Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_08-cv-01064/USCOURTS-cand-3_08-cv-01064-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SHARTSIS FRIESE LLP,

Plaintiff,

 v.

JP MORGAN RETIREMENT SERVICES, LLC

dba JP MORGAN COMPENSATION AND

BENEFIT STRATEGIES as Successor in

Interest of CCA STRATEGIES LLC and

CHICAGO CONSULTING ACTUARIES, LLC

and DOES 1-10,

Defendants.

 

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Case No. 08-1064 SC

ORDER GRANTING IN

PART AND DENYING IN

PART DEFENDANTS'

MOTION TO DISMISS

I. INTRODUCTION

This matter comes before the Court on the Motion to Dismiss

("Motion") filed by the defendants JP Morgan Retirement Services,

LLC, dba JP Morgan Compensation and Benefit Strategies ("JP

Morgan"), as successor in interest to CCA Strategies LLC and

Chicago Consulting Actuaries LLC ("CCA") (collectively

"Defendants" or "JP Morgan"). Docket No. 20. The plaintiff

Shartsis Friese LLP ("Plaintiff" or "SF") submitted an Opposition

and Defendants filed a Reply. Docket Nos. 24, 25. For the

reasons stated herein, Defendants' Motion is GRANTED IN PART and

DENIED IN PART.

Case 3:08-cv-01064-SC Document 34 Filed 08/01/08 Page 1 of 8
United States District Court

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II. BACKGROUND

According to the First Amended Complaint ("FAC"), SF is a

limited liability partnership constituted for the practice of law

and headquartered in San Francisco. FAC, Docket No. 17, ¶ 1. 

Defendant JP Morgan is the successor in interest of CCA and

acquired CCA in approximately November 2006. Id. ¶¶ 2, 3. CCA,

as a business, provided consulting, administrative and actuarial

services and advice in connection with, among other things,

retirement plans, including profit sharing and 401(k) plans. Id.

¶ 2. SF is the sponsor and serves as administrator of the

Shartsis, Friese & Ginsburg LLP Profit Sharing/401(k) Plan ("the

Plan"). Id. ¶ 6. Beginning February 2001, and lasting through

October 2006, SF retained CCA to assist in the administration of

the Plan by providing necessary computations, allocations and

related consulting services. Id. In particular, CCA was retained

by SF to advise it regarding the optimum manner in which SF could

maximize its partners' contributions to the Plan, minimize costs

to SF, and remain in compliance with the applicable laws. Id. ¶¶

6-8.

According to the agreement between SF and CCA, CCA

representative Tim Mahannah ("Mahannah") provided SF with the

specific amounts for partner and non-partner contributions to the

Plan, as well as computations, valuations, and compliance testing. 

Id. ¶¶ 8-9. Mahannah represented to SF that the specific

contributions and allocations he directed be made by SF and its

partners to the Plan from 2000 through 2005 were consistent with

the Plan. Id. As it turns out, however, Mahannah's advice and

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directions were not in accordance with the Plan's allocation

formula and the contributions were therefore not in compliance

with the applicable law. Id. ¶ 10. As a result, the Plan has

lost or will lose its tax-favored exempt status unless corrective

action acceptable to the IRS is taken. Id. ¶ 11. Loss of the

Plan's tax-favored status may have significant financial

implications for SF and all of the Plan participants, and may

result in substantial loss of retirement benefits for partners and

other Plan participants. Id. As a result, SF filed the instant

action against JP Morgan, alleging breach of oral contract,

negligence, negligent representation, breach of fiduciary duty,

and declaratory relief. Id. ¶¶ 15-36. Defendants now move to

dismiss SF's claims for negligent representation and breach of

fiduciary duty. 

III. DISCUSSION

A. Legal Standard

A Federal Rule of Civil Procedure 12(b)(6) motion to dismiss

tests the sufficiency of the complaint. Dismissal pursuant to

Rule 12(b)(6) is appropriate if the plaintiff is unable to

articulate "enough facts to state a claim to relief that is

plausible on its face." Bell Atl. Corp. v. Twombly, 127 S. Ct.

1955, 1974 (2007). For purposes of such a motion, the complaint

is construed in the light most favorable to the plaintiff and all

properly pleaded factual allegations are taken as true. Jenkins

v. McKeithen, 395 U.S. 411, 421 (1969); Everest & Jennings, Inc.

v. Am. Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir. 1994). All

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reasonable inferences are to be drawn in favor of the plaintiff. 

Id. Unreasonable inferences or conclusory legal allegations cast

in the form of factual allegations, however, are insufficient to

defeat a motion to dismiss. W. Mining Council v. Watt, 643 F.2d

618, 624 (9th Cir. 1981).

B. Analysis

1. Negligent Representation

Defendants assert various theories for why Plaintiff's

negligent representation claim is defective. The Court addresses

each in turn.

a. Rule 9(b) Particularity

The parties dispute whether Rule 9(b)'s heightened pleading

requirement applies to claims for negligent misrepresentation. 

Although Plaintiff's position that Rule 9(b) does not apply finds

some support in this Circuit, see, e.g., In Re Heritage Bond

Litigation, 289 F. Supp. 2d 1132 (C.D. Cal. 2003); Mills v. Ramona

Tire, Inc., No. 07-0052, 2007 WL 4277537, at *3(S.D. Cal. Dec. 5,

2007) (stating "Rule 9(b) ordinarily would not apply to a claim

for negligent misrepresentation"), the majority of the district

courts in this Circuit who have addressed this issue have held

that negligent misrepresentation claims are in fact subject to

Rule 9(b)'s heightened pleading requirements. See Deitz v.

Comcast Corp., No. 06-6352, 2006 WL 3782902, at *6 (N.D. Cal. Dec.

21, 2006) (collecting cases). Nonetheless, the Court need not

decide this issue because even assuming, arguendo, that claims for

negligent misrepresentation must meet the heightened pleading

standard of Rule 9(b), Plaintiff has satisfied that burden.

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Rule 9(b) requires that "[i]n alleging fraud or mistake, a

party must state with particularity the circumstances constituting

fraud or mistake." Fed. R. Civ. P. 9(b). A pleading is

sufficient under Rule 9(b) if it identifies the circumstances

constituting fraud so that the defendant can prepare an adequate

answer from the allegations. Neubronner v. Milken, 6 F.3d 666,

671 (9th Cir. 1993). In addition, allegations of fraud must be

accompanied by "the who, what, when, where, and how of the

misconduct charged." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,

1106 (9th Cir. 2003).

In the FAC, SF alleges that in March 2001, Mahannah

represented in writing to SF employee Susan Wallin the "specific

amount each partner at SF could contribute to the Plan [for the

year 2000] with the knowledge and expectation that she would

communicate that amount to SF's partners and that they would rely

on it." FAC ¶ 27. SF further alleges that "Mahannah represented

in writing the specific maximum amount each partner could

contribute to the Plan each year thereafter for Plan years 2001,

2002, 2003, 2004 and 2005 in or about March of the succeeding year

. . . ." Id. These allegations are more than enough to put

Defendants on notice and permit them to prepare an adequate

answer. See Neubronner, 6 F.3d at 671. In addition, the

allegations describe the "who, what, when, where and how of the

misconduct charged." Vess, 317 F.3d at 1106. Accordingly, SF's

claim for negligent misrepresentation survives Defendants' Rule

9(b) challenge.

///

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b. Reliance

Defendants also argue that SF has failed to allege sufficient

facts to demonstrate that SF justifiably relied on CCA's

representations. In support of this argument, Defendants assert

that because SF was acting as one of the Plan's fiduciaries

pursuant to the Employee Retirement Income Security Act ("ERISA"),

29 U.S.C. § 1101 et seq., SF "cannot reasonably argue that it was

so ignorant of the Plan's provisions that it was unable to

determine if, on their face, CCA's recommendations were in

accordance with the Plan." Mot. at 8. 

As SF's FAC makes clear, SF retained CCA for the express

purpose of providing SF with expert advice regarding the maximum

contributions that legally could be made to the Plan. Although

SF, as a fiduciary, was required to discharge its duties "in

accordance with the documents and instruments governing the plan

insofar as such documents and instruments are consistent with the

provisions of" ERISA, 29 U.S.C. § 1104(a)(1)(D), the level of care

and skill SF was required to use was that of "a prudent man acting

in a like capacity and familiar with such matters . . . ." Id. §

1104(a)(1)(B). In light of these standards and the facts alleged

in the FAC, the Court finds that SF sufficiently alleged

justifiable reliance for its negligent misrepresentation claim. 

Defendants' remaining arguments in support of its Motion to

Dismiss SF's negligent misrepresentation claim are equally

unavailing and the Motion with respect to this claim is DENIED.

///

///

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2. Breach of Fiduciary Duty

Defendants also move to dismiss SF's claim for breach of

fiduciary duty. "A fiduciary relationship is any relation

existing between parties to a transaction wherein one of the

parties is [] duty bound to act with the utmost good faith for the

benefit of the other party." Wolf v. Super. Ct., 107 Cal. App.

4th 25, 30 (Ct. App. 2003) (internal quotation marks omitted). 

Such a relation ordinarily arises "when confidence is reposed by

persons in the integrity of others, and if the latter voluntarily

accepts or assumes to accept the confidence, he or she may not act

so as to take advantage of the other's interest without that

person's knowledge or consent." Pierce v. Lyman, 1 Cal. App. 4th

1093, 1101-02 (Ct. App. 1991). "Traditional examples of fiduciary

relationships in the commercial context include

trustee/beneficiary, directors and majority shareholders of a

corporation, business partners, joint adventurers, and

agent/principal." Wolf, 107 Cal. App. 4th at 30. Furthermore,

"California law is that parties to a contract, by that fact alone,

have no fiduciary duties toward one another." Rickel v. Schwinn

Bicycle Co., 144 Cal. App. 3d 648, 655 (Ct. App. 1983).

In the instant action, SF has failed to allege "enough facts

to state a claim to relief that is plausible on its face" for

breach of a fiduciary duty. Twombly, 127 S. Ct. at 1974. SF has

not pled facts that would give rise to any of the traditional

fiduciary relationships. Nor has SF provided a plausible

alternative theory under which CCA would owe SF a fiduciary duty. 

Defendants' Motion to Dismiss this claim is therefore GRANTED. As

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it is unclear whether amendment may cure this defect, this claim

is dismissed without prejudice and SF may amend said claim within

30 days.

 

IV. CONCLUSION

For the reasons stated above, the Court GRANTS in part and

DENIES in part Defendants' Motion to Dismiss. With respect to

SF's claim for negligent misrepresentation, Defendants' Motion is

DENIED. With respect to SF's claim for breach of fiduciary duty,

Defendants' Motion is GRANTED without prejudice and SF may file an

amended claim within 30 days.

IT IS SO ORDERED.

Dated: August 1, 2008

 

UNITED STATES DISTRICT JUDGE

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