Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_03-cv-03815/USCOURTS-cand-4_03-cv-03815-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MJT SECURITIES, LLC,

Plaintiff,

v.

THE TORONTO-DOMINION BANK; TD

OPTIONS, LLC; and DOES 1 through 25,

Defendants.

 /

No. C 03-3815 CW

ORDER GRANTING

DEFENDANTS'

MOTION FOR

SUMMARY JUDGMENT 

Defendants The Toronto-Dominion Bank (TD Bank) and TD Options,

LLC move for summary judgment on the sole remaining cause of action

and the sole remaining remedy in this case. Plaintiff MJT

Securities, LLC opposes the motion. The matter was heard on

May 10, 2007. Having considered the parties' papers, the evidence

cited therein and oral argument, the Court grants Defendants'

motion. 

BACKGROUND

Market-making is one form of options trading; it involves the

buying and selling of option contracts, or issues, in the stocks of

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particular companies. During the relevant time, there were four

trading floors where issues were traded: the Chicago Board Options

Exchange (CBOE), the American Stock Exchange (AMEX) in New York,

the Philadelphia Stock Exchange (PHLX) and the Pacific Exchange

(PCX). Issues were routinely listed on multiple exchanges. This

created competition for "order flow," which refers to the volume of

options contracts sent to market makers from order flow providers

such as Charles Schwab and other brokers. To attract order flow to

their respective exchanges, the exchanges designated for each issue

a lead market maker (LMM), also called a designated primary market

maker or specialist. The appointed LMM would have certain

obligations to provide liquidity in the market and certain rights

to a percentage of the order flow; ordinary market makers did not

have these rights and obligations. Depending on market conditions

and the skill of the trader, an LMM could make higher profits, and

incur great losses, than an ordinary market maker. 

MJT, an options trading business on the Pacific Exchange, was

founded over a decade ago. Its principals are L. Matthew Adams and

John Brown. In 1998, the PCX appointed MJT as a LMM. The PCX

later allocated a significant number of issues to MJT.

MJT had a very good year in 1999. But the next year it was

losing millions of dollars. By September, 2000, it had lost

between five to ten million dollars. It was concerned that, if it

did not find a joint venture partner, it might have to shut down as

a LMM. 

On September 15, 2000, MJT entered into a joint venture

agreement with JSS Investments, LLC, which agreed to contribute

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needed capital. The agreement transferred the MJT LMM to a joint

venture owned seventy percent by JSS and thirty percent by MJT. It

further provided that JSS could sell the joint venture's LMM

without MJT's approval or consent and would pay MJT an amount equal

to thirty percent of the gross sale proceeds. If JSS chose to

terminate its relationship with MJT and continue to operate the

LMM, JSS would pay MJT thirty percent of the fair market value of

the LMM, as mutually agreed between the parties. 

The joint venture was not profitable. It is undisputed that

between October, 2000 and May, 2001, the joint venture lost

thirteen million dollars. In response, JSS removed both Brown and

Adams from the trading floor. Brown states that, in June, 2001,

JSS effectively banned MJT from any role in the operation or

management of the LMM or the joint venture. 

During this same period, TD Bank was exploring potential

opportunities for United States listed option trading businesses. 

According to an internal memorandum:

Establishing a U.S. listed option market making capability

will ensure that TD Bank Financial Group is well positioned to

maximize the value of its existing and future listed option

flow. In addition, given the inefficiencies that continue to

exist in the listed option market and recent regulatory

changes, a technology based market making platform could

result in a compelling value proposition for TD as a

standalone business. . . . The main objective of adding a

market making capability is to maximize the value of TD

Waterhouse's listed option flow.

Cialone Dec., Ex. 11. 

In particular, it considered acquiring JSS and The LETCO

Group. TD Bank states that JSS's technology was the principal

drive behind its eventual acquisition of JSS because it believed

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that the technology would offer a long-term competitive advantage

in options trading. TD Bank's internal deal summaries show that

JSS's technology was the most attractive part of JSS's business,

more attractive than JSS's on-floor market making. 

Nonetheless, JSS, like LETCO, had a strong presence on the

CBOE and AMEX, the national exchanges with the most profitable

order flow. The PCX and PHLX were regarded as smaller, regional

exchanges with lower volume. Fourteen of the eighteen LMMs that TD

Bank anticipated acquiring from JSS and LETCO were on the CBOE and

AMEX. TD Bank believed that the trading revenue generated by order

flow on the CBOE and AMEX would be the foundation of its marketmaking business. To eliminate any overlapping issues on the

different exchanges, TD Bank generally planned to keep the issues

on the CBOE and AMEX and trade away the issues on the PCX and PHLX. 

Thus, TD Bank planned to keep LETCO's Worldcom issue on the CBOE

and not MJT's Worldcom issue on the PCX. 

As part of the potential acquisition, JSS provided TD Bank

information about its business and financial results for its

various market makers, including MJT. One document stated that the

MJT LMM had lost $1.2 million in 2000, but its earning were

expected to escalate to three million dollars in 2001. Another

document, entitled "Explanation of San Francisco DPM (MJT)," stated

that MJT's trading resulted in over six million dollars in losses

in January and February, 2001, but that this "unfortunate

situation" was now under control. Sommer Dec., Ex. 12. 

TD Bank created its own forecast based on the information that

JSS provided, which included a footnote stating that excluded from

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the 2001 projections was a "one time loss on PCX of $6.8 million." 

Although TD Bank was concerned about the MJT LMM losses, it could

shut down the LMM if the losses continued post-acquisition.

While TD Bank was negotiating with JSS and LETCO, JSS's

relationship with MJT continued to deteriorate. In August, 2001,

MJT sent a letter to John S. Stafford, the managing member of JSS,

that stated that JSS's actions constituted a constructive

termination and repudiation of the joint venture agreement. It

demanded that, pursuant to the LMM, JSS pay it an amount equal to

thirty percent of the fair market value of the LMM as of June 7,

2001. JSS responded a week later and rejected MJT's demand that it

be compensated, contending that the joint venture had not been

terminated, constructively or otherwise. In addition, JSS informed

MJT that it was beginning arbitration proceedings against it to

collect $414,785.72. In September, 2001, MJT filed counterclaims

in that arbitration, contending that JSS had terminated the joint

venture agreement on May 18, 2001, the date that JSS prevented

Brown and Adams from participating in the joint venture, and

further that JSS breached its fiduciary duty and the duty of good

faith and fair dealing.

On December 3, 2001, MJT's counsel sent a letter again

asserting that JSS's actions were consistent with a termination of

the joint venture agreement. The letter noted that MJT was aware

that JSS and TD Bank were meeting to discuss the acquisition of the

LMM owned by JSS and MJT and requested that MJT have an opportunity

to meet with representatives of TD Bank and LETCO. JSS's attorneys

responded that, although they would inform MJT about any ultimate

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resolution of the negotiations involving the LMM, it was not

appropriate for MJT to be involved with the discussions. MJT never

met with anyone from TD Bank or LETCO, nor did it contact TD Bank

or have any involvement in the acquisition of the LMM.

That same day, TD Bank's counsel sent an email to JSS's

counsel summarizing TD Bank's understanding with respect to MJT and

other market makers that were to be sold as part of the JSS sale. 

TD Bank's understanding with respect to MJT was as follows:

M.J.T. Securities transferred its PCX LMM appointment to JSS

in late 2000 pursuant to a joint venture agreement under which

M.J.T. retained a P&L split. The joint venture was terminated

by JSS in May 2001 because of significant trading losses. JSS

has commenced an arbitration against M.J.T. in respect to the

losses. M.J.T. has counterclaimed for defamation and breach

of fair dealing. The hearing will likely occur in the summer

or fall of 2002. The Sellers to retain the losses, and

indemnify TD Option. . . . Notwithstanding termination of the

joint venture, the LMM appointment remains with JSS. Under

the agreement, JSS is to pay M.J.T. 30% of the gross proceeds

from a sale of the Specialist unit. We understand that the

Sellers will determine the allocation of purchase price to

this Specialist unit and 30% of this allocation is, therefore,

for the account of M.J.T. The Sellers intend to offset

against this amount an equivalent amount of M.J.T.'s

outstanding liability for the trading losses.

Cialone Dec., Ex. 15.

The next day, JSS's counsel responded:

Correct, with the following exceptions: The joint venture has

not been terminated by JSS. Rather in May, 2001, Brown and

Adams, the Principals of MJT, were relieved of their trading

responsibilities. JSS has carefully avoided terminating the

Joint Venture Agreement. MJT claims, in the arbitration

proceeding, that JSS has "constructively terminated" the Joint

Venture Agreement, and we disagree. 

Id. at Ex. 16.

TD Bank then responded that it thought "that the situation

would be much cleaner if the joint venture was terminated." Id. 

But, given JSS's response, it assumed "that there are reasons why

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this has not been done." Id. TD asked JSS to explain why

termination would not be desirable. Id. 

On December 12, 2001, JSS's counsel sent an email to TD Bank's

counsel informing him that, since they had talked two days before,

he had talked with JSS concerning TD Bank's preference that the

joint venture agreement between JSS and MJT be terminated prior to

the JSS-TD Bank transaction. Cialone Dec., Ex. 18. He expounded,

If we sell the LMM, in a separate transaction to TD (or a TD

affiliated designated by TD) for the sum of $500,000, then JSS

would owe 30% of that amount or $150,000 to MJT, which we

would acknowledge . . . . The overall purchase price paid by

TD in acquiring the Stafford entities would be reduced by a

corresponding $500,000. Based upon information we are

receiving of recent transactions involving the purchase and

sale of LMMs on the PCX, we believe this valuation is very

supportable and, in fact, an argument could be made that it

should be less, but in order to avoid any disagreement with

MJT in the arbitration we are willing to be as fair as

possible in determining its value of $500,000. We have asked

the head of our San Francesco office to contact the PCX and do

an analysis of recent purchases/sales of LMMs, get the

details, so we can assemble data that will assist in

determination of fair market value for our LMM. 

What we would propose is a separate purchase agreement . . .

with which the exchange staff and legal department are very

familiar and routinely approve. John Jr. feels it would be

important to sign and close this transaction prior to closing

the overall transaction with TD, and if for some reason the

overall transaction does not close, we could provide comfort

in some fashion to TD that we would repurchase the LMM, so TD

is not stuck with a single LMM.

Id. 

At some point during the process, Evan Kimmel, now the

president of TD Options, jotted down notes from what appears to be

a conversation with JSS's attorney concerning MJT. The note

states: "Jason: something . $500K for the PCX." Cialone Dec., Ex.

24. Mr. Kimmel explained that he wrote the note because it was the

first time he heard the $500,000 figure and he needed to bring it

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the attention of Jason Marks, the "decision-maker." Id. at Ex. 3,

18:7-19:7. Also included on his notes, with a circled star next to

it: "How best to determine the value of the LMM??" Id.

On December 21, 2001, TD Bank and JSS signed a Master Purchase

Agreement, which provides:

Before the Closing Date, JSS shall cause the Joint Venture

Agreement made September 15, 2000 ("the MJT JV Agreement") by

and between JSS and M.J.T. Securities, L.L.C. ("MJT") to be

terminated, either through a sale of the subject Lead Market

Maker business to Buyer [TD Bank] or by voluntary termination

thereunder. At the request of JSS, Buyer shall negotiate,

both JSS and Buyer acting reasonably and in good faith, an

agreement to purchase the subject Lead Market Maker business

(the "LMM Purchase Agreement") at a fair market value which

shall be mutually agreed upon by Buyer and JSS before the

Closing Date. 

Cialone Dec., Ex. 20. The language "at a fair market value which

shall be mutually agreed upon by Buyer and JSS" did not appear in

the original draft; JSS's lawyers requested that the language be

added and it was.

TD Bank signed a similar Master Purchase Agreement with LETCO

that same day. The JSS purchase price was over $100 million; the

combined price for both entities exceeded $200 million. In

reaching the purchase prices, TD Bank evaluated the acquired

businesses as a whole and did not break the businesses into

components. Nonetheless, TD Bank negotiated a reduction in price

with both JSS and LETCO after several of their market makers

declined to participate in the proposed acquisition. For example,

TD Bank initially calculated that the entities it would acquire

from JSS would provide coverage of thirty-one percent of TD

Waterhouse's order flow. After AGS, a lead market maker on the

AMEX, declined to participate, JSS's coverage dropped to nineteen

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percent. JSS proposed to reduce the amount TD Bank paid to JSS by

over twenty million dollars, nearly two million dollar per

percentage point of coverage. TD Bank reduced the price even more,

which reflected its view that coverage on the AMEX was worth a

premium. Likewise, TD Bank reduced its offered price for LETCO by

about two million for each percentage point of coverage lost after

two of LETCO's market markers refused to participate in the deal.

On February 27, 2002, TD Options, a subsidiary of TD Bank,

bought the MJT LMM for $500,000. The $500,000 figure was mutually

agreed upon by TD Bank and JSS. TD Banks's corporate

representative, Jason Marks, did a "sanity check" on JSS's proposed

price of $500,000. He knew that JSS had acquired good listings

from a trading group for nothing more than the cost of employment

contracts for the traders and that another company sold its issues

for $10,000 each. MJT had fifty-one issues that were being

transferred to TD Bank. Thus, TD Bank concluded that the $500,000

was reasonable. However, TD Bank was also aware that, a couple

months earlier, LETCO had valued the LETCO Omega LMM, which was

similar to the MJT LMM, at nearly $4.2 million and another PCX

market maker at nearly $8.4 million. Further, TD Bank was aware

that, in 2000, MJT provided at least 2.14 percent coverage,

although that number dropped to 1.07 percent in 2001. And one of

TD Bank's documents purported that the MJT LMM was worth over eight

million dollars. 

TD Bank acknowledges that it did not perform an individual

valuation of the MJT LMM; rather, it relied on its knowledge of

issues being sold for $10,000 each and JSS's representation that

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the amount was fair. It notes that, prior to acquiring the LMM, TD

Bank had never traded on the PCX and that it could not obtain data

regarding comparable sales from the PCX because such information is

not publicly reported. Therefore, it relied on JSS and LETCO to

put a price tag on their LMMs.

That same day, JSS sent MJT a letter informing it that JSS had

sold the LMM to TD Options for $500,000 and, therefore, with the

closing of the sale, which was expected later that week, the joint

venture agreement was terminated. Upon closing, JSS would hold

$150,000, or thirty percent of the purchase price, in escrow

pending the final resolution of the arbitration proceedings. 

Before JSS sent the letter to MJT, it sent a draft to TD Bank,

which made a few minor changes to the letter. 

The following day, JSS merged into TD Options. 

Shortly thereafter, MJT instituted a new counterclaim in the

arbitration with JSS, contending that the $500,000 allegedly paid

by TD Options for the MJT LMM was unfair. During arbitration

proceedings, MJT introduced testimony from a valuation expert that

its LMM was worth seven to ten million dollars. Guy Leung, a

thirty percent owner of a PCX LMM, which had approximately sixty

issues and which was sold as part of the LETCO transaction,

testified that he received $1.25 million for his thirty percent

interest. 

Throughout the arbitration, JSS took the position that

termination of the joint venture did not occur until the MJT LMM

was sold to TD Options in February, 2002. MJT, however, argued

that the termination occurred in May, 2001. Brown testified that

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1MJT now states that the joint venture agreement "was

terminated coincidentally with the closing of the sale of the LMM,

in accordance with the February 27, 2002 letter." Sommer Dec.,

Ex. 16 at 5.

11

he had no role in the joint venture after May 18, 2000. And, in

its closing argument, MJT argued to the panel that it should award

MJT thirty percent of the fair market value of the LMM "as of the

time of termination, May 18, 2001; or if you find that there wasn't

a constructive termination, as of December of 2001." Sommer Dec.,

Ex. 6 at 154.1 

In March, 2003, the arbitration panel issued its written

decision awarding MJT $1,200,000 for its counterclaims; JSS

received nothing for its claims. The panel did not explain its

decision. 

In July, 2003, MJT filed this suit. Approximately a year

later, the Court dismissed with prejudice MJT's first amended

complaint. MJT appealed. The Ninth Circuit affirmed the Court's

ruling that MJT could not state a claim for interference or seek

attorneys' fees, but it reversed the Court's ruling that MJT failed

to plead a cause of action for aiding and abetting a fiduciary's

breach of trust and remanded for further proceedings.

LEGAL STANDARD

Summary judgment is properly granted when no genuine and

disputed issues of material fact remain, and when, viewing the

evidence most favorably to the non-moving party, the movant is

clearly entitled to prevail as a matter of law. Fed. R. Civ.

P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);

Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.

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1987).

The moving party bears the burden of showing that there is no

material factual dispute. Therefore, the court must regard as true

the opposing party's evidence, if supported by affidavits or other

evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815

F.2d at 1289. The court must draw all reasonable inferences in

favor of the party against whom summary judgment is sought. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d

1551, 1558 (9th Cir. 1991). 

Material facts which would preclude entry of summary judgment

are those which, under applicable substantive law, may affect the

outcome of the case. The substantive law will identify which facts

are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).

Where the moving party does not bear the burden of proof on an

issue at trial, the moving party may discharge its burden of

production by either of two methods. Nissan Fire & Marine Ins.

Co., Ltd., v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir.

2000). 

The moving party may produce evidence negating an

essential element of the nonmoving party’s case, or,

after suitable discovery, the moving party may show that

the nonmoving party does not have enough evidence of an

essential element of its claim or defense to carry its

ultimate burden of persuasion at trial. 

Id. 

If the moving party discharges its burden by showing an

absence of evidence to support an essential element of a claim or

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defense, it is not required to produce evidence showing the absence

of a material fact on such issues, or to support its motion with

evidence negating the non-moving party's claim. Id.; see also

Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885 (1990); Bhan v.

NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991). If the

moving party shows an absence of evidence to support the non-moving

party's case, the burden then shifts to the non-moving party to

produce "specific evidence, through affidavits or admissible

discovery material, to show that the dispute exists." Bhan, 929

F.2d at 1409. 

If the moving party discharges its burden by negating an

essential element of the non-moving party’s claim or defense, it

must produce affirmative evidence of such negation. Nissan, 210

F.3d at 1105. If the moving party produces such evidence, the

burden then shifts to the non-moving party to produce specific

evidence to show that a dispute of material fact exists. Id.

If the moving party does not meet its initial burden of

production by either method, the non-moving party is under no

obligation to offer any evidence in support of its opposition. Id.

This is true even though the non-moving party bears the ultimate

burden of persuasion at trial. Id. at 1107.

DISCUSSION

Defendants move for summary judgment on MJT's remaining cause

of action, aiding and abetting a breach of fiduciary duty, and its

remaining remedy, punitive damages. MJT contends that sale of the

LMM to TD Options was a sham transaction and that TD Banks knew

that, and knew that JSS had a fiduciary duty to MJT, but

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nonetheless helped JSS breach its duty by going along with the sham

transaction.

I. Aiding and Abetting Breach of Fiduciary Duty

To prove aiding and abetting a breach of fiduciary duty, the

plaintiff must first establish an underlying breach of fiduciary

duty. Then the plaintiff must show (1) the aider and abettor's

substantial assistance or encouragement in accomplishing the breach

of fiduciary duty and (2) the aider and abettor's actual knowledge

of that breach that the aider and abetter substantially assisted. 

See Casey v. U.S. Bank National Ass'n, 127 Cal. App. 4th 1138,

1444, 1448 (2005). Defendants contend that there is no genuine

issue of material fact as to any of those three elements and,

therefore, they are entitled to judgment as a matter of law.

There is no dispute that MJT and JSS, as joint venture

partners, were in a fiduciary relationship. But the parties

dispute whether they remained in a fiduciary relationship at the

time of the sale of the LMM to TD Options. Defendants point to

MJT's previous insistence that the joint venture agreement was

terminated in May or June, 2000. They contend that, as a matter of

law, JSS had no fiduciary duty to pay MJT thirty percent of the

sale proceeds of the LMM over half a year after termination of the

joint venture agreement and, therefore, they could not have aided

and abetted a breach of any such duty. 

MJT responds that Defendants mistakenly rely on the

"irrelevant fact" that in arbitration it argued that the joint

venture was constructively terminated in May, 2001. It notes that

it is not judicially estopped from taking an inconsistent position

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in this litigation. See Interstate Fire & Cas. Co. v. Underwriters

at Lloyds, London, 139 F.3d 1234, 1239 (9th Cir. 1998) ("Judicial

estoppel precludes a party from taking inconsistent positions in

the same litigation."). And it points to facts that it contends

establish a disputed fact as to when the joint venture was

terminated: in December, 2001, JSS informed TD Bank that, contrary

to TD Bank's understanding, JSS had "carefully avoided" terminating

the joint venture, and TD Bank assisted JSS in drafting the

February 27, 2002 termination letter. Nonetheless, although it

contends that the joint venture agreement was "actually terminated"

when JSS sent the termination letter, it concedes that the joint

venture was "constructively terminated" in May, 2001.

MJT may not be estopped from arguing inconsistent positions,

but its statement in its opposition brief that the joint venture

agreement was constructively terminated in May, 2001, is an

admission of a party and supported by undisputed facts. American

Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 227 (9th Cir. 1988)

("statements of fact contained in a brief may be considered

admissions of the party in the discretion of the district court"). 

MJT fails to provide any authority to support its distinction

between "constructive termination" and "actual termination." And

the arguments it made in arbitration, such as that the law looks on

constructive termination as a termination, support the conclusion

that any distinction is not relevant in this case. 

The Court finds that the undisputed facts show that the joint

venture agreement was terminated months before the sale of the LMM

and, therefore, JSS did not breach any fiduciary duty to MJT. 

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2Section 3294(c) provides:

(1) “Malice” means conduct which is intended by the defendant

to cause injury to the plaintiff or despicable conduct which

is carried on by the defendant with a willful and conscious

disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a

person to cruel and unjust hardship in conscious disregard of

that person's rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or

concealment of a material fact known to the defendant with the

intention on the part of the defendant of thereby depriving a

person of property or legal rights or otherwise causing

injury.

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Because there is no underlying breach of fiduciary duty, MJT's

aiding and abetting claim fails as a matter of law. Therefore, the 

Court need not examine the other elements of MJT's claim. Summary

judgment in favor of Defendants is granted. 

II. Punitive Damages

California law provides punitive damages only in limited

circumstances to discourage oppression, fraud, or malice by

punishing the wrongdoer. See Cal. Civ. Code § 3294; In re First

Alliance Mortgage Co., 471 F.3d 977, 998 (9th Cir. 2006). Punitive

damages are appropriate only where a plaintiff establishes by clear

and convincing evidence that the defendant is guilty of (1) fraud,

(2) oppression or (3) malice. Cal. Civ. Code § 3294(a).2

 Further,

a plaintiff may not recover punitive damages unless the defendant

acted with intent or engaged in “despicable conduct.” Cal. Civ.

Code § 3294(c). A California court instructs, “The adjective

‘despicable’ connotes conduct that is so vile, base, contemptible,

miserable, wretched or loathsome that it would be looked down upon

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and despised by ordinary decent people.” Lackner v. North, 135

Cal. App. 4th 1188, 1210 (2006) (internal quotation marks and

citations omitted). 

As explained in In re First Alliance Mortgage Co., "Some

limited weighing of the evidence is a natural component of

determining whether a jury could have reasonably found punitive

damages appropriate under the heightened clear and convincing

evidence standard." 471 F.3d at 998-99 (citing Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 254-55 (1986)). Here, viewing the

evidence in the light most favorable to MJT, and assuming the joint

venture had not been terminated, the Court concludes that a

reasonable juror could not find, by clear and convincing evidence,

grounds on which to award punitive damages.

 Defendants reliance on In re JTS Corp., 305 B.R. 529 (N.D.

Cal. 2003), is misplaced. There, the court denied summary judgment

even though the evidence to support punitive damages was "not

strong" because the defendant in that case was a director and

fiduciary of the company who tried to get relief from personal debt

when the company was insolvent. Defendants are not, and have never

been, the fiduciary of MJT. Although the evidence MJT provides may

be sufficient to support a punitive damages claim against JSS, it

is not sufficient to support a punitive damages claim against

Defendants. See In re First Alliance Mortgage Co., 2003 WL

21530096, *11 (C.D. Cal.) (finding that punitive damages may be

appropriate against mortgage lender who owed duty to its borrowers,

but not against alleged aider and abettor). 

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3

Defendants' requests for judicial notice (Docket Nos. 128 and

144) are also GRANTED.

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CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants' motion

for summary judgment (Docket No. 120).3 Judgment in favor of

Defendants shall enter accordingly. Defendants shall recover their

costs from Plaintiff. 

IT IS SO ORDERED.

Dated: 6/14/07 

CLAUDIA WILKEN

United States District Judge

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