FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

THEODORE C. SWARTZ, 

Plaintiff-Appellant,

v.

No. 05-35167 KPMG LLP,

Defendant, D.C. No.  CV-03-01252-MJP and

OPINION PRESIDIO ADVISORY SERVICES INC.;

DEUTSCHE BANK AG; DEUTSCHE

BANK SECURITIES, INC.,

Defendants-Appellees. 

Appeal from the United States District Court

for the Western District of Washington

Marsha J. Pechman, District Judge, Presiding

Argued and Submitted

October 20, 2006—Seattle, Washington

Filed February 12, 2007

Before: Dorothy W. Nelson and Richard A. Paez,

Circuit Judges, and Edward Rafeedie,* District Judge.

Per Curiam Opinion

*The Honorable Edward Rafeedie, Senior United States District Judge

for the Central District of California, sitting by designation. 

1731
COUNSEL

Philip A. Talmadge, Anne E. Melley, Talmadge Law Group,

Tukwila, Washington, Brian G. Isaacson, The Isaacson Law

Firm, Seattle, Washington, for the plaintiff-appellant. 

David H. Smith, Garvey Schubert Barber, Seattle, Washington, Lawrence M. Hill, Seth C. Farber, Dianne F. Coffino,

Dewey Ballantine LLP, New York, New York, for

defendants-appellees Deutsche Bank AG and Deutsche Bank

Securities, Inc.

Stephen C. Willey, Savitt & Bruce LLP, Seattle, Washington,

Steven M. Bauer, Karli E. Sager, Latham & Watkins LLP,

San Francisco, California, for defendant-appellee Presidio

Advisory Services, Inc. 

SWARTZ v. KPMG 1735
OPINION

PER CURIAM: 

I. INTRODUCTION

This suit arises out of a failed tax shelter, which defendants

allegedly sold to plaintiff-appellant Theodore Swartz, charging over a million dollars, even though they knew the scheme

would be considered unlawful by the IRS. Among the named

defendants were accounting firm KPMG, law firm Sidley

Austin Brown & Wood (“B&W”), Deutsche Bank AG and

Deutsche Bank Securities (collectively “DB” or “Deutsche

Bank”), and Presidio Advisory Services (“Presidio”). Against

all defendants, Swartz asserted claims (1) under the Racketeer

Influenced and Corrupt Organizations Act (“RICO”), 18

U.S.C. § 1964, (2) under the Washington Consumer Protection Act (“WCPA”), Wash. Rev. Code § 19.86.010 et seq., (3)

for common-law fraud, and (4) for civil conspiracy. Swartz

also sought a judicial declaration of defendants’ liability for

interest and penalties that might have arisen during an IRS

audit, incomplete at the time he filed his lawsuit. Swartz

advanced separate claims against KPMG and B&W for

breach of contract, breach of fiduciary duty, and professional

malpractice. In a published order,1 the district court dismissed

all causes of action against Presidio and DB concluding both

that Swartz’s complaint failed to state any claims upon which

relief could be granted and that it contained insufficient allegations to establish personal jurisdiction.2

 Swartz sought leave

to cure the substantive and jurisdictional defects in the complaint and to add alternative securities fraud claims. Believing

amendment would be futile and that the request was procedurally improper, the district court denied leave to amend. Swartz

appeals each of these rulings.3

1

Swartz v. KPMG, 401 F. Supp. 2d 1146 (W.D. Wash. 2004) (Swartz

I). 

2The district court also dismissed many but not all of the claims against

the remaining defendants. This appeal concerns only Swartz’s claims

against Presidio and DB. 

3Swartz also argues, for the first time on appeal, that the district court

should have taken judicial notice of certain documents attached to his

opposition to defendants’ motions to dismiss. Because he never presented

this argument to the district court and has not demonstrated any excep1736 SWARTZ v. KPMG
With the exception of its holding that the allegations in the

complaint ruled out “reasonable reliance” as a matter of law,

the district court did not err in Swartz I and we adopt its decision in large measure. Specifically, we affirm the district

court’s dismissal with prejudice of the RICO and WCPA

claims as well as the request for declaratory relief because

each was properly resolved on grounds independent of the

reasonable reliance inquiry and because amendment would be

futile in each case.

However, we reverse the district court’s denial of leave to

amend the common-law fraud and conspiracy claims.

Whether Swartz could demonstrate reasonable reliance on

defendants’ alleged misrepresentations was not properly settled as a matter of law under the allegations in the complaint.

Furthermore, even if the original complaint otherwise failed

to satisfy the heightened pleading requirements of Federal

Rule of Civil Procedure 9(b), it would not have been futile for

Swartz to amend. Additionally, although the original complaint failed to allege sufficient jurisdictional facts, Swartz

should have been given an opportunity to cure this defect

through amendment. Finally, Swartz should have been

granted leave to add alternative claims for securities fraud. 

II. BACKGROUND 

A. Factual Allegations4

tional circumstances explaining his silence, we decline to address it here.

See United States v. Oregon, 769 F.2d 1410, 1414 (9th Cir. 1985). We

also reject Swartz’s invitation to take judicial notice of various documents

outside the pleadings. The facts recited in the documents and Swartz’s

characterization of them are “subject to reasonable dispute” and are therefore not properly noticed. Fed. R. Evid. 201(b). 

4Because we are primarily concerned with the sufficiency of Swartz’s

pleadings, we focus on the allegations in his complaint and take them as

true for purposes of this appeal. See Jackson v. Carey, 353 F.3d 750, 753

(9th Cir. 2003). 

SWARTZ v. KPMG 1737
In 1999, Swartz sold a business and realized an approximately $18 million gain representing potentially taxable

income. KPMG approached Swartz and “lured” him into purchasing a tax-reduction product called BLIPS (Bond Linked

Issue Premium Structure), represented as a strategy that

would allow Swartz to claim a loss sufficient to offset his capital gain. KMPG advised Swartz of the possibility of an audit,

but assured him that KPMG and law firm B&W would provide tax “opinion letters” testifying to the legitimacy of the

scheme to the satisfaction of the IRS. According to the complaint, the BLIPS transactions had been devised by KPMG

and B&W as a means of charging unwarranted and excessive

fees to a “ ‘select audience’ of individuals who had sold large

businesses or otherwise incurred large capital gains.” Swartz

alleged Presidio and DB “were active participants in the conspiracy” and “knew that the series of BLIPS transactions were

predetermined steps to generate sham losses for the purpose

of obtaining tax benefits.” Swartz further alleged that Presidio

and DB knew that KPMG and B&W promoted the BLIPS

transactions through the allegedly fraudulent representations

outlined above and that the defendants acted in concert and as

mutual agents. 

In fall 1999, Swartz entered into various BLIPS-related

contracts including an “engagement letter,” executed September 4, 1999, between himself and KPMG. The letter outlined

KPMG’s role in the transactions, disclosed that the IRS might

question the BLIPS losses, and stated that KPMG “would not

guarantee tax results, but would provide that . . . there is a

greater than 50 percent likelihood . . . that [the promised tax

benefits] would be upheld if challenged by the [IRS].”

Despite this caveat, Swartz alleged that he reasonably relied

on KPMG’s oral representations that BLIPS would succeed in

eliminating his income tax liability. 

The transactions comprising the BLIPS strategy occurred

between September 30 and December 13, 1999. Because the

details are largely irrelevant, they are recounted here in very

1738 SWARTZ v. KPMG
rough form. KPMG and Presidio facilitated the extension of

a multi-million dollar line of credit from DB to Swartz.

Swartz created a new limited liability company, Longs Strategic Investment Fund (“Longs”), and engaged Presidio as its

manager. The credit facility was contributed to Longs. Longs

held various assets including a number of shares of Microsoft

common stock. After engaging in two foreign currency transactions intended to give Longs the appearance of a legitimate

business, Presidio directed that Longs be dissolved. On

December 13, 1999, the company was dissolved and the

Microsoft stock was transferred to Swartz as part of his ownership assets. 

The intended effect of these transactions was to artificially

inflate Swartz’s basis in the Microsoft stock so that he could

sell it and claim a capital “loss” in the amount of the difference between his inflated basis and the value of the stock. In

this case, KPMG represented that “the sale of 364 shares of

Microsoft stock would trigger a purported 1999 capital loss of

[approximately $18 million].” Swartz paid significant fees to

defendants to implement these transactions including a

$550,000 management fee to Presidio and more than

$800,000 in fees and interest to DB. 

According to the complaint, on December 27, 1999, the

IRS issued a notice concluding that BLIPS did not produce

bona fide losses for income tax purposes. Nevertheless, on

December 31, 1999, KPMG and B&W issued opinion letters

that purported to confirm the propriety of the scheme. 

On August 25, 2000, before Swartz filed his 1999 tax

return, his independent tax preparation firm, Moss Adams,

questioned the validity of the scheme, informing Swartz it

believed the IRS would consider the BLIPS losses to be

improper. On September 5, 2000, the IRS issued an additional

notice reiterating its opinion that BLIPS losses were illegitimate and warning that criminal penalties might attach to individuals who attempted to use them on their tax returns. On

SWARTZ v. KPMG 1739
October 4, KPMG advised Swartz that the promised tax benefits might be disallowed by the IRS. In response, Swartz

sought recision of the BLIPS agreements and a monetary

refund. The defendants refused. On October 10, Moss Adams

resigned from its engagement. KPMG then assisted Swartz in

preparing his 1999 return, which reflected deductions for

BLIPS “losses.” 

At some point thereafter, the IRS commenced an audit of

Swartz’s 1999 tax return.5 Swartz did not amend his 1999 tax

return in 2001 or 2002. 

On February 21, 2002, KPMG informed Swartz that it was

under IRS investigation in connection with the BLIPS scheme

and that the IRS had announced an amnesty from certain penalties for individual tax filers who disclosed their involvement. KPMG advised Swartz to make a full disclosure to the

IRS. B&W sent a similar letter on March 5. The complaint

does not indicate whether Swartz took advantage of the IRS

initiative. 

B. Proceedings Below 

On June 6, 2003, Swartz initiated this lawsuit. On February

13, 2004, the district court issued Swartz I granting several

Federal Rule of Civil Procedure 12(b)(6) motions including

Presidio’s and DB’s. As to each cause of action, the court

held there was no conceivable set of facts which could justify

relief and dismissed with prejudice. The court also found

Swartz had not met his burden of pleading personal jurisdic5The IRS had initiated an audit but had not yet disallowed the BLIPS

losses at the time Swartz filed his complaint in June 2003. In September

2003, in opposition to defendants’ motions to dismiss, Swartz submitted

a declaration from his then-current tax attorney indicating that the approximately $17 million loss claimed on Swartz’s 1999 tax return had been disallowed. The declaration also indicated that Swartz paid back-taxes and

interest. Swartz has not alleged any penalties have been imposed by the

IRS. 

1740 SWARTZ v. KPMG
tion and dismissed Presidio and DB from the lawsuit under

Rule 12(b)(2). The court added, “[b]ecause [Presidio and DB]

were only named in regard[ ] to causes of action which are

being dismissed with prejudice, there is no point in permitting

plaintiff to amend and plead sufficient jurisdictional facts.”

Swartz I, 401 F. Supp. 2d at 1149. 

On March 9, 2004, Swartz sought leave to amend. In support, he proposed an amended complaint adding significant

detail to the dismissed claims, supplementing the jurisdictional allegations, and adding alternative causes of action for

securities fraud under federal and Washington state law. The

district court disallowed amendment of the original claims

relying on its February 13, 2004 order.6 The court also denied

leave to add new securities fraud claims. This appeal followed. 

III. STANDARD OF REVIEW 

A trial court’s decision to dismiss for failure to state a

claim is reviewed de novo, Decker v. Advantage Fund, Ltd.,

362 F.3d 593, 595-96 (9th. Cir. 2004), as is a dismissal for

lack of personal jurisdiction, Action Embroidery Corp. v. Atl.

Embroidery, Inc., 368 F.3d 1174, 1177 (9th Cir. 2004).

Assuming a substantive or jurisdictional defect in the pleadings, “[d]ismissal without leave to amend is proper only if it

is clear, upon de novo review, that the complaint could not be

saved by any amendment.” McKesson HBOC, Inc. v. N.Y.

State Common Ret. Fund, Inc., 339 F.3d 1087, 1090 (9th Cir.

2003) (quotations, citations omitted). 

6Specifically, the district court noted that it had dismissed the original

claims with prejudice. The court went on to treat the portion of the motion

relating to the dismissed claims as a motion for reconsideration of its February 13, 2004 order. So construed, the motion was time-barred and was

otherwise improper. Swartz does not argue that he presented a proper

motion for reconsideration. Rather, he argues that he was entitled to

amend his complaint notwithstanding the fact that the district court dismissed his claims with prejudice. 

SWARTZ v. KPMG 1741
IV. DISCUSSION

A. The RICO Claim 

[1] A civil RICO claim requires allegations of the conduct

of an enterprise through a pattern of racketeering activity that

proximately caused injury to the plaintiff. Sedima, S.P.R.L. v.

Imrex Co., 473 U.S. 479, 496 (1985). Swartz’s RICO claim

was predicated on allegations of mail and wire fraud —

namely that the marketing and implementation of the BLIPS

scheme was carried out through the use of interstate mail and

wire communications systems. 

The district court dismissed the RICO claim on two alternative grounds. First, the court held the alleged fraud was “in

connection with” the sale of the Microsoft stock and could not

form the basis of a RICO claim under section 107 of the Private Securities Litigation Reform Act (“PSLRA”), Pub. L.

No. 104-67, 109 Stat. 737, 758 (1995). Second, the court held

that allegations in the complaint foreclosed a finding of “reasonable reliance” — a necessary element for all species of

fraud, including mail/wire fraud. 

[2] We agree that the PSLRA bars Swartz’s claim and

hereby adopt the district court’s opinion in Swartz I to that

extent. Swartz I, 401 F. Supp. 2d at 1151-52 (Section III. A.

1. “Effect of Private Securities Litigation Reform Act”).

Swartz’s argument on appeal that the BLIPS transactions

were intended to be a swap agreement does not change the

fact that the complaint alleges fraud in connection with the

sale of securities. Neither was the sale of securities “incidental” to the fraud. The sale of the Microsoft stock was the

lynchpin of the BLIPS scheme. The entire purpose of setting

up Longs and funding it with the loan proceeds from DB was

that, on dissolution, Longs would be able to transfer its assets

(the Microsoft stock) to Swartz and his basis in those assets

would be artificially inflated by the value of the loan. If

Swartz never sold the assets with the inflated basis (the stock)

1742 SWARTZ v. KPMG
he would never realize the “loss” that he required to offset his

real capital gains. As in SEC v. Zandford, “the securities sales

and [appellees’ alleged] fraudulent practices were not independent events.” 535 U.S. 813, 820 (2002). 

[3] Because the PSLRA bar would apply under any internally consistent set of facts, it would be futile to amend the

RICO claim. Consequently, it was not error to dismiss this

claim with prejudice. See Albrecht v. Lund, 845 F.2d 193, 195

(9th Cir. 1988) (if “the allegation of other facts consistent

with the challenged pleading could not possibly cure the deficiency, then . . . dismissal without leave to amend is proper.”)

(internal quotation, citation omitted). The reasonable reliance

holding is addressed below. 

B. WCPA Claim 

[4] The district court properly dismissed the Washington

Consumer Protection Act claim and we adopt its opinion on

that issue. Swartz I, 401 F. Supp. 2d at 1153-54 (Section III.

C. “Washington Consumer Protection Act”). We note that a

scheme marketed to a “select audience” of persons with millions of dollars of capital gains to shield from taxation lacks

the capacity to deceive a substantial portion of the public. The

claim was properly dismissed with prejudice because amendment would be futile. 

C. Common-law Fraud Claim 

[5] Under Washington law, a fraud plaintiff must plead and

prove that he justifiably relied on the defendants’ misrepresentations. See Stiley v. Block, 925 P.2d 194, 204 (Wash.

1996); Wash. Pattern Jury Instr. Civ. WPI 160.01 (5th ed.).

“Whether a party justifiably relied upon a misrepresentation

is an issue of fact.” Alejandre v. Bull, 98 P.3d 844, 851

(Wash. Ct. App. 2004). 

A party’s reliance is justified when it is “reasonable under

the surrounding circumstances.” ESCA Corp. v. KPMG Peat

SWARTZ v. KPMG 1743
Marwick, 959 P.2d 651, 655 (Wash. 1998). An analysis of the

“surrounding circumstances” is necessarily fact-intensive and

involves multiple considerations. Washington courts have, for

example, discussed the plaintiff’s education, Skagit State

Bank v. Rasmussen, 745 P.2d 37, 38 (Wash. 1988), her experience and relative sophistication with the subject matter of

the representations, Puget Sound Nat’l Bank v. McMahon,

330 P.2d 559, 561 (Wash. 1958), whether the defendant had

special expertise, Westby v. Gorsuch, 50 P.3d 284, 293

(Wash. Ct. App. 2002), and whether oral misrepresentations

were “contradicted” by written documents in the representee’s

possession, Williams v. Joslin, 399 P.2d 308, 309 (Wash.

1965). 

[6] The district court first found that because the engagement letter between Swartz and KPMG advised that BLIPS

was aggressive in nature and involved the possibility of a successful IRS audit, Swartz was precluded from establishing

reasonable reliance. We are unaware of any Washington

authority creating a bright-line rule that “[oral] representations cannot establish reasonable reliance as a matter of law

where there are written documents which contradict [the] oral

statements.” Swartz I, 401 F. Supp. 2d at 1152.7 To be sure,

the existence of truth-containing documents in a plaintiff’s

possession ought to be relevant to the question of whether he

7The non-Washington cases cited by the district court and appellees

similarly fail to establish such a rule or are otherwise inapposite. See e.g.

Chaset v. Fleer/Skybox Int’l, 300 F.3d 1083 (9th Cir. 2002) (addressing

injury, not reasonable reliance); Paracor Fin., Inc. v. Gen. Elec. Capital

Corp., 96 F.3d 1151, 1159 (9th Cir. 1996) (explicit written statement disclaiming reliance “goes far to defeat” claim but is not dispositive); Bank

of the West v. Valley Nat’l Bank of Ariz., 41 F.3d 471, 477-78 (9th Cir.

1994) (bank’s explicit written statement that it exercised independent

judgment in extending credit undermines claim of reliance); Zobrist v.

Coal-X, Inc., 708 F.2d 1511, 1516-17 (10th Cir. 1983) (holding that written statements are not determinative but are one factor among many in

determining reasonable reliance); Townsend v. Columbia Operations, 667

F.2d 844 (9th Cir. 1982) (addressing dismissal on statute of limitations

grounds). 

1744 SWARTZ v. KPMG
reasonably relied on oral falsehoods. But this single factor

will usually not be dispositive. See Stewart v. Estate of

Steiner, 93 P.3d 919, 927 (Wash. Ct. App. 2004) (requiring

consideration of multiple factors in context of securities fraud

suit). 

[7] Even if there were such a rule, it is not at all clear that

the engagement letter “contradicts” any oral misrepresentations alleged by Swartz. The gravamen of Swartz’s complaint

is that the defendants represented BLIPS as an effective taxavoidance strategy and collected substantial fees to implement

the scheme despite knowing that it had no chance of success.

While the engagement letter acknowledges the possibility of

an audit, it also contains assurances that the plan would more

likely than not be upheld over an IRS challenge. Whether this

contradicts any oral representations is not self-evident and

should not result in a dismissal with prejudice at this stage in

the litigation. In addition, Swartz attempted to allege additional misrepresentations by defendants in his proposed

amended complaint that may have demonstrated reasonable

reliance even in the face of the engagement letter. Although

the engagement letter may undermine Swartz’s claim of reasonable reliance, we are not prepared, at the motion to dismiss

stage, to conclude that the letter demonstrates “beyond doubt

that the plaintiff can prove no set of facts in support of the

claims that would entitle him to relief.” Osborne v. District

Attorney’s Office for Third Judicial Dist., 423 F.3d 1050,

1052 (9th Cir. 2005) (emphasis added). 

Swartz also argues that the district court erred by considering the contents of the engagement letter in deciding the

motions to dismiss. The letter itself was proffered in support

of KPMG’s motion and was arguably a matter outside the

pleadings and therefore not cognizable. 

We reject Swartz’s argument. First, it was not presented to

the district court, and indeed was raised for the first time in

Swartz’s reply brief to this court. The claim was therefore

SWARTZ v. KPMG 1745
waived. RUI One Corp. v. City of Berkeley, 371 F.3d 1137,

1152 (9th Cir. 2004). In addition, the district court did not err

here. In ruling on a 12(b)(6) motion, a court may generally

consider only allegations contained in the pleadings, exhibits

attached to the complaint, and matters properly subject to

judicial notice. Jacobson v. Schwarzenegger, 357 F. Supp. 2d

1198, 1204 (C. D. Cal. 2004). However, in order to

“[p]revent[ ] plaintiffs from surviving a Rule 12(b)(6) motion

by deliberately omitting . . . documents upon which their

claims are based,” a court may consider a writing referenced

in a complaint but not explicitly incorporated therein if the

complaint relies on the document and its authenticity is

unquestioned. Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th

Cir. 1998), superseded by statute on other grounds as stated

in Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir. 2006);

see also Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th

Cir. 2001). Here, Swartz brought a breach of contract claim

against KPMG and referred explicitly to the engagement letter. The authenticity of the letter is not in dispute. Therefore,

the letter was properly considered on the 12(b)(6) motions.8

The district court also ruled that circumstances alleged in

the complaint apart from the engagement letter precluded a

finding of reasonable reliance. It highlighted (1) that Moss

Adams warned of the likely failure of the BLIPS claim and

resigned from preparing Swartz’s taxes in October 2000, (2)

that KPMG advised that the tax advantages might be disallowed by the IRS around the same time, and (3) that Swartz

nevertheless filed his 1999 tax return claiming BLIPS losses

and failed to amend it through 2002. While these facts may

also undermine Swartz’s claim of reasonable reliance, they do

8DB suggests that we may affirm the reasonable reliance holding on the

ground—not considered by the district court—that a separate contract

between Swartz and DB contained an express statement of non-reliance.

However, because Swartz neither asserted a breach of contract claim

against DB nor referenced this document in his complaint, the exception

described in the main text does not apply and this material outside the

pleadings may not be considered. 

1746 SWARTZ v. KPMG
not warrant a dismissal under the demanding Rule 12(b)(6)

standard. Jackson, 353 F.3d at 755 (“The issue is not whether

a plaintiff will ultimately prevail but whether the claimant is

entitled to offer evidence to support the claims. Indeed it may

appear on the face of the pleadings that a recovery is very

remote and unlikely but that is not the test.”) (citation omitted). 

In addition, the district court neglected that Swartz essentially claimed two different injuries occurring at different

times: First, Swartz seeks to recover substantial fees paid at

the outset of the BLIPS dealings in the fall of 1999 in reliance

on KPMG’s sales pitch (allegedly as an agent and coconspirator of Presidio and DB) that BLIPS would eliminate

his tax burden. Second, Swartz seeks to recover for harms (in

the form of back taxes, interest, potential penalties, and other

costs) flowing from actually claiming the BLIPS losses on his

tax return filed in fall 2000. That warnings about the scheme’s

unlawfulness began mounting and eventually reached a fever

pitch in the fall of 2000 has little to do with the first injury.

In other words, even if it became unreasonable to rely on

promises of a tax-free future at some point in the fall of 2000,

it was not necessarily unreasonable to pay substantial fees in

the fall of 1999 in connection with what might have then

appeared to be a watertight tax dodge. 

Finally, Swartz’s proposed amended complaint contained

additional allegations that, if proven, could potentially ground

a finding of reasonable reliance even with respect to the second set of harms. For example, Swartz sought to add allegations that KPMG assured Swartz that Moss Adams did not

understand the complexities of BLIPS and that KPMG

remained committed to the viability of the scheme for some

period even after its fall 2000 warning. 

Presidio and DB argue that we may affirm the dismissal of

Swartz’s fraud claim on the ground—not addressed by the

district court—that Swartz failed to adequately plead any misSWARTZ v. KPMG 1747
representations attributable to them. “To survive a motion to

dismiss for failure to state a claim under Rule 12(b)(6), a

complaint generally must satisfy only the minimal notice

pleading requirements of [Federal] Rule [of Civil Procedure]

8(a)(2).” Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003).

However, where a complaint includes allegations of fraud,

Federal Rule of Civil Procedure 9(b) requires more specificity

including an account of the “time, place, and specific content

of the false representations as well as the identities of the parties to the misrepresentations.” Edwards v. Marin Park, Inc.,

356 F.3d 1058, 1066 (9th Cir. 2004) (citation omitted). “To

comply with Rule 9(b), allegations of fraud must be specific

enough to give defendants notice of the particular misconduct

which is alleged to constitute the fraud charged so that they

can defend against the charge and not just deny that they have

done anything wrong.” Bly-Magee v. California, 236 F.3d

1014, 1019 (9th Cir. 2001) (citation, quotations omitted). 

Swartz’s original complaint included several allegations

detailing the time, place, and content of representations made

by KPMG and B&W to Swartz. No one disputes that Swartz

satisfied his pleading burden with respect to those defendants.

Rather, Presidio and DB claim that because the complaint

failed to specify any false representations made by them, it

failed the Rule 9(b) standard. Swartz argues that since DB and

Presidio would be liable for the misrepresentations of their

co-conspirators, and since he pled a conspiracy, the allegations concerning the KPMG and B&W misrepresentations are

sufficient. See e.g., Beltz Travel Serv., Inc. v. Int’l Air Transp.

Ass’n, 620 F.2d 1360, 1367 (9th Cir. 1980). 

[8] First, there is no absolute requirement that where several defendants are sued in connection with an alleged fraudulent scheme, the complaint must identify false statements

made by each and every defendant. “Participation by each

conspirator in every detail in the execution of the conspiracy

is unnecessary to establish liability, for each conspirator may

be performing different tasks to bring about the desired

1748 SWARTZ v. KPMG
result.” Beltz Travel Service, Inc., 620 F.2d at 1367. On the

other hand, Rule 9(b) does not allow a complaint to merely

lump multiple defendants together but “require[s] plaintiffs to

differentiate their allegations when suing more than one

defendant . . . and inform each defendant separately of the

allegations surrounding his alleged participation in the fraud.”

Haskin v. R.J. Reynolds Tobacco Co., 995 F. Supp. 1437,

1439 (M.D. Fla. 1998) (citation, quotation omitted). In the

context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, “identif[y] the role of [each] defendant[ ] in the alleged fraudulent scheme.” Moore v. Kayport

Package Express, Inc., 885 F.2d 531, 541 (9th Cir. 1989). 

[9] With respect to Presidio and DB, the allegations in

Swartz’s original complaint patently fail to comply with Rule

9(b). The complaint is shot through with general allegations

that the “defendants” engaged in fraudulent conduct but attributes specific misconduct only to KPMG and B&W. Conclusory allegations that Presidio and DB “knew that [KPMG and

B&W] were making . . . false statements to clients, including

Swartz, and thus were acting in concert with [KPMG and

B&W]” and “were acting as agents [of KPMG and B&W]”

and were “active participants in the conspiracy” without any

stated factual basis are insufficient as a matter of law. 

[10] However, we cannot say on de novo review that the

pleading “could not possibly be cured by the allegation of

other facts.” Bly-Magee, 236 F.3d at 1019 (quotation, citation

omitted). Indeed, we note that Swartz’s proposed amended

complaint contained detailed allegations of an agreement

between the defendants and the various roles played in the

alleged conspiracy. Consequently, although the lack of specificity in Swartz’s allegations of fraud provides an independent

reason, not relied on by the district court, to affirm its dismissal of Swartz’s fraud based claims, that dismissal would

necessarily be without prejudice. Id.; see also Vess v. CibaGeigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003) (dismissals under Rule 9(b) are “functional[ly] equivalent” to disSWARTZ v. KPMG 1749
missals under Rule 12(b)(6) and should be without prejudice

if defects are curable). For the foregoing reasons, we reverse

the district court’s denial of leave to amend the fraud claim.

D. Civil Conspiracy 

[11] The district court dismissed the civil conspiracy claim

on the ground that it was derivative of Swartz’s other claims,

each of which had been dismissed. Because Swartz is entitled

to an opportunity to re-plead the common-law fraud claim, we

reverse the denial of leave to amend the civil conspiracy claim

as well. 

Presidio and DB argue that the civil conspiracy claim fails

for lack of specificity in the pleadings. Rule 9(b) imposes

heightened pleading requirements where “the object of the

conspiracy is fraudulent.” Wasco Prods, Inc. v. Southwall

Techs, Inc. 435 F.3d 989, 991 (9th Cir.) cert. denied, 127

S. Ct. 83 (2006). As stated in the previous section, we agree

that Swartz failed to sufficiently detail the roles played by the

defendants in the alleged conspiracy to defraud. However, we

repeat that the defects may be curable and reverse the denial

of leave to amend this claim. 

E. Declaratory Judgment 

[12] The district court did not err in dismissing Swartz’s

request for declaratory judgment and we adopt its opinion to

that extent. Swartz I, 401 F. Supp. 2d at 1154-55 (Section III.

E. “Declaratory Judgment”).9 To the extent Swartz seeks a

declaration of defendants’ liability for penalties that may be

9To be clear, we adopt only the district court’s reasons for dismissing

the declaratory judgment claim with prejudice. We do not adopt those

parts of Section III. E. dismissing the common-law fraud and civil conspiracy claims with prejudice. Specifically, we do not adopt the last paragraph in the section beginning with “The above causes of action . . .”

Swartz I, 401 F. Supp. 2d at 1155. 

1750 SWARTZ v. KPMG
assessed in the future, the claim is not ripe. To the extent

Swartz seeks a declaration of defendants’ liability for damages sought for his other causes of action, the claim is merely

duplicative and was properly dismissed. 

F. Personal Jurisdiction 

At the motion to dismiss stage, a plaintiff is generally

required only to make out a prima facie showing of personal

jurisdiction to overcome a 12(b)(2) motion. See Glencore

Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284

F.3d 1114, 1119 (9th Cir. 2002). Even so, mere “bare bones”

assertions of minimum contacts with the forum or legal conclusions unsupported by specific factual allegations will not

satisfy a plaintiff’s pleading burden. See Alperin v. Vatican

Bank, 410 F.3d 532, 539 n.1 (9th Cir. 2005); Butcher’s Union

Local No. 498, United Food and Commercial Workers v. SDC

Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986). 

Appellees are correct that conclusory allegations that “[defendants] directed communication into the U.S. Western District of Washington and otherwise conducted business therein

sufficient to establish minimum contacts within the forum that

support the exercise of jurisdiction over their persons by this

Court” are insufficient to establish a prima facie showing of

personal jurisdiction. Swartz has pointed to nothing more in

his original complaint that would satisfy the requirements of

due process. 

[13] The district court, in its order dismissing Presidio and

DB stated that “[b]ecause those . . . defendants were only

named in regards to causes of action which are being dismissed with prejudice, there is no point in permitting plaintiff

to amend and plead sufficient jurisdictional facts as regards

them.” Swartz I, 401 F. Supp. 2d at 1149. However, because

we reverse the district court’s denial of leave to amend the

common-law fraud and civil conspiracy claims, Swartz may

attempt to cure the jurisdictional defects as well. We note that

SWARTZ v. KPMG 1751
Swartz’s proposed amended complaint contained numerous

factually detailed allegations of appellees’ contacts with the

State of Washington. The sufficiency of those allegations

should, of course, be determined by the district court in the

first instance. 

G. Securities Fraud Claims 

[14] In his proposed amended complaint, Swartz sought to

add alternative claims for violations of federal and Washington securities fraud statutes. The district court disallowed

these new claims primarily on the ground that it had already

held Swartz’s original complaint ruled out the possibility of

reasonable reliance. Since we reverse the district court’s reasonable reliance holding, we also reverse the denial of leave

to add the securities fraud claims. 

[15] The court also noted, but did not reach, B&W’s argument that Swartz’s federal securities fraud claim was timebarred. The issue has not been raised on appeal and we

express no opinion as to whether the claim fails for reasons

other than the reasonable reliance holding. Finally, the district

court objected that because Swartz’s proposed amended complaint sought to disassociate the fraud from the sale of securities in connection with the re-stated RICO claim, he could not

simultaneously plead a securities fraud cause of action. However, because “[a] party may . . . state as many separate claims

. . . as the party has regardless of consistency,” Fed. R. Civ.

P. 8(e)(2), denial of leave to add the securities fraud claims

on this basis was improper. 

V. CONCLUSION 

For the foregoing reasons, we affirm the district court’s dismissal with prejudice of the RICO, WCPA, and declaratory

judgment claims. We also adopt in part the district court’s

opinion in Swartz I as described supra. We reverse the denial

of leave to amend the common-law fraud and civil conspiracy

1752 SWARTZ v. KPMG
claims as well as the denial of leave to add statutory securities

fraud claims. 

AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. APPELLANT TO RECOVER

COSTS ON APPEAL. 

SWARTZ v. KPMG 1753