cir. 1994). Evidence of the affirmative conduct of active concealment is necessary. See Tibble v. Edison Int'l, 639 F.Supp.2d 1074, 1086 (C.D.Cal. 2009) aff'd, 711 F.3d 1061 (9th Cir. 2013) and aff'd, 729 F.3d 1110 (9th Cir. 2013). Showing such concealment requires pleading that the Defendant "made knowingly false misrepresentations with the intent to defraud" or undertook "affirmative steps" to conceal any alleged fiduciary breaches. Barker, 64 F.3d at 1401; Kanawi, 590 F.Supp.2d at 1226.
Conversely, offering proof of the underlying breach of fiduciary duty is not enough. Barker v. Am. Mobil Power
As to Cotterman,
Absent tolling by active concealment, Yamauchi's claim against Cotterman is time-barred. Yamauchi also fails to plead sufficiently such concealment. To begin, Yamauchi does not satisfy Rule 9's pleading standards. As the Court advised Yamauchi at the hearing on Cotterman and Citigroup's first motions to dismiss, Yamauchi must meet the heightened pleading standard of Rule 9 with respect to any allegations sounding in fraud. This includes allegations of fraudulent concealment. To invoke the doctrine of fraudulent concealment, Yamauchi "must plead
In terms of "affirmative steps," Yamauchi alleges that Cotterman misrepresented that he would turn the long-term Plan assets over to him. See Amended Complaint ¶¶ 18; 20. While this allegation may support Yamauchi's theory of Cotterman's breach of fiduciary duties under 29 U.S.C. § 1104, this allegation does not suffice to plead any "knowingly false misrepresentations with the intent to defraud." Barker, 64 F.3d at 1401 (emphasis added); Kanawi, 590 F.Supp.2d at 1226.
Yamauchi's allegations of affirmative steps of concealment are also deficient. Yamauchi alleges that Cotterman "did nothing except conceal the fact ... that Cotterman had not assigned the loans to Plaintiff." Amended Complaint ¶¶ 20-21, 30-34. This allegation is conclusory and does not satisfy Rule 8 or Rule 9. Iqbal, 556 U.S. at 678, 129 S.Ct. 1927 (holding Rule 8 "does not require detailed factual allegations, but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation" (citation omitted)); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (holding under Rule 9(b) that "[a]verments of fraud must be accompanied by `the who, what, when, where, and how' of the misconduct charged."). Yamauchi fails to plead the required showing that Cotterman undertook "affirmative steps" to conceal the alleged fiduciary breach. Id.; see also Barker, 64 F.3d at 1402 ("Because the plaintiffs in this action failed to show that [Defendants] themselves committed specific acts of fraud or concealment, the plaintiffs may not invoke the `fraud or concealment' exception to ERISA's statute of limitations."); Kanawi, 590 F.Supp.2d at 1226.
This case is factually analogous to Laskin v. Siegel in the Seventh Circuit, in which an ERISA plan beneficiary alleged fiduciary breach arising from termination of the plan without notice and without payment of her vested assets. Id. 728 F.3d 731, 733 (7th Cir. 2013), reh'g denied (Oct. 3, 2013), cert. denied, ___ U.S. ___ 134 S.Ct. 1879, 188 L.Ed.2d 912 (2014). The plan terminated three years after the beneficiary received an account statement showing her account balance was $12,602.86. Id. When the beneficiary inquired into the account years later, she was informed that the plan had been terminated, that its funds were disbursed in whole, and that she had received no payment because she could not be located. Id. In Laskin, the Seventh Circuit affirmed summary judgment for the defendants, finding that the beneficiary's claims were time-barred under Section 413. Id. at 735. The Seventh Circuit found that the last act or omission under 29 U.S.C. § 1113(1) occurred at plan termination, seventeen years before the beneficiary learned that her account no longer existed and nineteen years before she filed suit. Id. As a result, the limitations period had expired. Id. The court also concluded that allegations that the fiduciary accurately informed the beneficiary that the eligibility age increased from 55 to 65 (arguably delaying her inquiry), that the fiduciary failed to notify the beneficiary of plan dissolution, and that the fiduciary failed to send the required Summary Plan Descriptions did not show concealment.
In this case, Yamauchi has an even weaker argument regarding concealment. Yamauchi, in his opposition, focuses on his notice of the injury from the breach. Relying on judicially noticeable documents, Yamauchi argues in his opposition brief that in July of 1998 he was told by Cotterman that the "mortgage participation investment consists of participation interests in three mortgages which are scheduled to begin to begin paying off thirteen years from now, however, two of the mortgages cannot be located." In this document, Cotterman proceeds to say that the "third mortgage has been located and is estimated, in thirteen years, to begin paying monthly payments . . . totaling about $92,500 over nine years."
As an initial matter, argument in opposition cannot cure a defect in the pleading. "In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss." Broam, 320 F.3d at 1026 n. 2 (quoting Schneider v. Cal. Dep't. of Corr., 151 F.3d 1194, 1197 n. 1 (9th Cir. 1998) (emphasis in original)).
In any event, allowing Yamauchi to amend to include these proffered facts in his complaint would not make Yamauchi's ERISA claim timely. ERISA's statute of
Nor has Yamauchi adequately pled fraud or concealment to extend the ERISA statute of limitations as to Cotterman. Setting aside Yamauchi's various arguments and allegations raised in opposition, it is clear that, within the four corners of Yamauchi's Amended Complaint, Yamauchi's pleadings do not satisfy Rule 8 and fall far short of Rule 9(b)'s heightened pleading standards. Nothing in Yamauchi's opposition suggests that these pleading defects can be cured. His Amended Complaint makes clear that Cotterman notified him regarding the anticipated Plan termination. Docket No. 61 ¶ 18. Similarly, the documents that Yamauchi points to and relies on in his opposition show that in 1998 Cotterman provided written notice to Yamauchi of the Plan's anticipated final distributions before the Plan termination. Cf. Laskin, 728 F.3d at 735 (declining to find concealment even where plaintiff received no notice of plan termination). Yamauchi may have expected to receive mortgage payments in 2011, but, like the Laskin beneficiary who may have waited to reach eligibility age, this is not evidence of concealment sufficient to toll the limitations period. Laskin, 728 F.3d at 735. This is particularly true, because, as discussed below, reasonable diligence should have led Yamauchi to discover his claims in or around 1998. For these reasons, the Court
The common law claims alleged by Yamauchi against the Bank Defendants are governed by statutes of limitation that range from two to four years. Yamauchi's claim of negligent misrepresentation is subject to a two-year limitations period under California law. E-Fab, Inc. v. Accountants, Inc. Servs., 153 Cal.App.4th 1308, 1316, 64 Cal.Rptr.3d 9 (2007) ("[A] cause of action for negligent misrepresentation typically is subject to a two-year limitations period."). Yamauchi's fraudulent misrepresentation and fraud claims are subject to a three-year statute of limitations. Cal. Civ. Proc. Code § 338(d) (three-year statute of limitations for actions for relief on the ground of fraud or mistake). Similarly, the statute of limitations for breach of fiduciary duty is three years where the gravamen of the claim is fraud; otherwise it is four years under the catchall provision of California's Civil Procedure Code Section 343(a). Am. Master Lease LLC v. Idanta Partners, Ltd., 225 Cal.App.4th 1451, 1479, 171 Cal.Rptr.3d 548 (2014), as modified (May 27, 2014).
Under California law, in general, "in ordinary tort and contract actions, the statute of limitations begins to run
The discovery rule, however, ameliorates the harshness of this rule where it is "manifestly unjust to deprive plaintiffs of a cause of action before they are aware that they have been injured." Apr. Enterprises, 147 Cal.App.3d at 826, 195 Cal.Rptr. 421. To prevent the dismissal of a cause of action brought by a plaintiff who is "blamelessly ignorant" of the existence of his claim, under the discovery rule, a cause of action accrues "when the plaintiff discovers or should have discovered all facts essential to his cause of action." Id. at 826-27, 195 Cal.Rptr. 421. The test is when the "plaintiff either (1) actually discovered his injury and its negligent cause or (2) could have discovered injury and cause through the exercise of reasonable diligence." Id. "[T]he discovery rule applies to causes of action involving the breach of a fiduciary relationship." Id. The discovery rule also inheres in actions arising from fraud or mistake, which do not accrue "until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." Cal. Civ. Proc. Code § 338(d).
A plaintiff relying on the discovery rule to show delayed accrual of a cause of action bears the burden of "pleading and proving belated discovery." Czajkowski v. Haskell & White, LLP, 208 Cal.App.4th 166, 174, 144 Cal.Rptr.3d 522 (2012). "The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action." Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 807, 27 Cal.Rptr.3d 661, 110 P.3d 914 (2005); see also Kline v. Turner, 87 Cal.App.4th 1369, 1374, 105 Cal.Rptr.2d 699, 702 (2001) (holding that in cases of fraud or mistake the "statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry").
A plaintiff is on inquiry notice when "he or she has reason at least to suspect a factual basis for its elements." Id. An adequate pleading of delayed discovery requires more than a mere conclusory allegation of diligence; it should set forth pleaded facts that show "(1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence." Czajkowski, 208 Cal.App.4th at 175, 144 Cal.Rptr.3d 522. "[O]nce properly pleaded, belated discovery is a question of fact." E-Fab, 153 Cal.App.4th at 1320, 64 Cal.Rptr.3d 9.
In this case, Yamauchi does not properly plead delayed discovery—he does not allege in the Amended Complaint the time and manner of the discovery of his cause of action or the inability to have made earlier discovery. He alleges, in connection with his fraud-related claims, that Cotterman misrepresented that he would take certain actions for Yamauchi and that Cotterman "did nothing except conceal the fact ... that Cotterman had not assigned the loans to Plaintiff." Amended Complaint ¶¶ 20-21, 30-34. Yamauchi does not, however, allege his diligence or the time and manner of discovery as required. Czajkowski, 208 Cal.App.4th at 175, 144 Cal.Rptr.3d 522.
More importantly, the Amended Complaint pleads facts that show that the exercise of reasonable diligence would have put Yamauchi on inquiry notice of his causes of action more than 10 years ago. Yamauchi alleges that no payments were remitted to
According to the allegations of the Amended Complaint, Cotterman did not provide Yamauchi with any writing effecting the transfer of the retained interest from the Plan to Yamauchi. Amended Complaint ¶ 4. Judicially noticeable documents show that Yamauchi was on notice that the Plan was being terminated in 1998. In September of 1998, Yamauchi's attorneys filed a declaration by Cotterman in connection with Yamauchi's sentencing in the criminal action in which Cotterman attests that "I have determined that the Plan assets should be distributed to the participants and that the Plan should be terminated." Docket No. 71-1 at ¶ 3. That declaration attaches, among other things, a memorandum to "All Plan Participants in the Echelon Mortgage Corporation 401(k) Profit Sharing Plan" from John Cotterman as Trustee. In that memorandum, Cotterman writes that as of the end of June, 1998:
Docket No. 71-1. Cotterman concludes "[o]nce all individual annuities and cash assets have been distributed and the ownership of the mortgage investment has been transferred, the termination of the Plan will be complete and final filings/reports will be made to the Internal Revenue Service and the Department of Labor." Id.
When Yamauchi received no writing effecting or confirming a transfer of the future participation interests in the three mortgages identified in this memo as Plan assets, Yamauchi was on inquiry notice, if not actual notice, of the alleged breach. In other words, Yamauchi was on notice in or around 1998. At or around the time of the termination of the Plan, Yamauchi was a
While Yamauchi does not directly raise any cases discussing continuing wrong in his opposition, Citigroup raises the issue, and the allegations of the Amended Complaint arguably point to a theory of continuing wrong as to the Banks. The Court addresses that theory for the sake of completeness. Citigroup contends that "California courts have not applied the `continuing violation' doctrine to common law torts." That contention is incorrect. The California Supreme Court, applying common law accrual principles, has recognized there "are two main branches [of continuing-wrong accrual], the continuing violation doctrine and the theory of continuous accrual." Aryeh v. Canon Bus. Solutions, Inc., 55 Cal.4th 1185, 1197, 151 Cal.Rptr.3d 827, 292 P.3d 871 (2013) (discussing continuing-wrong principles with respect to UCL claims governed by common law accrual rules).
Nevertheless, the Court agrees that the Amended Complaint does not adequately plead a continuing violation theory. This is not a case where the "wrongful course of conduct became apparent only through the accumulation of a series of harms." Aryeh, 55 Cal.4th at 1198, 151 Cal.Rptr.3d 827, 292 P.3d 871 (holding continuing violation not applicable in case alleging recurring wrongful charges pursuant to a lease that began outside the limitations period). Consequently, Yamauchi has failed to allege a viable claim of continuing violation. Id.
Nor can Yamauchi's claims be saved by the continuous accrual doctrine. California recognizes continuous accrual where there is a continuing or recurring obligation. The continuous accrual doctrine responds to "the inequities that would arise if the expiration of the limitations period following a first breach of duty or instance of misconduct were treated as sufficient to bar suit for any subsequent breach or misconduct; parties engaged in long-standing misfeasance would thereby obtain immunity in perpetuity from suit even for recent and ongoing misfeasance." Aryeh, 55 Cal.4th at 1198, 151 Cal.Rptr.3d 827, 292 P.3d 871. In situations where "there is a continuing or recurring obligation" the cause of action is deemed to accrue each time there is a new
In the Amended Complaint, Yamauchi alleges that "[b]y keeping the funds, the [B]anks have breached their fiduciary duties to plaintiff and these breaches are separate causes of action." Amended Complaint ¶ 16. He continues to note that each of the Banks' purported fiduciary breaches "continues as each payment is made and booked to each account of each bank." Id. Separate, recurring breaches of fiduciary duty may provide a basis for the application of continuous accrual, where each violation triggers its own statute of limitations. Aryeh, 55 Cal.4th at 1199, 151 Cal.Rptr.3d 827, 292 P.3d 871.
Here, however, the Amended Complaint does not point to any violations by the Banks within the limitations period. Plaintiff's Amended Complaint attaches correspondence from 1998 from before Echelon's interest in the Partial Purchase Agreement was assigned to the Plan. Amended Complaint, Ex. 7 (dated February 12, 1998); see also Ex. 3 (dated February 18, 1998). This letter shows that the Paysinger loan, one of the loans that was subject to the Partial Purchase Agreement, was sold by Fleet to Associates Private Mortgage at some point in 1996. The letter reflects that the last payment to Fleet was in September 1996, almost two years before Echelon's participation interest was allegedly transferred to the Plan. Id.
In other words, under the pled facts, Fleet ceased receiving funds from the Paysinger loan well before Echelon's interest was transferred to the Plan and well before Cotterman was allegedly under an obligation to transfer the Plan's interest to Yamauchi, a fact of which Yamauchi was on notice in 1998. Moreover, Yamauchi's claims against BANA stem from his belief that BANA obtained the Plan's funds after it merged with Fleet Bank. According to a Form 8-K filed with the Securities and Exchange Commission, FleetBoston Financial Corporation merged with and into Bank of America Corporation, the publicly-traded holding company registered with the SEC, effective April 1, 2004.
As a result, on the face of the Amended Complaint, Yamauchi has not alleged any timely breaches of fiduciary duty against the Banks, even applying a theory of continuous accrual. Moreover, Yamauchi offers no allegation of any continuous wrongful conduct with respect to his negligent misrepresentation, fraudulent misrepresentation, or fraud claims. The pled facts lead to the inescapable conclusion that Yamauchi had inquiry notice of his claims over ten years before he filed suit. Yamauchi's claims against the Banks for breach of fiduciary duty, negligent misrepresentation, fraudulent misrepresentation, and fraud are therefore all time-barred.
The Declaratory Judgment Act places a "remedial arrow in the district court's quiver." Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). Declaratory judgment
Consequently, if "a claim for declaratory relief could have been resolved through another form of action which has a specific limitations period, the specific period of time will govern." Levald, 998 F.2d at 688 (quotations omitted). As applied here, "styling an action as one for declaratory relief rather than for damages" cannot save Yamauchi's claims from the specific applicable statutes of limitation. Id. The declaratory judgment claim faces the same time bar as Yamauchi's other claims.
In addition to the failure to plead timely claims, Yamauchi's pleading has numerous other defects.
The elements of breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach. Pierce v. Lyman, 1 Cal.App.4th 1093, 3 Cal.Rptr.2d 236 (1991). There must be an adequate showing of each of these elements in order to plead a cause of action for breach of fiduciary duty. City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal.App.4th 445, 80 Cal.Rptr.2d 329 (1998).
Yamauchi has not sufficiently alleged that a fiduciary relationship existed between the Banks and him. The Amended Complaint, as presently pled, alleges that the Banks were servicing the mortgages and had a fiduciary relationship "with the owner of the Promissory Notes." Amended Complaint ¶ 4. In this case, the Partial Purchase Agreement assigned the Promissory Notes and Deeds of Trust to Fleet Finance for the life of the loan. Amended Complaint, Ex. 4, § 2. At best, Yamauchi had a partial interest in the monthly payments on the notes. There are no allegations that show that Yamauchi was ever the owner of the Promissory Notes. Indeed, the allegations show the contrary. Yamauchi specifically alleges that Cotterman never transferred the participation interest to Yamauchi in the first place. Amended Complaint ¶ 4.
Yamauchi also refers in the Amended Complaint to a Housing and Urban Development handbook and California Bankers Association Compliance Bulletin as the basis for his allegations of duty and breach. Neither of these documents provides the necessary factual allegation that Yamauchi was in a fiduciary relationship with the Banks. The HUD webpage to which Plaintiff refers is an "Insured Multifamily Mortgagee Servicing and Field Office Handbook" issued in 1996, and it outlines various servicer functions. See http:// www.hud.gov/offices/adm/hudclips/ handbooks/hsgh/4350.4/43504c1HSGH.pdf; Amended Complaint ¶ 15. The handbook does not support a finding of any fiduciary relationship between a servicer and Yamauchi.
Brown shows that fiduciary duties are imposed between a Bank and its customer in very different cases from the one at bar. Brown concerned the enforcement of an arbitration agreement between a bank and its customer. Brown acknowledged that "[b]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law." Brown v. Wells Fargo Bank, NA, 168 Cal.App.4th 938, 960, 85 Cal.Rptr.3d 817 (2008). Such fiduciary obligations may arise as a matter of law where "one party's vulnerability," e.g., "advanced age, youth, lack of education, ill health, and mental weakness," is "so substantial as to give rise to equitable concerns." Id. (quotations omitted). As the cited Bulletin summarizes, a fiduciary duty in Brown was established where "the defendant bank officer (1) knew Brown had limited vision and experienced declining health; (2) worked biweekly at the Browns' home office; (3) was provided with access to all of the Browns' financial information, and managed their significant financial paperwork; (4) introduced the Browns to an estate attorney and an accountant; (5) gave the Browns investment advice; and (6) urged the Browns to consult with the bank's affiliate and open a securities account." CBA Regulatory Compliance Bulletin.
In this case, no allegations suggest that Yamauchi was in a similarly vulnerable relationship with respect to the Banks. Indeed, there are no allegations that Yamauchi ever interacted with BANA or Citigroup (or their predecessor entities) (a) with respect to the transfer he alleges should have been made from the Plan to him or (b) with respect to any of the payments he alleges he should have received. Yamauchi's argument in his opposition that his conviction for embezzling from the Plan made him a "vulnerable customer" does not point to the equitable concerns contemplated in Brown. The kind of circumstances that would lead to the imposition of a fiduciary duty under Brown is inapposite here.
Furthermore, aside from the Paysinger loan, Yamauchi does not identify which loans are allegedly serviced by the particular Banks or their predecessor entities. Nor does Yamauchi draw any nexus between the proceeds of a given loan and BANA or Citigroup's acquisition of those proceeds. As Yamauchi acknowledges in his opposition "Jonathan Yamauchi does not know exactly what is going on and who is collecting his money." Docket No. 78 at 5. This is not enough to survive a motion to dismiss. Iqbal, 556 U.S. at 678-79, 129 S.Ct. 1937 (Rule 8 "does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions"). The Court concludes that Yamauchi has failed to allege factual content showing the existence of a fiduciary relationship between the Banks and Yamauchi. The Court therefore
In addition to being time-barred, Yamauchi's negligent misrepresentation and fraud claims fail, because he has not identified any misrepresentation by the Banks; for the fraud claims, Yamauchi does not satisfy Rule 9(b).
In California, the elements of negligent misrepresentation are "(1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage." Ragland v. U.S. Bank Nat. Assn., 209 Cal.App.4th 182, 196, 147 Cal.Rptr.3d 41 (2012).
Yamauchi argues that the Banks' alleged failure to disburse the funds was a misrepresentation. Amended Complaint ¶¶ 24-25; 36-37, 42; Opp., Docket No. 75 at 12-13. The Banks' alleged failure to pay, standing alone, does not support a claim of negligent misrepresentation. Even assuming that the failure of payment might be deemed an omission, an omission alone cannot form the basis for a claim of negligent misrepresentation. Byrum v. Brand, 219 Cal.App.3d 926, 942, 268 Cal.Rptr. 609 (1990); Regents of the Univ. of Cal. v. Principal Fin. Group, 412 F.Supp.2d 1037, 1045 (N.D.Cal.2006) ("California negligent misrepresentation law, however, does not impose liability for negligent omissions; some `positive assertion' is required."). Because Yamauchi fails to allege any affirmative misrepresentation by the Banks, his negligent misrepresentation claim fails. Mitsui O.S.K. Lines, Ltd. v. SeaMaster Logistics, Inc., 913 F.Supp.2d 780, 789 (N.D.Cal.2012) (citing Lopez v. Nissan N. Am., Inc., 201 Cal.App.4th 572, 596, 135 Cal.Rptr.3d 116, (2011)) (negligent misrepresentation claim requires affirmative representation and cannot be based on nondisclosures).
In California, "[t]he general elements of a cause of action for fraudulent misrepresentation are (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage." Vogelsang v. Wolpert, 227 Cal.App.2d 102, 109, 38 Cal.Rptr. 440 (1964). The elements for a claim of fraud are the same. In re Estate of Young, 160 Cal.App.4th 62, 79, 72 Cal.Rptr.3d 520 (2008) (quoting Lazar v. Super. Ct., 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996)).
Under Rule 9(b), "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). On the other hand, "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Id. As discussed supra, "[a]verments of fraud must be accompanied by `the who, what, when, where, and how' of the misconduct charged." Vess, 317 F.3d at 1106. That is, "[a] plaintiff must set forth more than the neutral facts necessary to identify the transaction[;] [t]he plaintiff must set forth what is false or misleading about a statement, and why it is false." Id. (quoting Decker v. GlenFed, Inc. (In re GlenFed, Inc. Sec. Litig.), 42 F.3d 1541, 1548 (9th Cir.1994)). The purpose of Rule 9(b) is to give defendants notice of the specific fraudulent conduct against which they must defend. Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir.2001).
State law causes of action brought in federal court must comply with these heightened pleading requirements where applicable. Vess, 317 F.3d at 1103. This includes allegations of fraudulent concealment
Here, Yamauchi fails to satisfy Rule 9(b) in multiple respects. "Rule 9(b) does not allow a complaint to merely lump multiple defendants together but requires plaintiffs to differentiate their allegations when suing more than one defendant and inform each defendant separately of the allegations surrounding his alleged participation in the fraud." Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir.2007) (quotations omitted). "[A] plaintiff must, at a minimum, `identify the role of each defendant in the alleged fraudulent scheme.'" Id. at 765 (quoting Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir.1989)). Yamauchi makes no specific allegations as against each particular Bank Defendant. The Amended Complaint lumps the Banks together for the fraud claims, as each allegation is averred as to "The Banks." This is improper under Rule 9(b). Swartz, 476 F.3d at 764-65.
Similarly, Yamauchi has failed to set forth sufficient facts that the Banks concealed any information with intent to defraud. Yamauchi contends that alleging that the Banks kept the contested funds shows intent to defraud. Docket No. 75 at 13 ("If BANA keeps Plaintiffs money they are certainly violating their fiduciary duties and defrauding the Plaintiff'); Docket No. 76 at 13 ("If CITI wanted to follow banking laws, they would disgorge the funds."). Such an allegation in itself does not state a fraud claim. Mere failure to pay without more does not plausibly show any intent to defraud or induce reliance—a necessary element of fraud. Indeed, Yamauchi's contentions cut against a finding of intent to defraud, because Yamauchi also alleges that Cotterman "failed to direct the Bank[s] where to pay the funds upon the Plan's termination." Amended Complaint ¶ 5. And to the extent that Yamauchi's fraud claims are actually all claims for constructive fraud, they fail for lack of showing any fiduciary or confidential relationship with the Banks, as discussed herein. Sonoma Foods, Inc. v. Sonoma Cheese Factory, LLC, 634 F.Supp.2d 1009, 1021 (N.D.Cal.2007). The Court
Under Rule 15, a court should "freely" give leave to amend when justice so requires. Fed. R. C. P. 15(a)(2). Dismissal without leave to amend is within the discretion of the trial court, and is appropriate where a court finds evidence of "undue delay, bad faith, dilatory motive . . . repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Sonoma County Ass'n of Retired Employees v. Sonoma County, 708 F.3d 1109, 1117 (9th Cir.2013). The Court's "discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint." City of Los Angeles v. San Pedro Boat Works, 635 F.3d 440, 454 (9th Cir.2011).
In this case, in ruling on the prior motions to dismiss, the Court found Yamauchi's action to be untimely. At that time, the Court specifically advised Yamauchi that he would need to satisfy Rule 9 as to any averments of fraud against the Defendants, that he would need to show affirmative concealment to plead the exception to the ERISA statute of limitations, and that he would need to identify a
Following the hearing on the pending motions to dismiss, Yamauchi proffered additional facts in an effort to show that he can allege timely claims. Docket No. 93. While it would be inappropriate to consider facts not contained in the Amended Complaint as to dismissal, the Court will entertain these facts in assessing whether further leave to amend should be given. Broam, 320 F.3d at 1026 n. 2.
Yamauchi argues that documents he received from Grand Bank show that Citigroup received payments from the Paysinger loan from September of 1996 to December 7, 2001. Docket No. 93 at 2. In other words, Citigroup is alleged to have received the contested loan proceeds over 12 years before Yamauchi filed suit, i.e., outside of the limitations period. Yamauchi's newly proffered facts therefore bolster the Court's conclusion that Yamauchi's claims cannot be saved even by application of the continuous accrual theory. Grand Bank, which is no longer in the case, appears to have had "[a]ll right, title and interest" in the Paysinger note since approximately 2002. Docket No. 93-1, Ex. 4. These newly proffered facts show that no alleged breaches of fiduciary duty by Citigroup or BANA took place within four years of the commencement of this lawsuit with respect to the Paysinger loan, the only loan that appears to have been located in 1998.
Yamauchi also argues that, contrary to his allegation in the Amended Complaint, the Grand Bank file for the Paysinger loan lacked "any reference to the 16% which should go to the pension or any information about the assignment of the note . . . to the Plaintiff." Compare Docket No. 93 at 2; with Amended Complaint ¶ 5. Yamauchi therefore concludes that "[w]ithout that information, there is no way that Grand Bank would know that it was to pay the funds to MassMutual for the benefit of the pension plan." Id. This concession further undermines Yamauchi's entire theory of liability as to the Banks. The Banks cannot have breached fiduciary duty, committed negligent misrepresentation, or committed fraud when nothing in the loan file creates any relationship with or responsibilities to Yamauchi (or even the Plan). As Yamauchi concedes, without such information, the Banks would have no way of knowing that money was due to the Plan or to Yamauchi. As to Cotterman, this allegation does not overcome ERISA's statute of limitations.
In light of the foregoing, the Court
For the reasons stated herein, the Court
This order disposes of Docket Nos. 64, 65, and 70.
IT IS SO ORDERED.
Citigroup objects to Yamauchi's request for judicial notice, because it claims that the accuracy of the Cotterman letter cannot be readily determined for the following reasons: Yamauchi is not the author, authenticity is necessarily a problem for a letter that is over 16 years old, and Yamauchi is a convicted criminal. Docket No. 82. The Court overrules Citigroup's objections in light of Defendant Cotterman's request for judicial notice of the same letter. See Docket No. 71-1 at pp. 12-15 of 41. Cotterman (and BANA's) request for judicial notice of the same document shows that the letter was filed as part of the public record of Yamauchi's criminal trial. Indeed, the letter itself shows that it was carbon copied to Judge Wilken. Authenticity concerns are therefore diminished, as the document can be verified as authentic in the Court's own docket records. Cotterman wrote the letter and seeks judicial notice of it, addressing Citigroup's concern regarding Yamauchi not being the author of the letter. Finally, Cotterman is not a convicted criminal.
