Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-00907/USCOURTS-caed-2_06-cv-00907-7/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

PENSION TRUST FUND FOR

OPERATING ENGINEERS LOCAL 3;

BOARD OF TRUSTEES OF THE

PENSION TRUST FUND FOR

OPERATING ENGINEERS LOCAL 3;

GIL CROSTHWAITE; ROBERT DOUB;

THOMAS HOLSMAN; JOHN HUMBER;

JIM MURRAY; RICHARD PIOMBO;

RENE VERERUYSSEN; KEN WALTERS;

LANCE WILHELM; RUSS BURNS;

CARL GOFF; FRANK HERRERA;

ROBERT T. MILLER; WALT POWERS;

JOE VIEIRA; and ROB WISE;

NO. CIV. S-06-904 WBS JFM

NO. CIV. S-06-905 WBS JFM 

 Plaintiffs, NO. CIV. S-06-907 WBS JFM

v. ORDER RE: MOTIONS TO DISMISS,

MOTIONS TO STRIKE, & MOTION

FOR A MORE DEFINITE STATEMENT

MCMORGAN & COMPANY; MCMORGAN &

COMPANY, LLC; STANTON, KAY &

WATSON; WEINBERG, ROGER &

ROSENFELD; VAN BOURG, ROGER &

ROSENFELD; JAMES WATSON; BARRY

HINKLE; EDWARD MEVI; DAVID

HOWARD; PAYNE, THOMPSON,

WALKER & TAAFFE; JOHN BONILLA;

CURTIS BROOKS; and DOES 1 TO

100, INCLUSIVE;

Defendants.

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2

 

PENSION TRUST FUND FOR OPERATING

ENGINEERS LOCAL 3; BOARD OF 

TRUSTEES OF THE PENSION

TRUST FUND FOR OPERATING 

ENGINEERS LOCAL 3; JOHN BONILLA;

RUSS BURNS; GIL CROSTHWAITE;

ROBERT DOUB; CARL GOFF;

FRANK HERRERA; THOMAS HOLSMAN;

JOHN HUMBER; ROBERT T. MILLER;

JIM MURRAY; RICHARD PIOMBO;

WALT POWERS; RENE VERERUYSSEN; 

JOE VIEIRA; KEN WALTERS; LANCE

WILHELM; and ROB WISE; 

Plaintiffs.

v.

MCMORGAN & COMPANY, LLC; BARRY

HINKLE; DAVID HOWARD; EDWARD 

MEVI; PAYNE, THOMPSON, WALKER, 

& TAAFE; STANTON, KAY, & 

WATSON; VAN BOURG, WEINBERG, 

ROGER & ROSENFELD; JAMES WATSON;

WEINBERG, ROGER & ROSENFELD; and 

DOES 1 TO 100, INCLUSIVE;

Defendants.

 

PENSION TRUST FUND FOR OPERATING 

ENGINEERS LOCAL 3; BOARD OF 

TRUSTEES OF THE PENSION TRUST 

FUND FOR OPERATING ENGINEERS 

LOCAL 3; JOHN BONILLA; CURTIS

BROOKS; RUSS BURNS; GIL 

CROSTHWAITE; ROBERT DOUB; CARL

GOFF; FRANK HERRERA; THOMAS 

HOLSMAN; JOHN HUMBER; ROBERT

T. MILLER; JIM MURRAY; RICHARD

PIOMBO; WALT POWERS; RENE 

VERERUYSSEN; JOE VIEIRA; KEN 

WALTERS; LANCE WILHELM; and ROB

WISE;

Plaintiffs.

v.

MCMORGAN & COMPANY; MCMORGAN & 

Case 2:06-cv-00907-WBS -EFB Document 66 Filed 09/26/06 Page 2 of 26
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Defendants McMorgan & Company, L.L.C. and David Howard, 1

an employee of McMorgan & Company, L.L.C., will collectively be

referred to as “the McMorgan defendants.” 

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COMPANY, LLC; LIFFEY, LLC; 

STANTON, KAY, & WATSON;

WEINBERG, ROGER & ROSENFELD;

VAN BOURG, WEINBERG, ROGER, &

ROSENFELD; JAMES WATSON;

BARRY HINKLE; EDWARD MEVI;

DAVID HOWARD; and PAYNE, 

THOMPSON, WALKER, & TAAFE;

and DOES 1 TO 100, INCLUSIVE;

Defendants.

----oo0oo----

Currently before the court are three motions to dismiss

brought by three sets of defendants in each of three related

cases. All of these motions share allegations that an investment

company and retained counsel mismanaged the investments of a

trust fund organized to provide pension benefits to members of a

labor union. Accordingly, all of the motions in each of these

three cases are addressed herein. 

I. Factual and Procedural Background

Plaintiff Pension Trust Fund for Operating Engineers

Local 3 (hereafter “Pension Trust Fund”) is a trust fund

organized to provide pension benefits to members of a labor

union. (06-904 Compl. ¶ 1.) A board of trustees runs the fund,

and this board is also a plaintiff in this action. (Id.) The

remaining plaintiffs are trustees and fiduciaries who sit on the

board. (Id. ¶ 2.) 

Defendant McMorgan and Company, L.L.C. agreed to serve 1

as the asset manager for Pension Trust Fund on or about September

1, 1995. (Id. ¶¶ 3, 12.) The duties of defendant McMorgan

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Defendant Barry Hinkle is and was an attorney and 2

partner in the law firm of Weinberg, Roger & Rosenfeld. (06-904

Compl. ¶¶ 7-8.) The court will refer to these defendants

collectively as the “Weinberg defendants.” 

Defendant Edward Mevi is and was an attorney and 3

partner in the law firm of Stanton, Kay & Watson, LLP; defendant

James Watson is and was an employee and/or agent of the same law

firm. (06-904 Compl. ¶¶ 9, 11.) The court will refer to these

defendants as the “Stanton defendants.” 

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include supervising the investment of all assets of the fund that

the board of trustees requested it to manage, selecting brokers

and placing brokerage orders “[i]n its sole discretion and

authority,” complying with the standards of fiduciary

responsibility required by ERISA, and providing support services

necessary to manage the account. (Id. ¶ 13.) Additionally, the

agreement expressly provided that defendant McMorgan was an ERISA

fiduciary to the Pension Trust Fund. (Id. ¶ 14.) 

The Pension Trust Fund also retained defendant

Weinberg, Roger & Rosenfeld, L.L.C. to perform “routine and 2

recurrent legal services the Fund has required and will continue

to require in the future.” (Id. ¶ 21.) These services included

attending all board and committee meetings; reviewing,

interpreting, and advising Pension Trust Fund about laws and

regulations that would affect the trust; and reviewing and

advising Pension Trust Fund regarding investment issues in

collaboration with parties including the investment manager. 

(Id.) Defendant Stanton, Kay & Watson, LLP signed an almost 3

identical retainer agreement with Pension Trust Fund. (Id. ¶¶

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Each of the three related cases here–-06-904, 06-905, 4

and 06-907 (Apr. 28, 2006 Notice of Related Cases)--involves the

same four causes of action, but 06-907 contains an additional

cause of action for fraud. More significantly, each case

references a slightly different set of underlying facts. 

Briefly, Case No. 06-904 refers to the sale of different

investment properties for less than fair market value, Case No.

06-905 relates to attorney/fiduciary malpractice for the failure

to attend a foreclosure sale, and Case No. 06-907 concerns

allegations of overbilling for costs and fees by retained

attorneys. 

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22, 23.) 

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A. Factual Allegations Underlying Case No. 06-904

Beginning in the late 1960s, the Pension Trust Fund

invested its assets in several properties. In approximately

1968, the Pension Trust Fund purchased about 3,590 acres of real

estate located in Rancho Murieta, California. (Id. ¶ 24.) The

relevant parts of this property were: Unit 5 (split into Parcels

A and B), and a “Hotel site” comprising 20.2 acres. (Id. ¶ 27.) 

The Hotel site was first sold to Jack Anderson in 1987 for

approximately $123,762.00 per acre. (Id.) However, Anderson

defaulted on the payments in approximately 1993 and the property

reverted back to the Pension Trust Fund. (Id.) In 2002, the

Pension Trust Fund sold the Hotel site and an additional 10.1

acres at a purchase price of approximately $72,528 per acre

(about half of the price the property was sold for in 1987). 

(Id. ¶ 28.) Escrow was extended over the next few years, but the

purchase price remained the same. (Id. ¶ 29.) 

In 2002, defendant McMorgan entered into several

contracts on behalf of the Pension Trust Fund to sell

approximately 59.7 acres of Parcel A and approximately 86.17

acres of Parcel B of the Rancho Murieta property. (Id. ¶¶ 32,

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34.) For the sale of Parcel A, the purchase price of the land

was $51,402.00 per acre. (Id. ¶ 32.) For the sale of Parcel B,

the price was set at $35,653.00 per acre. (Id. ¶ 34.) Although

the real estate market appreciated between 2002 and 2004,

defendant McMorgan allowed numerous extensions of the contracts,

and eventually sold parcels A and B in 2004 for the price

originally agreed upon, despite the properties’ subsequent

increase in value. (Id. ¶¶ 33, 35.) Defendant McMorgan

allegedly mismanaged the real estate properties belonging to the

Pension Trust Fund and caused it to incur significant losses. 

(Id. ¶ 37.) Additionally, the Stanton defendants and the

Weinberg defendants undertook the duty to oversee and participate

in the land sales and other real estate transactions by providing

legal counsel and advice. (Id. ¶ 39.) Plaintiffs allege that

they did not discover the mismanagement of the Pension Trust

Fund’s assets by all of these defendants before August of 2005. 

(Id. ¶ 40.) 

B. Factual Allegations Underlying Case No. 06-905

After the Pension Trust Fund sold some of the Rancho

Murieta property to Jack Anderson, Anderson sold two parcels to

Winncrest Homes, Inc. (06-905 Compl. ¶¶ 24, 26, 27.) By 1993,

Anderson and Winncrest Homes, Inc. had defaulted in making

payments, and the Pension Trust Fund instituted judicial

foreclosure proceedings against them on the advice of McMorgan &

Company. (Id. ¶¶ 28, 29.) Judgment on the foreclosure was

entered in 2000 and affirmed on appeal in 2003. (Id. ¶ 31.) The

Pension Trust Fund subsequently became the judgment creditor in

the amount of $17,000,000.00 against Winncrest (the judgment

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The court takes judicial notice of the Weinberg 5

defendants’ submitted evidence attached to the Declaration of

Rachel Meny, including the trial court proceedings related to

this litigation. See Greeson v. Imperial Irr. Dist., 59 F.2d

529, 531 (9th Cir. 1932) (explaining that “[j]udicial knowledge

is taken of all matters generally known” and further noting that

“the court is bound to take notice of public facts”). 

“Ordinarily, when matters outside the pleadings are introduced on

a Rule 12(b)(6) motion, and these matters are not excluded by the

court, the motion is to be treated as one for summary judgment

and disposed of as provided in Rule 56. However, under Rule 201

of the Federal Rules of Evidence, a district court may take

judicial notice of ‘matters of public record’ outside the

pleadings without converting a motion to dismiss into a motion

for summary judgment.” Mann v. GTCR Golder Rauner, L.L.C., No.

02-2099, 2006 WL 2473988, at *4 (D. Ariz. 2006) (citing MGIC

Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986))

(other citations omitted).

Relatedly, the Stanton defendants request that the

court take judicial notice of the underlying court documents in

Case No. 06-907. (See Aug. 4, 2006 Stanton Defs.’ Request for

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debtor). (Id.) 

The Pension Trust Fund petitioned for a writ of sale of

the property to execute the judgment, and such a writ was issued. 

(Id. ¶ 32.) Individuals from defendant McMorgan & Company and

agents of the Stanton defendants (who, in turn, were acting as

agents for the Weinberg defendants) were to attend the sale to

bid on the property on behalf of the Pension Trust Fund. (Id. ¶

33.) Although the sale was noticed, defendant Mevi (of the

Stanton defendants) received a personal phone call regarding the

sale, and defendants Mevi and Howard planned to attend the sale,

both of these defendants arrived late to the sale, after the

property had been sold for $2,000.00. (Id. ¶¶ 34-41.) 

Significantly, however, the property was appraised for a value of

between $12,000,000.00 and $14,000,000.00. (Id. ¶ 41.) The

Pension Trust Fund filed suit to have the foreclosure set aside,

but the suit was not successful. (Id. ¶¶ 44, 47.) 5

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Judicial Notice.) Plaintiffs oppose this request, but because

these documents are public facts, the court will take judicial

notice of them. 

However, the Weinberg defendants have additionally

submitted “relevant documents regarding these proceedings.” 

Aside from the court documents, the documents attached do not

appear to be public information. In order to address this motion

as a motion to dismiss rather than converting it to a motion for

summary judgment, the court will not consider these documents.

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C. Factual Allegations Underlying Case No. 06-907

In the context of the judicial foreclosure proceedings

against Anderson and Winncrest Homes, Inc., defendant McMorgan

allegedly had the obligation and duty to protect the Pension

Trust Fund’s assets from unethical or incompetent provision by

service providers, such as attorneys, to monitor the service

providers more generally, and to monitor the payment of bills and

invoices. (06-907 Compl. ¶¶ 59, 66, 73.) The Weinberg

defendants and the Stanton defendants were retained by the

Pension Trust Fund to represent them in these proceedings. (Id.

¶¶ 32, 33, 37.) Pursuant to the successful judicial foreclosure

action, the Pension Trust Fund paid its attorneys what it now

contends was an exorbitant amount for attorneys’ fees, including

improper costs for office furniture and equipment. (Id. ¶¶ 32-

45.) As evidence that the amounts paid were excessive and

unreasonable, plaintiff notes that the court deciding the

foreclosure proceedings, in the context of an attorneys’ fees

motion, halved the attorneys’ fees requested by its attorneys

(and previously billed to plaintiff), denying the law firms more

than $7,000,000.00 that they had requested. (Id. ¶ 37.)

D. Legal Claims

Based upon these underlying facts, each of the three

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The Stanton defendants signed tolling agreements with 6

plaintiff Pension Trust Fund regarding the claims in cases 06-905

and 06-907, and therefore do not make this argument in those

cases.

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complaints alleges the following causes of action against all

defendants: (1) Professional Negligence; (2) Breach of Contract;

(3) Breach of Fiduciary Duty; and (4) Violations of the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§

1105, 1109, and 1132(a)(2) & (3). Case No. 06-907 additionally

contains a cause of action for fraud. 

Each of the three sets of defendants brings different

challenges to the complaints in these cases. The Weinberg

defendants move to dismiss claims 1-3 as barred by the statute of

limitations, to strike plaintiffs’ request for attorneys’ fees in

the event claim 1 is not dismissed, and to dismiss claim 4 as

improperly brought against defendants not subject to the

fiduciary duties imposed by ERISA. (Id.)

The Stanton defendants move to strike plaintiffs’

requests for attorneys’ fees and costs, to strike the requests

for punitive and treble damages, and to dismiss plaintiffs’

fourth cause of action as improperly brought against a nonfiduciary not subject to ERISA. Additionally, the Stanton

defendants move to dismiss the fourth cause of action for failure

to state a claim under ERISA or alternatively move for a more

definite statement of the claim. The Stanton defendants move to

dismiss counts 1-3 as barred by the statute of limitations in

Case No. 06-904 only. Finally, the Stanton defendants move to 6

dismiss the fifth cause of action in case no. 06-907 for failure

to plead fraud with particularity.

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Defendant Liffey L.L.C. joins in this motion to 7

dismiss. However, defendant Liffey L.L.C. served its joinder in

the motion on August 16, 2006, two days prior to the time the

opposition was due, and plaintiffs did not have sufficient notice

to include arguments against defendant Liffey in their

opposition. Additionally, defendant Liffey L.L.C. did not argue

their motion or explain the basis for their status as an ERISA

fiduciary in the papers submitted to the court or during oral

argument. Because the court has not been presented with the

arguments for this motion, the court will not consider defendant

Liffey’s joinder in the motion at this time.

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The McMorgan defendants move to dismiss claims 1-3 as

against them in Case Nos. 06-904, 06-905, and 06-907, arguing

that these causes of action are state law claims that are

preempted by ERISA. 

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II. Discussion

A. Weinberg and Stanton Defendants’ Motions to Strike

I. Request for Attorneys’ Fees

The Stanton defendants move to strike the plaintiffs’

request for attorneys’ fees and costs in the first cause of

action; the Weinburg defendants move to strike the plaintiffs’

request for attorneys’ fees and costs in both the first and

second causes of action. Federal Rule of Civil Procedure 12(f)

provides that “redundant, immaterial, impertinent, or scandalous

matters” may be “stricken from any pleading.” Such motions are

designed “to avoid the expenditure of time and money that must

arise from litigating spurious issues by dispensing with those

issues prior to trial . . . .” Sidney-Vinstein v. A.H. Robins

Co., 697 F.2d 880, 885 (9th Cir. 1983). However, “[m]otions to

strike are generally disfavored.” Abney v. Alameida, 334 F.

Supp. 2d 1221, 1234 (S.D. Cal. 2004); Bureerong v. Uvawas, 922 F.

Supp. 1450, 1478 (C.D. Cal. 1996) (“Rule 12(f) motions are

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Attorneys’ fees can simply be requested at the 8

appropriate time through a noticed motion. Allstate Ins. Co., 46

Cal. App. 4th at 1797 (citing Cal. Civ. Proc. Code §

1033.5(c)(5)).

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generally ‘disfavored’ because they are ‘often used as delaying

tactics, and because of the limited importance of pleadings in

federal practice.’” (quoting William W. Schwarzer et al.,

California Practice Guide: Federal Civil Procedure Before Trial §

9:375)). “If there is any doubt as to whether the allegations

might be an issue in the action, [the] court[ should] deny the

motion.” In re 2TheMart.com, Inc. Sec. Litig., 114 F. Supp. 2d

955, 965 (C.D. Cal. 2000) (citing Fantasy, Inc. v. Fogerty, 984

F.2d 1524, 1527 (9th Cir. 1993) rev’d on other grounds, 510 U.S.

517, 534-35 (1994)).

Arguing that California follows the “American Rule”

under which each party must bear their own attorneys’ fees,

defendants move to strike this requested relief. Defendants

point out that in California, a party may not recover attorneys’

fees unless there is a statute, contractual provision, or rule

that authorizes such an award. Cal. Civ. Proc. Code § 1021. 

Because plaintiffs are not required to “plead entitlement to

attorney fees as an item of damages in order to recover them in

California,” plaintiffs’ request for attorneys’ fees is not the 8

proper target of a motion to strike, given that the court’s

decision here will have no impact on plaintiffs’ ability to

ultimately recover the relief sought. Allstate Ins. Co. v. Loo,

46 Cal. App. 4th 1794, 1797 (1996) (citing Cal. Civ. Proc. Code §

1033.5(a)(10)); Cardinale v. La Petite Acad., Inc., 207 F. Supp.

2d 1158, 1163 (D. Nev. 2002) (making the same observation and

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denying defendant’s 12(f) motion because “[t]he inclusion of

claims for attorneys’ fees in the Complaint does not constitute

an ‘insufficient defense or any redundant, immaterial,

impertinent, or scandalous matter’ such that a Motion to Strike

pursuant to Federal Rule of Civil Procedure 12(f) is proper”). 

But see Bianchi v. State Farm Fire & Cas. Co., 120 F. Supp. 2d

837, 842 (N.D. Cal. 2000) (striking plaintiff’s request for

attorneys’ fees because the state statute providing for such

relief was preempted by federal law). “The purpose of a motion

to strike is to clean up the pleadings, streamline litigation,

and avoid unnecessary forays into immaterial matters” and it is

not clear how any of these purposes are served by striking from

the complaint claims that plaintiffs are not even required to

plead. McInerney v. Moyer Lumber & Hardware, Inc., 244 F. Supp.

2d 393, 402 (E.D. Pa. 2002). Defendants’ motions to strike

plaintiffs’ request for attorneys’ fees will therefore be denied

without prejudice, because they are premature at this stage of

the proceedings.

ii. Requests for Punitive and Treble Damages

Both the Weinberg and Stanton defendants additionally

move to strike plaintiffs’ claims for punitive damages in the

first and third causes of action and treble damages in the second

cause of action with respect to Case No. 06-907. Plaintiffs

acquiesce to defendants’ contentions that they do not

sufficiently allege a basis for punitive damages. (Pls.’ Opp’n

to Weinberg Defs.’ Mot to Dismiss and Mot. to Strike 16; Pls.’

Opp’n to Stanton Defs.’ Mot. to Dismiss and Mot. to Strike 11.) 

The court will not resolve a dispute that does not exist, and

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will therefore grant plaintiff leave to amend these causes of

action. 

B. Motions to Dismiss

At the pleading stage, the plaintiff need only set

forth “a short and plain statement of the claim showing that the

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2);

Leatherman v. Tarrant County Narcotics Intelligence &

Coordination Unit, 507 U.S. 163, 168 (1993). A complaint need

only “give the defendant fair notice of what the plaintiff’s

claim is and the grounds upon which it rests.” Conley v. Gibson,

355 U.S. 41, 47 (1957). Consequently, on a motion to dismiss,

the court accepts the allegations in the complaint as true and

draws all reasonable inferences in favor of the pleader. Scheuer

v. Rhodes, 416 U.S. 232, 236 (1974); Cruz v. Beto, 405 U.S. 319,

322 (1972). 

Additionally and significantly, under Rule 8 of the

Federal Rules of Civil Procedure, “[a] party may set forth two or

more statements of a claim or defense alternatively or

hypothetically.” Rule 8 does not require that claims pled in the

alternative be consistent with each other. Moreover, the Ninth

Circuit has explained that, because of the liberality of Rule 8

pleading standards, “a pleading should not be construed as an

admission against another alternative or inconsistent pleading in

the same case.” McCalden v. Cal. Library Ass’n, 955 F.2d 1214,

1219 (9th Cir. 1990) (citation omitted). 

i. McMorgan Defendants’ Motion to Dismiss State Law

Claims as Preempted by ERISA

The McMorgan defendants argue that plaintiffs’ state

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law claims are preempted by ERISA. Their preemption argument

rests on the notion that “any state-law cause of action that

duplicates, supplements, or supplants the ERISA civil enforcement

remedy conflicts with the clear congressional intent to make the

ERISA remedy exclusive and is therefore pre-empted.” Aetna

Health Inc. v. Davila, 542 U.S. 200, 209 (2004) (citations

omitted) (concluding that ERISA preempted state law claims where

the complaint did not allege “any violation of a legal duty

independent of ERISA”). In response, plaintiffs contend that,

pursuant to Rule 8, they have alternatively pled state and

federal claims in an effort to protect themselves if it is

determined at a later stage in the litigation that they cannot

maintain the ERISA claim in the complaint. 

Regardless of whether plaintiffs have plead the ERISA

and state law causes of action in the alternative, it is unclear

what basis plaintiffs have for claiming that the McMorgan

defendants are subject to state law claims. The contract signed

by the Pension Trust Fund and the McMorgan defendants states that

McMorgan & Company was hired as an investment manager and an

ERISA fiduciary. It is difficult to understand how state law

claims are colorable against the McMorgan defendants given

“ERISA’s provision that ‘a person is a fiduciary with respect to

a plan to the extent [that] he renders investment advice for a

fee or other compensation, direct or indirect, with respect to

any moneys or other property of such plan.’” See Dudley

Supermarket, Inc. v. Transamerica Life Ins. & Annuity Co., 302

F.3d 1, 4 (1st Cir. 2002) (citing 29 U.S.C. § 1002(21))

(dismissing state law claims as preempted by ERISA against an

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Plaintiffs cite Coleman v. Standard Life Insurance 9

Company, which is a case in which this court concluded that where

“there has been no determination as to whether ERISA applies, and

[the] defendant has presented no evidence of its own to that

effect other than citations to allegations in the complaint,”

state law claims pled in the alternative should not be dismissed

based on their preemption by ERISA. Coleman v. Standard Life

Ins. Co., 288 F. Supp. 2d 1116, 1121 (E.D. Cal. 2003). 

Coleman involved a defendant that explicitly disputed

whether it was an ERISA fiduciary. Id. By contrast, the

complaint here describes the McMorgan defendants as ERISA

fiduciaries for their role, and they do not contest this

characterization. Additionally, Coleman addressed a situation

involving a different type of ERISA fiduciary than is involved

here. The defendant in Coleman was an insurance company that

allegedly failed to provide long-term disability benefits,

whereas the relevant defendant here is an investment management

company acting as a fiduciary over a pension trust fund. 

Therefore, Coleman is inapplicable to this case.

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investment manager who acted as an ERISA fiduciary). Plaintiffs 9

have not alleged how defendants may have acted beyond the scope

of exercising their discretion as an ERISA fiduciary such that

they may be subject to state law claims that do not relate to the

ERISA claim. 

Because defendants have not been given sufficient

notice of how these state law claims against them do not

duplicate, supplement, or supplant the provisions of ERISA

referenced by plaintiffs’ fourth cause of action, the state law

claims will be dismissed with leave to amend.

ii. Stanton and Weinberg Defendants’ ERISA Fiduciary

Status

The Stanton defendants and the Weinberg defendants

contend that as retained counsel for plaintiffs, they were not

ERISA fiduciaries, and a cause of action for breach of duty under

ERISA cannot be brought against them. “ERISA permits suits for

breach of fiduciary duty only against ERISA defined fiduciaries.” 

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Kyle Railways, Inc. v. Pacific Admin. Servs., Inc., 990 F.2d 513,

516 (9th Cir. 1993). “To become a[n ERISA] fiduciary, the person

or entity must have control respecting the management of the plan

or its assets, give investment advice for a fee, or have

discretionary responsibility in the administration of the plan.” 

Az. State Carpenters Pension Trust Fund v. Citibank, 125 F.3d

715, 721-22 (9th Cir. 1997). Absent a showing of the assignment

of one of these duties, an attorney is not an ERISA fiduciary. 

Yeseta v. Baima, 837 F.2d 380, 385 (9th Cir. 1988) (concluding

that an attorney was not an ERISA fiduciary when neither his

“status as an attorney nor as executor showed he controlled the

Plan in a manner other than by usual professional functions”). 

“While an attorney’s duty to his client is that of a

fiduciary, the mere fact that an attorney represents an ERISA

plan does not make the attorney an ERISA fiduciary because legal

representation of ERISA plans rarely involves the discretionary

authority or control required by the statute’s definition of

‘fiduciary.’” Custer v. Sweeney, 89 F.3d 1156, 1162 (4th Cir.

1996). Conversely, “merely because a person serves as legal

counsel to a pension plan does not automatically preclude a

finding that the attorney is also an ERISA fiduciary, at least as

to some activities.” Id. “Fiduciary status under ERISA is to be

construed liberally.” Az. State Carpenters, 125 F.3d at 720.

The Stanton defendants and the Weinberg defendants were

retained as counsel by the Pension Trust Fund. Their retainer

agreements, which were virtually identical, set forth

responsibilities to review and advise Pension Trust Fund

regarding legal issues related to investments. (06-907 Compl. ¶

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The allegations relevant here are the same in all three 10

complaints.

The Stanton defendants move, in the alternative, for a 11

more definite statement of the ERISA claims against them. 

Because the court will grant their motion to dismiss, it need not

consider the motion for a more definite statement.

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21. ) There is no indication in these listed duties that these 10

defendants had control of the plan or plan assets, exercised

discretion in administering the plan, or offered investment

advice. The agreement does indicate, however, that counsel were

to additionally perform any “non-routine legal services” not

included in their duties, and that the attorneys may work on

“real estate transactions, sales, and leases.” (Id.) The

complaint further alleges that the Stanton defendants undertook a

duty to oversee the real estate transactions at issue here. (Id.

¶ 39.) 

These allegations do not sufficiently allege that the

Stanton defendants or the Weinberg defendants acted or undertook

to act beyond the ordinary role of retained counsel to exercise

discretion over the plan or to make investment decisions. 

Nevertheless, the court is not certain that plaintiffs could not

make such allegations. Accordingly, this motion to dismiss will

also be granted with leave to amend to include allegations

explaining what actions the Stanton defendants undertook beyond

the actions a lawyer would undertake for a client.11

iii. Stanton and Weinberg Defendants’ Statute of

Limitations Arguments

The Stanton defendants and the Weinberg defendants

contend that claims one through three should be dismissed as

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time-barred in Case No. 06-904. The Weinberg defendants

additionally make this argument with respect to Cases No. 06-905

and 06-907. “A plaintiff must bring a claim within the

limitations period after accrual of the cause of action.” Fox v.

Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 806 (2005). 

“Generally speaking, a cause of action accrues at the time when

the cause of action is complete with all of its elements.” Id.

(internal quotations and citation omitted). The parties agree

that California Code of Civil Procedure § 340.6 provides the

limitations period for these claims. (Weinberg Defs.’ Mot. to

Dismiss 4-5; Stanton Defs.’ Mot. to Dismiss 4; Pls.’ Opp’n to

Mot. to Dismiss 3-4.) 

Under California Code § 340.6, unless it is tolled, the

statute of limitations expires “one year after the plaintiff

discovers, or through the use of reasonable diligence should have

discovered, the facts constituting the wrongful act or omission,

or four years from the date of the wrongful act or omission,

whichever occurs first.” “[W]hen the plaintiff has notice of

information of circumstances to put a reasonable person on

inquiry, or has the opportunity to obtain knowledge from sources

open to his investigation (such as public records or corporation

books), the statute commences to run.” McKelvey v. Boeing N.

Am., Inc., 74 Cal. App. 4th 151, 160 n.11 (1999) (quoting 3 B.E. 

Witkin, California Procedure § 602 at 773 (4th ed. 1996)). 

Moreover, a “plaintiff must plead (and later prove) the facts

showing . . . [that] in the exercise of reasonable diligence the

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This heightened pleading standard would seem to 12

conflict with the liberal notice pleading standard provided by

Federal Rule of Civil Procedure 8(a). However, this court has

previously noted that “the Ninth Circuit has unequivocally held

that in order to rely on a defense to a statute of limitations

challenge provided by state law, plaintiff must meet the pleading

requirements of that state law.” Adobe Lumber, Inc. v. Hellman,

415 F. Supp. 2d 1070, 1081 (E.D. Cal. 2006) (citing Cal. Sansome

Co. v. U.S. Gypsum, 55 F.3d 1402, 1407 (9th Cir. 1995)).

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facts could not have been discovered at an earlier date.” Id. 12

However, the statute of limitations can be tolled if “[t]he

attorney continues to represent the plaintiff regarding the

specific subject matter in which the alleged wrongful act or

omission occurred . . . .” Cal. Code Civ. Pro. § 340.6.

a. Case No. 06-904

Plaintiffs’ first three claims are based upon the sale

of property in 2004. Because plaintiffs allege that the harm

they faced was the sale of property for less than its fair market

value, the cause of action was “complete with all of its

elements” on the date of the sale, and that is when the cause of

action would ordinarily accrue. Although plaintiffs do not

allege that they were unaware of the sale of the property at the

time it occurred, they allege that defendants’ breaches of the

standard of care “were not discovered by plaintiffs until after

August 2005,” and that their suit was timely when brought within

a year of the date of this discovery, in March of 2006. 

Yet nowhere in the complaint do plaintiffs explain why

this information could not have been discovered at an earlier

date with the exercise of reasonable diligence. Plaintiffs

attempt to shirk this burden by arguing that expert testimony was

necessary for plaintiffs to determine that they had been injured. 

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This assertion does not change the fact that plaintiffs knew the

property was sold and for what price. After the property was

sold, plaintiffs had a year to “obtain knowledge from sources

open to [their] investigation (such as public records or

corporation books),” McKelvey, 74 Cal. App. 4th at 160 n.11, and

according to the allegations in the complaint, they did not do

so. 

However, California Code of Civil Procedure §

340.6(a)(2) additionally provides that the statute of limitations

may be tolled if the Stanton defendants continued to represent

plaintiffs “regarding the specific subject matter in which the

alleged wrongful act or omission occurred” (emphasis added). 

More specifically, 

The continuous representation rule, as 

codified in section 340.6, subdivision (a), 

is not triggered by the mere existence of an

attorney-client relationship. Instead, the 

statute’s tolling language addresses a 

particular phase of such a relationship--

representation regarding a specific subject 

matter. Moreover, the limitations period 

is not tolled when an attorney’s subsequent 

role is only tangentially related to the 

legal representation the attorney provided 

to the plaintiff. 

Foxborough v. Van Atta, 26 Cal. App. 4th 217, 228-29 (1994). The

specific subject matter at issue here appears to be the sale of

the properties in 2004 for less than their market value. 

Plaintiffs have not explained or alleged how their attorneys

continued to represent them specifically with regard to completed

transactions after those transactions were completed, and they

simply contend that defendants have “represented the [Pension

Trust Fund (PTF)] at all relevant times mentioned herein and

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continue to represent the PTF up to and including the date of the

filing of this complaint.” (06-904 Compl. ¶ 40.) Based on these

vague allegations in the complaint, it is unclear whether the

Stanton and Weinberg defendants continued to represent plaintiffs

regarding the same subject matter. Thus, the court will dismiss

these counts without prejudice, but will also give plaintiffs

leave to amend to explain how the continuing representation

doctrine operates here to toll the statute of limitations.

b. Case No. 06-905

Plaintiffs’ first three causes of action in Case No.

06-905 are based on the foreclosure sale that occurred on

February 24, 2004. Because plaintiffs allege that the harm they

faced was the sale of property for millions of dollars less than

its market value, the cause of action was “complete with all of

its elements” on the date of the foreclosure sale. Thus, that is

when the cause of action would ordinarily accrue unless

plaintiffs did not discover the existence of this cause of action

until after the fact, or could not have discovered it with the

exercise of reasonable diligence. 

Plaintiffs do allege that defendants’ breaches of the

standard of care “were not discovered by plaintiffs until after

August 2005,” and that their suit was timely when brought within

a year of the date of this discovery, in March of 2006. 

Plaintiffs additionally argue that they did not understand the

legal repercussions of the missed sale because there were ongoing

efforts to resolve the matter, although they do not contend that

they did not know about the harm that had been done to them. 

Plaintiffs’ argument simply establishes that plaintiffs

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were exploring the possibility of fixing the harm in a manner

other than this lawsuit. The complaint does not allege that

plaintiffs were unaware of the sale of the property at the time

it occurred, nor does it explain how they could be unaware of the

fact that such an egregious mistake occurred. Additionally,

plaintiffs do not allege that there were ongoing efforts to

resolve the matter or when these efforts occurred in their

complaint. Thus, plaintiffs have not sufficiently alleged that

they did not know or could not have known of the existence of

this cause of action until August of 2005. See In re Calpine

Corp. Sec. Litig., 288 F. Supp. 2d 1054, 1074 (N.D. Cal. 2003)

(“In adjudicating a motion to dismiss, the court need not accept

as true unreasonable inferences or conclusory legal allegations

cast in the form of factual allegations.” (citing W. Mining

Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981))).

Nevertheless, as previously discussed, California Code

of Civil Procedure § 340.6(a)(2) provides that the statute of

limitations may be tolled if the Weinberg defendants continued to

represent plaintiffs “regarding the specific subject matter in

which the alleged wrongful act or omission occurred” (emphasis

added). The specific subject matter at issue here appears to be

the failure of the attorneys to attend the foreclosure sale, and

the subsequent sale of the property for far less than its market

value. Although plaintiffs allege that the Weinberg defendants

continued to represent them, they do not explain how this

representation was related to the same subject matter that

underlies these claims. (See 06-905 Compl. ¶ 50 (alleging that

defendants “represented the [Pension Trust Fund (PTF)] at all

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relevant times mentioned herein and continue to represent the PTF

up to and including the date of the filing of this complaint”).) 

It is possible that the Weinberg defendants’ representation in

attempting to undo the sale or in drafting tolling agreements

between plaintiffs and other defendants was representation on

this specific subject matter, and that this representation may

have tolled the statute of limitations such that this case was

timely filed. Therefore, the court will dismiss these claims but

allow plaintiff leave to amend.

c. Case No. 06-907

The Weinberg defendants contend that claims one, two,

three, and five in Case No. 06-907 should be dismissed as timebarred. Plaintiffs’ first, second, third, and fifth causes of

action are based on the attorneys’ fees paid during judicial

foreclosure proceedings, the appeals for which concluded in July

2003. Plaintiffs allege that defendants’ breaches of the

standard of care “were not discovered by plaintiffs until after

August 2005,” and that their suit was timely when brought within

a year of the date of this discovery, in March of 2006. 

Plaintiffs contend that they did not understand the billing

charges and further would need expert testimony to have

understood them. 

The specific subject matter at issue in these causes of

action appears to be the overbilling by the attorneys during the

foreclosure proceedings. This complaint, like the others,

alleges that “all defendants named herein have represented the

[Pension Trust Fund (PTF)] at all relevant times mentioned herein

and continue to represent the PTF up to and including the date of

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the filing of this complaint.” (06-907 Compl. ¶ 47.) Plaintiffs

claim that there are facts they could allege to supplement the

conclusory allegations in the complaint and explain how the

Weinberg defendants continued to represent them through 2006.

(Pls.’ Opp’n to Mot. to Dismiss 6.) 

Here, too, it is unclear how long the Weinberg

defendants represented plaintiffs on this specific subject

matter, and the court cannot determine from the allegations in

the complaint that the statute of limitations is tolled with

respect to these causes of action. Therefore, these causes of

action should be dismissed as well, and plaintiff should be given

an opportunity to amend the complaint.

iv. Stanton Defendants’ Motion to Dismiss Cause of

Action for Fraud in 06-907

The Stanton defendants additionally argue that count 5

does not plead fraud with sufficient particularity to survive a

motion to dismiss. Federal Rule of Civil Procedure 9(b) provides

that “[i]n all averments of fraud or mistake, the circumstances

constituting fraud or mistake shall be stated with

particularity.” “To avoid dismissal for inadequacy under Rule

9(b), [a] complaint would need to ‘state the time, place, and

specific content of the false representations as well as the

identities of the parties to the misrepresentation.’” Edwards v.

Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004); see also

Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (“The

complaint must specify such facts as the times, dates, places,

benefits received, and other details of the alleged fraudulent

activity.”).

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Plaintiffs allege that the Stanton defendants, the

Weinberg defendants, and two other sets of defendants

“intentionally and knowingly overbilled” the Pension Trust Fund

by submitting bills and costs while knowing they were

unreasonable, excessive, and/or not incurred on behalf of work

performed for the Pension Trust Fund. (Compl. ¶ 79.) Without

greater specificity as to times, dates, the contents of and the

parties to these alleged misrepresentations, the complaint does

not sufficiently allege a cause of action for fraud. Therefore,

the court will dismiss this cause of action with leave to amend. 

III. Conclusion

In Case No. 06-904, IT IS THEREFORE ORDERED that:

(1) the first, second, and third causes of action

against the McMorgan defendants be, and the same hereby are,

DISMISSED WITHOUT PREJUDICE.

(2) the complaint as against the Weinberg defendants

and the Stanton defendants be, and the same hereby is, DISMISSED

WITHOUT PREJUDICE.

(3) with respect to all other defendants and/or claims,

defendants’ motions to dismiss, to strike and for a more definite

statement be, and the same hereby are, DENIED.

In Case No. 06-905, IT IS THEREFORE ORDERED that:

(1) the first, second, and third causes of action

against the McMorgan defendants be, and the same hereby are,

DISMISSED WITHOUT PREJUDICE.

(2) the complaint as against the Weinberg defendants

be, and the same hereby is, DISMISSED WITHOUT PREJUDICE.

(3) the fourth cause of action as against the Stanton

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defendants be, and the same hereby is, DISMISSED WITHOUT

PREJUDICE.

(4) with respect to all other defendants and/or claims,

defendants’ motions to dismiss, to strike and for a more definite

statement be, and the same hereby are, DENIED.

In Case No. 06-907, IT IS THEREFORE ORDERED that:

(1) the first, second, and third causes of action

against the McMorgan defendants be, and the same hereby are,

DISMISSED WITHOUT PREJUDICE.

(2) the complaint as against the Weinberg defendants

be, and the same hereby is, DISMISSED WITHOUT PREJUDICE.

(3) the fourth and fifth causes of action as against

the Stanton defendants be, and the same hereby is, DISMISSED

WITHOUT PREJUDICE.

(5) with respect to all other defendants and/or claims,

defendants’ motions to dismiss, to strike and for a more definite

statement be, and the same hereby are, DENIED.

Plaintiff is hereby given 30 days from the date of this

order to file an amended complaint in each of these three cases

consistent with this order. 

DATED: September 24, 2006

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