MARGARET M. MORROW, District Judge.
On February 23, 2015, Dwight J. Freeney and Roof Group LLC ("RG") (collectively, "plaintiffs") filed this action in Los Angeles Superior Court against Bank of America Corporation ("BAC"), Bank of America, N.A. ("BANA") (collectively, "BofA"), Michael J. Bock, and various fictitious defendants (collectively, "defendants").
On May 7, 2015, BofA filed a motion to dismiss plaintiffs' complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the court finds the matters appropriate for decision without oral argument; the hearing calendared for July 20, 2015, is therefore vacated, and the matter is taken off calendar.
Dwight J. Freeney is a professional football player who has played thirteen seasons as a defensive end in the National Football League ("NFL") — from 2002 to 2012, for the Indianapolis Colts and in 2013 and 2014, for the San Diego Chargers.
In 2007, Freeney allegedly entered into a six-year contract with the Indianapolis Colts.
Freeney allegedly has no expertise in financial matters and limited investment experience.
RG was founded in 2009 by two entrepreneurs — Joe Altounian and Niall Donnelley — to own and operate the Rolling Stone Los Angeles ("RSLA") restaurant, café, and lounge in Los Angeles, California.
Freeney first became a member of RG in September 2009, when he acquired a 20 percent ownership interest in the company in exchange for an investment of $1.5 million.
Construction of RLSA allegedly began in late 2009; the restaurant was completed in 2010.
BofA is the second largest banking institution in the United States.
At all relevant times, BofA allegedly had five divisions; one of these was the Global Wealth & Investment Management ("GWIM") Division.
Michael Stern, also known by the alias Michael Millar and/or David Michael Millar, was born and raised in southern Florida and allegedly spent most of his adult life in and around Miami, Florida.
The complaint alleges that Stern paid more than $100,000 in bribes to Miami Beach city officials to obtain demolition and construction permits for properties he was developing.
In February 2009, Stern and his wife, Layne Harris Stern, purportedly sought personal bankruptcy protection in the United States Bankruptcy Court for the Southern District of Florida.
Michael Bock is a stock broker and investment advisor with more than thirty years of experience.
Eva Weinberg allegedly graduated from Boston University in 1984 with a bachelor's degree in finance.
Bock and Weinberg have married twice and divorced twice, most recently in June 2009.
Plaintiffs alleges, on information and belief, that beginning in January 2009, Weinberg and Stern became romantically involved.
In April 2009, Bock and Weinberg purportedly joined ML's Coral Gables office, and thereafter became BofA employees under the supervision of branch manager Matthew Liebman.
Between March and June 2009, Weinberg allegedly leased an apartment in Fisher Island, Miami, and moved out of the house she shared with Bock.
Plaintiffs allege, on information and belief, that in January 2010, Bock, Liebman, Surgarman, and Weinberg were transferred from the ML office in Coral Gables to the BofA branch located on Brickell Avenue in Miami Beach, Florida.
Richard Weinberg, who is Eva Weinberg's brother, purportedly obtained a license to sell life insurance in New Jersey in May 2010, shortly after Freeney became a BofA client.
Plaintiffs allege that the scheme to defraud Freeney began in January 2010, when Bock's team purportedly recruited him to become a BofA client.
While recruiting Freeney to become a BofA client, and during the execution of defendants' scheme to defraud, BofA, Bock, and Weinberg also purportedly concealed various material facts from Freeney. These include that (1) Weinberg was only a part-time BofA employee; (2) Weinberg was not licensed to give investment advice to clients; (3) Weinberg was not competent to manage Freeney's assets, investments, or income; (4) Weinberg had twice been married to Bock and had an acrimonious working relationship with him; (5) there was an outstanding $1.6 million judgment against Weinberg for issuing $400,000 in worthless checks; (6) the judgment creditors had served a petition to garnish Weinberg's wages in an effort to satisfy the judgment on BofA; (7) Weinberg had helped Stern commit bankruptcy fraud; (8) Bock's team had no experience or expertise in managing or operating a restaurant; (9) Bock's team had no ability to maintain the books and records of, or prepare budgets or financial projections for, a restaurant; and (10) Bock's team had no experience supervising the staffing, opening, or operation of a restaurant.
Had Freeney had known these facts and known the falsity of defendants' purported representations while he was being recruited, he allegedly would have never agreed to become a BofA client or to entrust the management of his assets, investments, and income to BofA.
While recruiting Freeney, BofA and Weinberg allegedly introduced him to Stern, who was using the alias Michael Millar.
BofA, Bock, and Weinberg also purportedly concealed various material facts about Stern including, inter alia, that he had declared personal bankruptcy in 2009; that he was a defendant in more than twenty civil lawsuits filed by individuals who asserted that, as a result of Stern's fraud, they had lost more than $20 million; and that all of his real estate assets were in receivership such that he did not have the ability to invest in RSLA.
Finally, BofA, Bock, and Weinberg allegedly concealed material facts regarding Bock's and Weinberg's relationship with Stern, including the fact that they had loaned Stern more than $1 million, which had not been repaid, and the fact that Bock and Weinberg had previously attempted to find investors for Stern's real estate holdings.
Had Freeney known the true facts regarding Stern, and Bock's and Weinberg's involvement with Stern, he purportedly would not have agreed to become a BofA client or to have his assets, investments, and income managed by BofA or its employees.
In February 2010, Freeney allegedly agreed to become a BofA client and transfer management of his financial affairs to Bock's team.
In her role as Freeney's banker, Weinberg purportedly oversaw the transfer of assets and investments from his prior financial manager and investment advisor to BofA.
In reliance on BofA's, Bock's, Weinberg's, and Stern's misrepresentations and non-disclosures, Freeney allegedly authorized Stern to work with Bock's team to negotiate the return of sums loaned by Freeney to several entities as investments, to dispose of unprofitable land investments, to increase Freeney's ownership interest in RG, and to oversee the build-out and operation of RSLA.
On February 18, 2010, with Bock and Weinberg's assistance, Stern purportedly incorporated Arms Reach Consulting LLC ("ARC") in Delaware.
Approximately one month after joining BofA as a client, BofA allegedly advised Freeney that he should obtain whole life insurance as part of his overall investment portfolio.
To facilitate Freeney's purchase of a new life insurance policy, Weinberg purportedly introduced Freeney to her brother, Richard Weinberg.
Based on BofA's, Weinberg's, and Richard's encouragement and representations that it would be a prudent and beneficial long-term investment, Freeney purportedly purchased up to $60 million in whole life insurance.
In late March 2010, BofA, Weinberg, and Stern allegedly referred Freeney to an attorney and law firm in Florida (the "Florida Attorney") to provide legal advice and services related to RG and RSLA.
The complaint alleges that, between March and June 2010, Weinberg, acting as a BofA employee, misappropriated approximately $160,000 from one of Freeney's personal BofA accounts.
Plaintiffs allege, on information and belief, that between February and April 2010, Bock, acting as a BofA employee, purchased approximately $890,000 in securities on Freeney's behalf without Freeney's knowledge or authorization.
During the relevant period, Stern purportedly used a private jet, tail number N900JF, which he claimed to own; Stern allegedly allowed Freeney to use the jet regularly for the cost of fuel as a gesture of goodwill and friendship.
In July and August 2010, after Freeney was introduced to Richard, he purchased three whole life insurance policies with a total value of $55 million.
In an attempt to defraud Freeney, BofA, Weinberg, and Richard allegedly made various misleading representations to induce Freeney to purchase the policies and pay approximately $500,000 in premiums. These included, inter alia, that Weinberg and her brother had experience and expertise selecting and purchasing insurance for investment purposes and that the purchase of the policies was in Freeney's financial interests.
Beginning in March 2010, BofA, Weinberg, and Stern purportedly made various false and misleading representations to Freeney and concealed certain facts to induce him to allow BofA, Weinberg, and Stern to assume management and control of RSLA and to allow Weinberg to become the de facto Chief Financial Officer ("CFO") of RG.
After Freeney became a BofA client, BofA, Weinberg, and Stern purportedly urged him to purchase the ownership stake of the two other owners of RG.
In May 2010, after Freeney had become the sole owner of in RSLA, Stern purportedly signed a "Term Sheet" as "David M. Millar" on RG's behalf with Salvatore and Stacy Feli, and their company SalandStacy Corp., to oversee RSLA's daily operations.
Plaintiffs allege, on information and belief, that at Weinberg's request, Josephine Del Campo, a BofA Assistant Vice President, opened a BofA business checking account for RG in May 2010, without necessary documentation or internal authorization to do so.
Plaintiffs allege, on information and belief, that after opening the BofA RG account, Weinberg, acting as a BofA employee, gave Stern confidential account information so that he could access the account remotely and transfer funds from it without Freeney's knowledge.
In June 2010, Weinberg, allegedly acting as a BofA employee, purportedly opened two accounts at Citibank in Freeney's name, using a signed power of attorney form.
Plaintiffs also assert, on information and belief, that beginning in February 2010, Bock and Weinberg began to make plans for Weinberg to leave BofA and start her own company with Freeney as a client.
On June 2, 2010, Weinberg, purportedly acting as a BofA employee, incorporated Global Wealth Management, LLC ("GWM") in Delaware and opened a business checking account in GWM's name at a Wells Fargo Bank branch in Los Angeles, California.
Plaintiffs assert, on information and belief, that Bock and Weinberg selected the name GWM because it was similar to GWIM; they purportedly did so to create the false impression that Weinberg was still employed by BofA.
In June 2010, Weinberg and Stern allegedly made plans to move from Miami Beach, Florida, to Los Angeles, California, so that they could continue their alleged fraud on Freeney.
On June 10, 2010, Weinberg purportedly faxed a handwritten note to BofA in which she announced she would resign from the bank effective July 2010.
In connection with Weinberg's relocation to Los Angeles, she and Bock purportedly agreed, as part of their marital settlement agreement, that Weinberg would pay Bock the first $100,000 of any amount that she recovered from Stern in repayment for Weinberg and Bock's loan to Stern.
Plaintiffs allege, on information and belief, that between June 2010 and October 2011, Weinberg deposited approximately $15.7 million — Freeney's salary from the Colts for the 2010 and 2011 NFL seasons — in the Citibank accounts.
Weinberg and Stern purportedly used RSLA to conceal and disguise the actual purpose of these wire transfers; notations provided with the transfers suggested that they concerned RSLA business; plaintiffs assert that none of the purported payments were made for that purpose, however.
Plaintiffs allege, on information and belief, that BofA, Bock, Weinberg, and Stern began to liquidate Freeny's investments in March 2010; this was purportedly done so that there would be sufficient liquid assets that Weinberg and Stern could misappropriate Freeney's funds without raising suspicions.
Plaintiffs allege, on information and belief, that in August 2011, BofA, Bock, Weinberg, and Stern liquidated almost all of Freeney's investments and depleted almost all of his available cash.
In January 2006, Freeney purportedly entered into an agreement to purchase a penthouse condominium in a W Hotel being constructed in South Beach; Freeney paid $1.2 million of the $6.0 million purchase price at that time and was to pay the balance upon completion of construction.
In December 2004, Freeney allegedly purchased 8.5 acres of undeveloped lakefront land in Mecklenburg County, North Carolina for investment purposes at a price of $1.53 million.
Beginning in 2011, BofA, Weinberg, and Stern purportedly took various steps to conceal and cover up their scheme to defraud Freeney.
In November 2011, Freeney allegedly became concerned that Weinberg was misusing funds in the RSLA bank accounts.
Plaintiffs allege, on information and belief, that despite the fact that hundreds of wire transfers totaling more than $17 million were made into and out of the BofA RG account during 2010 and 2011, BofA never filed a Suspicious Activity Report ("SAR") concerning the transactions.
Notwithstanding its Financial Industry Regulatory Authority ("FINRA") reporting obligations, BofA also purportedly delayed filing a Form U4 reporting Freeney's complaints of wrongdoing against Bock, Liebman, and Del Campo, and ultimately filed such a report only because it was concerned that Freeney would sue it.
Plaintiffs allege that, following discovery of the fraudulent scheme, Freeney took steps to mitigate his losses by, inter alia, closing RSLA, settling the dispute related to the condominium in the W Hotel, and repaying the mortgage loan on the North Carolina investment property.
Based on the preceding facts, plaintiffs allege the following claims: (1) violation of the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c) and 1964(c);
BofA asks the court to take judicial notice of several documents. In deciding a Rule 12(b)(6) motion, courts generally look only to the face of the complaint and documents attached thereto. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990). A court must normally convert a Rule 12(b)(6) motion into a Rule 56 motion if it "considers evidence outside the pleadings. . . . A court may, however, consider certain materials — documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice — without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003). See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (a court may consider "other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice"); Branch v. Tunnell 14 F.3d 449, 453 (9th Cir. 1994) (noting that a court may consider a document whose contents are alleged in a complaint, so long as no party disputes its authenticity), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).
Thus, in deciding a motion to dismiss, a court can consider material that is the proper subject of judicial notice under Rule 201 of the Federal Rules of Evidence. FED.R.EVID. 201. Under Rule 201, the court can judicially notice "[o]fficial acts of the legislative, executive, and judicial departments of the United States," and "[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy." Courts have held that "[j]udicial notice is appropriate for records and `reports of administrative bodies.'" United States v. 14.02 Acres of Land More or Less in Fresno County, 547 F.3d 943, 955 (9th Cir. 2008) (quoting Interstate Natural Gas Co. v. Southern California Gas Co., 209 F.2d 380, 385 (9th Cir. 1954)). The court can take judicial notice of the regulation. It is available at the federal register website, and neither party questions its authenticity. Courts routinely take judicial notice of documents available on government websites because the documents are not subject to reasonable dispute. In re Epogen & Aranesp Off Label Mktg. & Sales Practices Litigation, 590 F.Supp.2d 1282, 1286 (C.D. Cal. 2008) ("The Court grants DaVita's request as to Exhibits 1-4, labels for Epogen that are publicly available on the FDA website, finding that the labels are documents not subject to reasonable dispute"); In re Amgen Inc. Securities Litigation, 544 F.Supp.2d 1009, 1023 (C.D. Cal. 2008) (same).
First, BofA asks the court to notice a Merrill Lynch Client Relationship Agreement signed by Freeney and dated February 11, 2010. "A district court ruling on a motion to dismiss may consider a document the authenticity of which is not contested, and upon which the plaintiff's complaint necessarily relies." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir.1998), superseded by statute on other grounds as recognized in Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 681 (9th Cir. 2006). This is so even if the plaintiff does not "explicitly allege the contents of th [e] document[s] in the complaint." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir.2005) ("We have extended the `incorporation by reference' doctrine to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint"). Here, the client agreement is essential to Freeney's claim, because but for the agreement, he would not have been a Merrill Lynch client, and thus these claims would never have arisen. Because Freeney does not dispute the authenticity of the document, the court will consider it under the incorporation by reference doctrine.
Second, BofA asks that the court notice two annual audit report forms X17A-5, which were filed with the Securities Exchange Commission on March 1, 2011 and March 2, 2015, respectively. Because the documents are on file with the SEC, they are judicially noticeable as undisputed matters of public record. See Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1064 n. 7 (9th Cir. 2008) ("Defendants sought judicial notice for Corinthian's reported stock price history and other publicly available financial documents, including a number of Corinthian's SEC filings. In its dismissal order, the court granted Defendants' unopposed requests for judicial notice. Metzler does not contest the propriety of the noticing of these documents on appeal, which in any event was proper"); Oklahoma Firefighters Pension & Ret. Sys. v. IXIA, 50 F.Supp.3d 1328, 1349 (C.D. Cal. 2014) ("Courts can consider securities offerings and corporate disclosure documents that are publicly available.").
As discussed infra, Freeney requests that the court take judicial notice of a number of documents in support of a theory of relief not pled in his complaint. Because this is improper, the court declines to take judicial notice of the documents.
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory," or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacific Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). The court must accept all factual allegations pleaded in the complait as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir. 1995).
The court need not, however, accept as true unreasonable inferences or legal conclusions cast in the form of factual allegations. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) ("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do"). Thus, a plaintiff's complaint must "contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.' . . . A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009); see also Twombly, 550 U.S. at 555 ("Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)" (citations omitted)); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a complaint to survive a motion to dismiss, the non-conclusory `factual content,' and reasonable inferences from that content, must be plausible suggestive of a claim entitling the plaintiff to relief," citing Iqbal and Twombly).
BAC and BANA first assert that they are not proper defendants because the complaint does not plausibly plead that Weinberg, Bock, and Liebman were BofA employees.
The court does not find plaintiffs' allegation that "BofA" employed Weinberg, Bock, and Liebman plausible. "It is a general principle of corporate law deeply `ingrained in our economic and legal systems' that a parent corporation . . . is not liable for the acts of its subsidiaries." United States v. Bestfoods, 524 U.S. 51, 61 (1998). "Only in unusual circumstances will the law permit a parent corporation to be held either directly or indirectly liable for the acts of its subsidiary." Bowoto v. Chevron Texaco Corp., 312 F.Supp.2d 1229, 1234 (N.D. Cal. 2004). Here, "plaintiffs have failed to allege any facts from which [it can be] infer[red] that these exceptions apply," and do not argue that any of the traditional bases for disregarding corporate separateness, e.g., alter ego, apply. See IndyMac Mortgage Backed Sec. Litig., 718 F.Supp.2d 495, 508 (S.D.N.Y. 2010); Bowoto, 312 F.Supp.2d at 1235 ("The party seeking to disregard the corporate form bears the burden of showing that there are good reasons for doing so").
Instead, plaintiffs allege that BofA purchased Merrill Lynch in 2009, and that Merrill Lynch then merged into BofA. In essence, the complaint alleges that BofA is Merrill Lynch's successor-in-interest. This is a mere legal conclusion. See Buchanan v. Neighbors Van Lines, No. CV 10 6206 PSG (RCx), 2010 WL 4916644, *3 (C.D. Cal. Nov. 29, 2010) ("The only allegations made by Plaintiff — that `at all relevant times each of the Defendants was the agent, employee, [and] . . . successor-in-interest of each of them, and of each other, and has, in such capacity or capacities, participated in the acts or conduct alleged' in the Complaint — are nothing more than legal conclusions of the type prohibited by Iqbal and Twombly. Plaintiff's argument that the conduct of Golden Hand is imputed to Neighbors therefore must fail"); In re IndyMac Mortgage-Backed Sec. Litig., 718 F.Supp.2d at 508 ("The successor-in-interest allegation, however, is nothing more than a legal conclusion without any factual amplification and so is `not entitled to the assumption of truth'"); see also Ortiz v. Green Bull, Inc., No. CV 10-3747 ADS ETB, 2011 WL 5554522, *9 (E.D.N.Y. Nov. 14, 2011) ("Plaintiff only alleges in the complaint the legal conclusion that Werner is successor in interest to Green Bull"); Sullivan v. Dollar Tree Stores, Inc., No. CV 07-5020 EFS, 2008 WL 1730079, *3 (E.D. Wash. Apr. 10, 2008) ("As an initial matter, the DOL's conclusion that Defendant is a successor in interest is a legal conclusion"). None of plaintiffs' factual allegations plausibly suggests that BofA merged with and became Merrill Lynch's successor in interest, or that Merrill Lynch ceased to exist as a going concern. The complaint "instead predicates B[of]A's liability solely on an [implied] allegation that it is a "successor-in-interest" to . . . Merrill[] Lynch." In re IndyMac Mortgage-Backed Sec. Litig., 718 F.Supp.2d at 508. As a result, the complaint fails to state a plausible claim for relief against BofA.
Plaintiffs' conclusory allegations are especially problematic given the existence of case law clearly noting that Merill Lynch and BANA "are wholly owned subsidiaries of [BAC]" and that Merrill Lynch is "a completely separate entity." Stansell v. Rev. Armed Forces of Col., 771 F.3d 713, 747-48 (11th Cir. 2014). They are also contradicted by annual audit reports filed with the SEC on March 1, 2011 and March 2, 2015.
In point of fact, the complaint fails even to allege which BofA entity merged with and became the successor in interest to Merrill Lynch. The complaint alleges that BofA (or "BOA" as it is described in the complaint) is two distinct entities, BANA and BAC. Plaintiffs do not identify the entities between or among which the merger took place. This too renders the merger allegations deficient, and requires dismissal of plaintiffs' claims against BANA and BAC. Walsh v. Kindred Healthcare, 798 F.Supp.2d 1073, 1083 (N.D. Cal. 2011) ("Nor have Plaintiffs alleged facts to show how Hillhaven, Rossmoor LLC, or Smith Ranch LLC fit into this corporate structure and that they should be held liable for the acts of the other defendants or have the other defendants be held liable for their acts"); see also Lewis v. County of San Diego, No. 13 CV 2818 L JMA, 2014 WL 3527719, *6 (S.D. Cal. July 15, 2014) ("Plaintiffs vaguely lump all defendants together without providing any factual allegations that specify separate acts of O'Malley and Cline that would subject them to liability"); Anthony v. Harmon, No. CIV 09 2272 WBSKJM, 2009 WL 4282027, *2 (E.D. Cal. Nov. 25, 2009) ("A number of averments in plaintiffs' complaint certainly appear to have been made without Iqbal in mind. For example, plaintiffs' allegations repeatedly lump defendants together, referring to them as `Advisors,' and do not plead facts that plausibly suggest that each defendant is liable for the claims in the Complaint").
For the same reason, any assertion that Merrill Lynch employees were BofA employees is unavailing. See Richard v. Bell Atl. Corp., 946 F.Supp. 54, 59-60 (D.D.C. 1996) ("Given the plaintiffs' earlier definition of the term `Bell Atlantic,' the complaint in effect alleges that each plaintiff was or is employed not only by BAC, but also by each of the subsidiaries. Such an allegation is nonsensical. Accordingly, the plaintiffs shall be ordered to file an amended complaint by the close of a sixty-day, limited discovery period, in which they identify each BAC subsidiary for which each named plaintiff worked or works"); see also Blackwell v. Bank of Am. Corp., No. CV 12-02783 JMC, 2013 WL 2181040, *3 (D.S.C. May 20, 2013) (recommending dismissal where BAC "argue[d] that it should be dismissed from th[e] action because the plaintiff was not employed by it but was instead employed by Merrill Lynch, which is a wholly owned subsidiary of [BAC]" and "[t]he plaintiff state[d] in his complaint that he was employed `by the defendant[, i.e., BAC,] in the Merrill Lynch branch located in Spartanburg'"); Menashe v. Bank of N.Y., 850 F.Supp.2d 1120, 1135 (D. Haw. 2012) (concluding that allegations that "[a]s a successor in interest to Countrywide, Defendant[s] BOA and BAC have hired, directed and controlled the actions of Countrywide in its capacity as originator broker of the mortgage loan in this case" were insufficient to establish the existence of an employment relationship).
Plaintiffs dispute that BAC and BANA are not proper parties. In their opposition, plaintiffs disavow the merger theory, and assert that a "parent corporation (in this case, BAC) may be liable for the actions of the employees of a subsidiary (in this case, [Merrill Lynch]) if the parent is a joint employer."
Plaintiffs seek to circumvent the fact that they have pled no facts indicating that BAC and Merrill Lynch are joint employers by asking that the court take judicial notice of twenty-seven documents, only eighteen of which they cite or discuss. Plaintiffs' attempt to amend their complaint through judicial notice to include facts purportedly demonstrating joint employment is improper. See Oklahoma Firefighters Pension & Ret. Sys. v. IXIA ("Ixia I"), 50 F.Supp.3d 1328, 1350 (C.D. Cal. 2014) ("Plaintiffs cannot utilize the [judicially noticeable] documents to amend the complaint and defeat defendants' motions to dismiss"); In re Turbodyne Technologies, Inc. Sec. Litig., No. CV 99-00697-MMM-BQRx, 2000 WL 33961193, *10 (C.D. Cal. Mar. 15, 2000) ("Plaintiffs' complaint alleges much of the information contained in Exhibit Q, including Turbodyne's stock price on certain days and the dates the stock's upward and downward price swings began. The complaint lacks any allegations regarding Turbodyne's daily trading volume, however, and plaintiffs clearly seek to have the court take judicial notice of Exhibit Q to cure this omission. In deciding a motion to dismiss, courts may not `take into account additional facts asserted in a memorandum opposing the motion to dismiss, because such memoranda do not constitute pleadings under Rule 7(a).' The effect of plaintiffs' request that the court take judicial notice of Exhibit Q is the same, and the court declines to do so for that reason" (internal citation omitted)); see also Harrell v. United States, 13 F.3d 232, 236 (7th Cir. 1993) (party "cannot cure [pleading deficiencies] by inserting the missing allegations in a document that is not either a complaint or an amendment"). Thus, the court need not address plaintiffs' joint employer arguments.
It does so nonetheless, because even had the allegations in plaintiffs' opposition been pled in the complaint, the claims against BofA would be deficient. Plaintiffs' joint employer theory does not appear to have application here, because the theory, and the case law plaintiffs cite in support of it, apply where an employee seeks to hold multiple entities liable on labor law and ADEA and ADA claims. See E.E.O.C. v. Pac. Mar. Ass'n, 351 F.3d 1270, 1275 (9th Cir. 2003) (applying "joint employer" test in Title VII case); Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d 990, 992-93 (6th Cir. 1997) ("It is undisputed that Barnes & Noble, not TTU, was plaintiffs' direct employer. Although a direct employment relationship provides the usual basis for liability under the ADEA or ADA, courts have fashioned various doctrines by which a defendant that does not directly employ a plaintiff may still be considered an `employer' under those statutes. In one approach, courts examine whether two entities are so interrelated that they may be considered a `single employer' or an `integrated enterprise.' In another approach, courts consider whether one defendant has control over another company's employees sufficient to show that the two companies are acting as a `joint employer' of those employees"); Bonnette, 704 F.2d at 1469 ("Two or more employers may jointly employ someone for purposes of the [Fair Labor Standards Act]. All joint employers are individually responsible for compliance with the FLSA. Regulations issued by the Department of Labor give the following examples of joint employment situations. . ."); Rivas v. Federacion de Asociaciones Pecuarias de Puerto Rico, 929 F.2d 814, 819-20 (1st Cir. 1991) ("In the labor relations context, the Supreme Court, in Boire v. Greyhound Corp., 376 U.S. 473, 480-81 (1964), recognized as an issue of fact whether an entity possesses sufficient indicia of control over employees so as to constitute a `joint employer' under § 9(c) of the NLRA, 29 U.S.C. § 159(c)"). Plaintiffs cite, and the court has located, no case in which a non-employee plaintiff successfully held an entity vicariously liable on a joint employer theory.
Assuming arguendo the theory is viable in a situation such as this, a plaintiff seeking to hold multiple entities liable as joint employers must plead specific facts that explain how the defendants are related and how the conduct underlying the claims is attributable to each. The opposition does not contain such facts, however. See Adedapoidle-Tyehimba, 2013 WL 4082137 at *5 ("Here, Mr. Adedapoidle-Tyehimba has failed to allege facts sufficient to hold NEV and NEFC liable as his joint employers. As the Court previously noted, the allegations in paragraph 25 of the SAC (identical to the allegations in paragraph 24 of the FAC) are imprecise and conclusory. The supplemental allegations in paragraph 25 of the SAC do not cure these deficiencies. Regarding NEV, the allegation that it focuses on `fitness clubs' says nothing about its relationship with Crunch, LLC or with Mr. Adedapoidle-Tyehimba."); U.S. E.E.O.C. v. Am. Laser Centers LLC, No. CV 09-02247 AWI DLB, 2010 WL 3220316, *5 (E.D. Cal. Aug. 13, 2010) ("EEOC has not alleged any specific facts to support its claim that the Defendants were alter egos, joint-employers, successors, or an integrated enterprise. EEOC's allegation that the conduct at issue is attributable to all Defendants because each acted `as a successor, alter ego, joint employer, integrated enterprise, agent, employee . . .' or `under the direction and control of the others' is merely a conclusory allegation. EEOC does not plead any specific factual allegations that explain how the four Defendant companies are related to each other. The Court is not required `to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences'").
Plaintiffs assert only that the evidence they seek to have the court judicially notice demonstrates that BAC owned, managed and oversaw, appointed directors, co-marketed, administered benefit plans for, and was generally interdependent with Merrill Lynch.
Accordingly, even were the court permitted to consider arguments in plaintiffs' opposition that are not alleged in the complaint, it would conclude that BAC and BANA are not proper defendants. BofA's motion to dismiss must therefore be granted.
When a defendant moves to dismiss under Rule 12(b)(2), the plaintiff bears the burden of demonstrating that the court may properly exercise personal jurisdiction over the defendant. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006); Bohara v. Backus Hosp. Medical Benefit Plan, 390 F.Supp.2d 951, 961 (C.D. Cal. 2005) (citing Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995)). Absent formal discovery or an evidentiary hearing, the plaintiff need only make a prima facie showing that jurisdiction exists to survive a Rule 12(b)(2) motion to dismiss. Pebble Beach, 453 F.3d at 1154; Rio Properties, Inc. v. Rio International Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002); Ziegler, 64 F.3d at 473.
To make this showing, the plaintiff can rely on the allegations in its pleadings to the extent they are not controverted by the moving party. See, e.g., Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001) ("Where not directly controverted, plaintiff's version of the facts is taken as true for the purposes of a 12(b)(2) motion to dismiss"). If defendants adduce evidence controverting the allegations, however, the plaintiff cannot rely on his pleadings, but must "`come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.'" Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986) (quoting Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th Cir. 1977)). "Conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor." Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004); see also American Telephone & Telegraph Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996) ("In determining whether [the plaintiff] has met this burden, uncontroverted allegations in [the] complaint must be taken as true, and `conflicts between the facts contained in the parties' affidavits must be resolved in [plaintiff's] favor for purposes of deciding whether a prima facie case for personal jurisdiction exists,'" quoting WNS Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir. 1989)).
"The general rule is that personal jurisdiction over a defendant is proper if it is permitted by a long-arm statute and if the exercise of that jurisdiction does not violate federal due process." Pebble Beach, 453 F.3d at 1154-55 (citing Fireman's Fund Ins. Co. v. Nat'l Bank of Coop., 103 F.3d 888, 893 (9th Cir. 1996)); see also Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 243 F.Supp.2d 1073, 1082 (C.D. Cal. 2003) (citing Aanestad v. Beech Aircraft Corp., 521 F.2d 1298, 1300 (9th Cir. 1974)). Because California authorizes jurisdiction to the full extent permitted by the Constitution, see CAL. CODE CIV. PROC. § 410.10, the only question the court must ask here is whether the exercise of jurisdiction over Bock would be consistent with due process. Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003); Peterson v. Highland Music, Inc., 140 F.3d 1313, 1317 n. 2 (9th Cir. 1998).
To satisfy due process, a defendant must have sufficient "minimum contacts" with the forum state that "maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). There are two recognized bases for exercising personal jurisdiction over a nonresident defendant: (1) "general jurisdiction," which arises where defendant's activities in the forum are sufficiently "substantial" or "continuous and systematic" to justify the exercise of jurisdiction over it in all matters; and (2) "specific jurisdiction," which arises when a defendant's specific contacts with the forum give rise to the claim in question. Helicopteros Nacionales de Columbia S.A. v. Hall, 466 U.S. 408, 414-16 (1984); Doe v. Am. Nat'l Red Cross, 112 F.3d 1048, 1050-51 (9th Cir. 1997).
Plaintiffs assert that Bock waived his right to challenge personal jurisdiction by making a general appearance. Under Rule 12(h)(1) of the Federal Rules of Civil Procedure, a defendant waives any personal jurisdiction defense he might otherwise have if he does not raise it in a responsive pleading or in a motion to dismiss that precedes the responsive pleading. See FED.R.CIV.PROC. 12(h)(1) ("A party waives any defense listed in Rule 12(b)(2)-(5) by: (A) omitting it from a motion in the circumstances described in Rule 12(g)(2); or (B) failing to either: (i) make it by motion under this rule; or (ii) include it in a responsive pleading or in an amendment allowed by Rule 15(a)(1) as a matter of course"). Although "Rule 12(h)(1) specifies the minimum steps that a party must take in order to preserve a defense," it does not follow "that a party's failure to satisfy those minimum steps constitutes the only circumstance under which a party will be deemed to have waived a defense." Peterson v. Highland Music, Inc., 140 F.3d 1313, 1318 (9th Cir.1998). A court can find that a defendant has waived a personal jurisdiction defense if its litigation conduct amounts to "deliberate, strategic behavior" or "sandbagging," e.g., "raising the issue of personal jurisdiction on a motion to dismiss, deliberately refraining from pursuing it any further when [the] motion is denied in the hopes of receiving a favorable disposition on the merits, and then raising the issue again on appeal only if [defendant] were unhappy with the district court's ultimate decision." Id.
A defendant's election to remove a case to federal court does not waive a personal jurisdiction defense. See Nationwide Eng'g & Control Sys. v. Thomas, 837 F.2d 345, 347-48 (8th Cir. 1988) ("[r]emoval, in itself, does not constitute a waiver of any right to object to lack of personal jurisdiction"); Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 299, 300-01 (9th Cir.1986) (dismissing a removed federal action for lack of personal jurisdiction); Team Enterprises, LLC v. W. Inv. Real Estate Trust, No. CV 08-1050LJOSMS, 2008 WL 4367560, *2 (E.D. Cal. Sept. 23, 2008) ("A defendant's choice to first remove an action to federal court before seeking to challenge personal jurisdiction does not constitute a waiver of objections to personal jurisdiction"); Dielsi v. Falk, 916 F.Supp. 985, 994 (C.D. Cal. 1996) ("a defendant does not waive jurisdictional challenges by removing the case to federal court"); see also Webb v. Sitzes, 82 F.3d 424, 1996 WL 169298, *3 (9th Cir. Apr. 10, 1996) (Unpub. Disp.) ("The district court properly held that the motion to remove did not waive the objection to personal jurisdiction").
Plaintiffs contend that Bock waived any right to challenge personal jurisdiction by filing a notice of related cases that sought to have this case transferred from the calendar of Judge Gary Klausner to this court; filing two stipulations asking that the court continue the deadline for the filing of a response to the complaint; and filing a notice of appearance designating Paul S. Malingagio as his counsel of record and requesting that additional attorneys be admitted pro hac vice.
Courts, moreover, have repeatedly and consistently rejected waiver arguments similar to those raised by plaintiffs. Bock's "counsels' filing of initial appearances or motions for admission pro hac vice are not the defensive moves in which a waiver of personal jurisdiction can occur." See Springer v. Balough, 96 F.Supp.2d 1250, 1256 (N.D. Okla. 2000); see also Coe v. Philips Oral Healthcare Inc., No. C13-518-MJP, 2014 WL 585858, *2 (W.D. Wash. Feb. 14, 2014) (holding that defendant's entry of a notice of appearance before filing a motion to dismiss did not constitute a waiver of personal jurisdiction objections); Martin v. United States, No. CV 13-03130, 2014 WL 3493233, *3 (C.D. Ill. July 14, 2014) (filing a notice of appearance and motion for extension of time to answer did not constitute a waiver if the defense was preserved in the first responsive pleading or pre-pleading motion filed). Second, "a motion to extend time to respond gives no hint that the answer will waive personal jurisdiction defects, and is probably best viewed as a holding maneuver while counsel consider how to proceed." See Benny v. Pipes, 799 F.2d 489, 493 (9th Cir. 1986) (defendant did not waive personal jurisdiction challenge by filing three stipulations to extend time); Heller v. Cepia, LLC, No. CV 11-01146 JSW, 2012 WL 13572, *10 (N.D. Cal. Jan. 4, 2012) ("A-Tech and The Bean filed a stipulation to extend the time for them to respond to Heller's complaint. Although it would have been a better practice had they specifically stated that they were not waiving any affirmative defenses, it would be a harsh result if the Court were to find the filing of this stipulation constituted a general appearance. The filing of this stipulation did not demonstrate a `clear purpose to defend the suit'"). Finally, filing a notice of related case, which Bock did with BofA, was required under the Local Rules,
As a consequence, the court concludes that Bock did not waive his right to challenge personal jurisdiction by filing a Rule 12(b)(2) motion.
A court can exercise general jurisdiction over a defendant if the defendant's contacts with the forum are "substantial" or "continuous and systematic." International Shoe Co., 326 U.S. at 316; Data Disc, Inc. v. Systems Technology Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977); see also Schwarzenegger, 374 F.3d at 801 (plaintiff must show that defendant engaged in "`continuous and systematic general business contacts' that `approximate physical presence' in the forum state," quoting Helicopteros, 466 U.S. at 416; Bancroft & Masters, Inc. v. Augusta National Inc., 223 F.3d 1082, 1086 (9th Cir. 2000)). "The standard is met only by `continuous corporate operations within a state [that are] thought so substantial and of such a nature as to justify suit against [the defendant] on causes of action arising from dealings entirely distinct from those activities.'" King v. American Family Mutual Ins. Co., 632 F.3d 570, 579 (9th Cir. 2011) (quoting International Shoe Co., 326 U.S. at 318). When properly invoked, general jurisdiction allows a federal court to hear any cause of action, even one unrelated to defendant's activities in the state. See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 445 (1952).
To determine if a defendant's activities in the forum are "continuous and systematic" or "substantial," the court must examine all of his activities impacting the state. See Helicopteros, 466 U.S. at 411; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980); Perkins, 342 U.S. at 445-49. "Factors to be taken into consideration are whether the defendant makes sales, solicits or engages in business in the state, serves the state's markets, designates an agent for service of process, holds a license, or is incorporated there." Bancroft & Masters, 223 F.3d at 1086 (citing Hirsch v. Blue Cross, Blue Shield, 800 F.2d 1474, 1478 (9th Cir. 1986)); Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1224 (9th Cir. 2011) ("To determine whether a nonresident defendant's contacts are sufficiently substantial, continuous, and systematic, we consider their `[l]ongevity, continuity, volume, economic impact, physical presence, and integration into the state's regulatory or economic markets,'" quoting Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1172 (9th Cir. 2006)).
Bock contends that even specific jurisdiction is lacking because he has no contacts with California. A fortiori, therefore, he asserts that the court cannot exercise general jurisdiction over him because his contacts fall far short of "continuous and systematic" and do not "approximate physical presence" in California. See Bancroft & Masters, 223 F.3d at 1086. Plaintiffs do not contend that the court can exercise general jurisdiction over Bock. Given the paucity of allegations and evidence, and plaintiffs' failure to argue that the court can exercise general jurisdiction over Bock, the court considers only whether it is appropriate to exercise specific jurisdiction over him. See, e.g., Ziegler, 64 F.3d at 473 ("There are two types of personal jurisdiction: general and specific. General jurisdiction exists if the nonresident's contacts with the forum are continuous and systematic, and the exercise of jurisdiction satisfies `traditional notions of fair play and substantial justice.' Ziegler does not contend that the district court had general jurisdiction; [therefore,] only specific jurisdiction is at issue" (citations omitted and emphasis added)); Abokasem v. Royal Indian Raj International Corp., No. C-10-01781 MMC, 2010 WL 635222, *2 n. 3 (N.D. Cal. Feb. 11, 2011) ("General jurisdiction typically requires `continuous and systematic general business contacts' with the forum. Plaintiffs do not argue the RIRIC defendants are subject to general personal jurisdiction"); Allstar Marketing Group, LLC v. Your Store Online, LLC, 666 F.Supp.2d 1109, 1118 (C.D. Cal. 2009) ("Plaintiffs assert conclusorily that defendants are subject to general jurisdiction. The analysis in their opposition to defendants' motion addresses specific jurisdiction only, however. Therefore, the court considers only whether specific jurisdiction exists"); American Auto Ass'n, Inc. v. Darba Enterprises, Inc., No. C 09-00510 SI, 2009 WL 1066506, *3 (N.D. Cal. Apr. 21, 2009) ("Because plaintiff argues only that specific jurisdiction is warranted, the Court does not address whether general jurisdiction would be appropriate here"); Nissan Motor Co., Ltd. v. Nissan Computer Corp., 89 F.Supp.2d 1154, 1158 (C.D. Cal. 2000) ("In this case, the plaintiffs do not argue that the Court has general personal jurisdiction over the defendant. Moreover, there is no evidence that the defendant has `substantial' or `continuous and systematic' contacts with California. The defendant has offices and employees only in North Carolina, offers only local Internet access, and apparently limits its sales and advertising to the East Coast. Accordingly, the Court finds that the plaintiffs have not established a basis for general personal jurisdiction over the defendant"); Colt Studio, Inc. v. Badpuppy Enterprise, 75 F.Supp.2d 1104, 1109 n. 3 (C.D. Cal. 1999) (noting that "[p]laintiffs do not argue that defendants' contacts with the state are so substantial, continuous, and systematic . . . as to render any of the defendants subject to general personal jurisdiction in this forum," and considering only whether defendants were subject to specific jurisdiction).
The Ninth Circuit applies a three-prong test to determine whether a court can exercise specific jurisdiction over a defendant:
The plaintiff bears the burden of satisfying the first two prongs of this test. Id. If it does, "the burden then shifts to the defendant[s] to `present a compelling case' that the exercise of jurisdiction would not be reasonable." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-78 (1985)).
"Purposeful availment analysis examines whether the defendant's contacts with the forum are attributable to his own actions or are solely the actions of the plaintiff." Sinatra v. Nat'l Enquirer, 854 F.2d 1191, 1195 (9th Cir. 1988). To demonstrate purposeful availment, plaintiffs must show that Bock "engage[d] in some form of affirmative conduct allowing or promoting the transaction of business within the forum state." Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (citing Shute, 897 F.2d at 381); see also Burger King, 471 U.S. at 475 ("This `purposeful availment' requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts, . . . or of the `unilateral activity of another party or a third person. . ."). Bock's contacts must be such that he should "reasonably [have] anticipate[d] being haled into court [ ]here." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Courts distinguish between contract and tort cases in assessing whether a defendant has purposefully availed itself of the benefits of conducting activities in the forum. See Roth v. Garcia-Marquez, 942 F.2d 617, 621 (9th Cir. 1991); see Schwarzenegger, 374 F.3d at 802 (noting that "purposeful availment" is often used "in shorthand fashion, to include both purposeful availment and purposeful direction[, the jurisdictional test in tort cases.] [B]ut availment and direction are, in fact, two distinct concepts").
Purposeful availment analysis is most often used in suits sounding in contract." Schwarzenegger, 374 F.3d at 802. The fact that the defendant entered into a contract with a forum resident, standing alone, is not sufficient to establish purposeful availment. See Burger King, 471 U.S. at 478; Gray & Co., 913 F.2d at 760; Sher v. Johnson, 911 F.2d 1357, 1362 (9th Cir. 1990). Rather, the court must utilize "a `highly realistic' approach that recognizes that a `contract' is `ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.' . . . It is these factors — prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing — that must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum." Burger King, 471 U.S. at 479.
In tort cases, by contrast, courts can exercise jurisdiction over defendants who have engaged in an act that is purposefully directed at, and has an effect in, the forum state, even if the act itself takes place outside state boundaries. See Schwarzenegger, 374 F.3d at 802-03. The Supreme Court recently clarified that "although physical presence in the forum is not a prerequisite to jurisdiction, physical entry into the State — either by the defendant in person or through an agent, goods, mail, or some other means — is certainly a relevant contact." Walden v. Fiore, ___ U.S. ___, 134 S.Ct. 1115, 1122 (2014). As a result, it stated, "a `mere injury to a forum resident is not a sufficient connection to the forum.' Rather, `an injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum State.'" Picot v. Weston, 780 F.3d 1206, 1214 (9th Cir. 2015) (quoting Walden, 134 S. Ct. at 1122). This is because "`minimum contacts' analysis looks to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there." Walden, 134 S. Ct. at 1122 (emphasis added); id. at 1123 ("Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the `random, fortuitous, or attenuated' contacts he makes by interacting with other persons affiliated with the State"). Thus, "a defendant's relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction." Id. at 1123.
Applying this general principle, the Court explained that the purposeful direction or "effects test" enunciated in Calder v. Jones, 465 U.S. 783 (1984), reflected the fact that
As noted, the complaint alleges twelve claims, all of which sound in tort. Neither party disputes that the purposeful direction test applies. The court must therefore examine whether it can be said that Bock purposefully directed his activities toward California such that his contacts with the state make it proper to exercise personal jurisdiction over him in this forum.
"In analyzing whether a court has specific personal jurisdiction over a tort claim, [the Ninth Circuit applies a] three-part `effects' test derived from Calder[, . . .] 465 U.S. 783. . . . Under this test, a defendant purposefully directed his activities at the forum if he: `(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.'" Picot, 780 F.3d at 1213-14 (citations omitted). As both the Supreme Court and Ninth Circuit have recently clarified, "applying this test, [courts] must `look[ ] to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.'" Id. at 1214 (quoting Walden, 134 S. Ct. at 1122). The parties' arguments focus principally on the express aiming requirement.
Plaintiffs contend the allegations in the complaint readily demonstrate that Bock, Weinberg, and Stern were part of an elaborate scheme to defraud Freeney, which began in January 2010 and continued until Stern's and Weinberg's arrests in March 2012.
Paragraph 193 alleges the contents of filings by Weinberg in Bock's and Weinberg's divorce proceedings. It pleads that Weinberg represented that her "relocation to Los Angeles was carefully planned with major input from [Bock]"; that "[Bock] was also instrumental in [Weinberg's] resignation from [Merrill Lynch] and start-up of her own company because he stressed to her that relocating to Los Angeles would be good for her business as there [were] great business opportunit[ies] to be found there"; that "[Bock] further told her that because he [was] a stock broker at Merrill Lynch, he [could] work out of any office so he would be in Los Angeles, California at least once a month"; and that "[Bock] . . . helped [Weinberg] design her business plan/strategize [Bock]'s future business goals for her in California."
Notably, the complaint does not allege that Bock made any of these statements; it asserts that Weinberg made them about Bock. In an effort to impute the statements to Bock, plaintiffs allege that he "did not dispute any of these statements in the responsive papers he filed in the divorce proceedings."
Moreover, even if Bock encouraged Weinberg to move to California, there are no allegations — conclusory or otherwise — that show Bock knew Weinberg was moving to California to engage in a fraudulent scheme. Merely encouraging Weinberg to move to California does not rise to the level of purposeful direction. "Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the `random, fortuitous, or attenuated' contacts he makes by interacting with other persons affiliated with the State." Walden, 134 S. Ct. at 1123. Stated differently, "a defendant's relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction." Id.
The Supreme Court's recent decision in Walden is instructive. There, the Court determined that a police officer's search of respondents and his seizure of U.S. currency in Georgia did not provide a basis for exercising personal jurisdiction over him in Nevada. The Court concluded that even if the officer caused harm to respondents in Nevada knowing that they lived there, that fact alone did not confer jurisdiction. Id. at 1124. It noted that it was
In so concluding, the Supreme Court expressly rejected the approach of the Court of Appeals, which "shift[ed] the analytical focus from petitioner's contacts with the forum to his contacts with respondents. Rather than assessing petitioner's own contacts with Nevada, the Court of Appeals looked to petitioner's knowledge of respondents' `strong forum connections.'" Id. at 1125. The Court explained that this
Walden controls the disposition of Bock's motion. The only allegations in the complaint indicating that Bock engaged in the fraudulent scheme concern misstatements and omissions "[i]n the course of recruiting Mr. Freeney to become a [BofA] client."
Walden mandates that courts determine whether they can exercise personal jurisdiction by "look[ing] to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there." 134 S. Ct. at 1122 (emphasis added); Bixby v. KBR, Inc., 603 Fed. Appx. 605, 606 (9th Cir. May 14, 2015) (Unpub. Disp.) ("The district court reasoned that the defendants had `expressly aimed' their conduct at Oregon because they `knew the persons to whom they intentionally directed their misrepresentations and failures to disclose were soldiers of the Oregon National Guard.' Walden, which was decided while this case was pending on appeal, makes clear that the personal jurisdiction analysis `looks to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.' After Walden, it is clear that `the plaintiff cannot be the only link between the defendant and the forum.' Because the district court expressly found that the plaintiffs are the only link between KBR and Oregon, we hold that the defendants are not subject to personal jurisdiction in Oregon for their actions in Iraq"); Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 802 (7th Cir. 2014) ("The district court also thought personal jurisdiction proper because Real Action knew that Advanced Tactical was an Indiana company and could foresee that its misleading emails and sales would harm Advanced Tactical in Indiana. Walden, however, shows the error of this approach. There the defendant knew that the plaintiffs were going to Nevada, and it was foreseeable that they would want the use of their money there, but the Court squarely rejected this as a permissible basis for jurisdiction. The `mere fact that [defendant's] conduct affected plaintiffs with connections to the forum State does not suffice to authorize jurisdiction.' The relation between the defendant and the forum `must arise out of contacts that the "defendant himself" creates with the forum State'"); Pelican Commc'ns, Inc. v. Schneider, No. CV-14-4371 EMC, 2015 WL 527472, *3 (N.D. Cal. Feb. 6, 2015) (" Based on the record before the Court, Mr. Schneider's contact with California appears to be random or fortuitous — i.e., resulting simply because Pelican happens to be a California resident. Nothing in the complaint establishes the kind of contact with California (as opposed to mere contact with a California resident) required by Walden"); Tresona Multimedia LLC v. Legg, No. CV-14-02141-PHX-DGC, 2015 WL 470228, *3 (D. Ariz. Feb. 4, 2015) (post-Walden "personal jurisdiction does not exist merely because a defendant engages in wrongful conduct targeted at a plaintiff whom the defendant knows to be located in a particular state").
The Ninth Circuit recently applied the "the principles of Walden" in Picot, and determined that specific jurisdiction was lacking because defendant's "actions did not connect him with California in a way sufficient to support the assertion of personal jurisdiction over him." 780 F.3d at 1215. The case involved an alleged oral agreement between three men, one of whom was a California resident, to develop an electrolyte for use in hydrogen fuel cells. Id. at 1209. After the California resident and one of the non-Californians sold the technology to a third party, the other non-Californian asserted he was entitled to a one-third share of the proceeds under the agreement. Id. The third party had agreed to pay the sales price to two pass-through trusts. Id. at 1210. The California resident and one of the non-Californians sued the other non-Californian in California; they sought a declaration that there was no oral agreement that entitled him to any portion of the sales proceeds, and damages for intentional interference with the sales contract. Id.
Plaintiffs argued that the defendant was subject to personal jurisdiction in California on the intentional interference claim under the Calder effects test. Id. at 1213-14. Specifically, they argued that defendant had expressly aimed his interference at California "because [he had] targeted [one of the plaintiffs,] a California resident." Id. at 1214. Defendant's allegedly tortious conduct consisted of making statements to an Ohio resident that caused a Delaware corporation with offices in Ohio to cease making payments to two trust accounts located in Wyoming and Australia. Defendant "did all this from his residence in Michigan, without entering California, contacting any person in California, or otherwise reaching out to California." Id. at 1215. The Ninth Circuit explained that "none of [defendant's] challenged conduct had anything to do with [California] itself." Id. (quoting Walden, 134 S. Ct. at 1125). It held that, "as in Walden, [the California plaintiff's] injury, an inability to access out-of-state funds, [wa]s not tethered to California in any meaningful way. Rather, his injury [was] entirely personal to him and would [have] follow[ed] him wherever he . . . cho[se] to live or travel. The effects of [defendant]'s actions [we]re therefore `not connected to the forum State in a way that ma[de] those effects a proper basis for jurisdiction.'" Id. (quoting Walden, 134 S. Ct. at 1125).
Neither the complaint nor the evidence proffered by plaintiffs demonstrates that Bock's conduct was connected to California, as opposed to Weinberg, who resided here. As Walden makes clear, a defendant's "relationship with a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction." Walden, 134 S. Ct. at 1123-24. At most, plaintiffs have alleged that Bock encouraged Weinberg to move to California, and that she engaged in fraud in the state. That will not suffice to hale a Florida resident into court in California. Moreover, like the plaintiff in Picot, Freeney's "injury is entirely personal to him and would follow him wherever he might choose to live or travel. The effects of [Bock]'s actions [we]re therefore `not connected to the forum State in a way that ma[de] those effects a proper basis for jurisdiction.'" Picot, 780 F.3d at 1215 (quoting Walden, 134 S. Ct. at 1125). Plaintiffs have therefore failed to allege jurisdictionally significant conduct by Bock directed at, and connected to, California. Bock's motion to dismiss therefore must be granted.
In their opposition, plaintiffs seek leave to conduct jurisdictional discovery concerning Bock's contacts with California. District courts have "a significant amount of leeway" in deciding whether to grant plaintiffs leave to conduct jurisdictional discovery while a motion to dismiss is pending. Orchid Biosciences, Inc. v. St. Louis University, 198 F.R.D. 670, 672 (S.D. Cal. 2001). Cf. Blackburn v. United States, 100 F.3d 1426,1436 (9th Cir. 1996) ("The district court has wide discretion in controlling discovery"). In the Ninth Circuit, jurisdictional discovery "should ordinarily be granted where `pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary.'" Butcher's Union Local No. 498 v. SDC Investment, Inc., 788 F.2d 535, 540 (9th Cir. 1986) (quoting Data Disc, Inc., 557 F.2d at 1285 n. 1; Wells Fargo & Co. v. Wells Fargo Exp. Co., 556 F.2d 406, 430 n. 24 (9th Cir. 1977)); see also Harris Rutsky, 328 F.3d at 1135 (holding that a district court abused its discretion in denying a motion for jurisdictional discovery regarding corporate alter ego liability).
Jurisdictional discovery need not be allowed, however, where the request amounts to a "fishing expedition." Johnson v. Mitchell, No. CIV S-10-1968 GEB GGH PS, 2012 WL 1657643, *7 (E.D. Cal. May 10, 2012) (citation omitted); see also Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008) (affirming the denial of a request for jurisdictional discovery "based on little more than a hunch that [discovery] might yield jurisdictionally relevant facts"); Butcher's Union Local No. 498, 788 F.2d at 540 (upholding the denial of a request for jurisdictional discovery where plaintiffs stated only that they "believed" discovery would enable them to demonstrate sufficient California contacts to establish personal jurisdiction); Videx, Inc. v. Micro Enhanced Tech., Inc., No. 12-0065, 2012 WL 1597380, *2 (D. Or. May 4, 2012) (denying jurisdictional discovery "[i]n light of [plaintiff's] purely speculative allegations of attenuated jurisdictional contacts"); Mackovich v. U.S. Government, No. 06-cv-00422-SMS (PC), 2008 WL 2053978, *1 (E.D. Cal. May 13, 2008) (denying discovery where plaintiff made "no showing that if further discovery were allowed, the outcome of the motion to dismiss would be affected," citing Laub v. United States Dept. of the Interior, 342 F.3d 1080, 1093 (9th Cir. 2003)).
Plaintiffs have adduced no evidence that Bock has contacts with California, nor demonstrated that Bock targeted California in any relevant way. Their request that the court permit discovery so that they can discover additional contacts that might subject Bock to jurisdiction in this forum is non-specific, and in light of the showing they have made, speculative. See Boschetto, 539 F.3d at 1020 (affirming the denial of a request for jurisdictional discovery "based on little more than a hunch that [discovery] might yield jurisdictionally relevant facts"); Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986) (upholding the denial of a request for jurisdictional discovery where plaintiffs stated only that they "believed" discovery would enable them to demonstrate sufficient California contacts to establish personal jurisdiction); Videx, Inc., 2012 WL 1597380 at *2 (denying jurisdictional discovery "[i]n light of [plaintiff's] purely speculative allegations of attenuated jurisdictional contacts").
Plaintiffs identify no specific discovery they seek to conduct that will be helpful in the jurisdictional analysis, nor do they describe the evidence of contacts they believe they can uncover. See Getz v. Boeing Co., 654 F.3d 852, 860 (9th Cir. 2011) (upholding the denial of jurisdictional discovery, where plaintiffs' allegations of jurisdictional contacts were "purely speculative," and plaintiffs failed to identify any "specific facts, transactions, or conduct" that might give rise to personal jurisdiction); Peter Strojnik, P.C. v. Signalife, Inc., No. 08-1116, 2009 WL 605411, *4 (D. Ariz. Mar. 9, 2009) (denying jurisdictional discovery because plaintiff "[did] not describe what evidence it reasonably hope[d] to discover"). "[W]here a plaintiff's claim of personal jurisdiction appears to be both attenuated and based on bare allegations in the face of specific denials made by the defendants, the Court need not permit even limited discovery. . . ." Pebble Beach, 453 F.3d at 1160 (citing Terracom v. Valley Nat. Bank, 49 F.3d 555, 562 (9th Cir. 1995)). The court therefore declines to authorize jurisdictional discovery. The court will, however, grant plaintiffs leave to amend the jurisdictional allegations in the complaint to clarify the nature and extent of Bock's involvement in the purported scheme to defraud plaintiffs and how it connected him to the forum.
For the reasons stated, the court grants BofA's motion to dismiss the complaint for failure to state a claim on which relief can be granted. The court also grants Bock's motion to dismiss for lack of personal jurisdiction. Dismissal is with leave to amend. See In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005) ("Dismissal without leave to amend is improper unless it is clear . . . that the complaint could not be saved by any amendment"); California ex rel. California Department of Toxic Substances Control v. Neville Chemical Co., 358 F.3d 661, 673 (9th Cir. 2004) ("[D]enial of leave to amend is appropriate if the amendment would be futile," citing Foman v. Davis, 371 U.S. 178, 182 (1962)). Plaintiffs may file an amended complaint within twenty (20) days of the date of this order if they are able to remedy the deficiencies in the claims and jurisdictional allegations the court has noted.
Plaintiffs may not plead additional claims, add additional parties, or add allegations that are not intended to cure the specific defects the court has noted. Should any amended complaint exceed the scope of leave to amend granted by this order, the court will strike the offending portions under Rule 12(f). See FED.R.CIV.PROC. 12(f) ("The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act: (1) on its own; or (2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading."); see also Barker v. Avila, No. 2:09-cv-00001-GEB-JFM, 2010 WL 3171067, *1-2 (E.D. Cal. Aug. 11, 2010) (striking an amendment to federal law claim where the court had granted leave to amend only state law claims).
