Court Opinion

ID: 3203178
Source: CourtListenerOpinion
Date Created: 2016-05-12 20:01:03.912613+00
Date Added: 2024-06-11T14:28:27.194017
License: Public Domain

NOT FOR PUBLICATION                        FILED
                       UNITED STATES COURT OF APPEALS                    MAY 12 2016
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

 GREGORY R. RAIFMAN; et al.,                       No. 14-15851

               Plaintiffs - Appellants,            D.C. No. 4:11-cv-02885-SBA

    v.
                                                   MEMORANDUM*
 WACHOVIA SECURITIES, LLC, n/k/a
 Wells Fargo Advisors, LLC and WELLS
 FARGO ADVISORS, LLC, successor in
 interest to Wachovia Securities, LLC,

               Defendants - Appellees.

                     Appeal from the United States District Court
                        for the Northern District of California
                    Saundra B. Armstrong, District Judge, Presiding

                                Submitted May 9, 2016**
                                San Francisco, California

Before: McKEOWN and FRIEDLAND, Circuit Judges and BOULWARE, ***
District Judge.

         *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
         **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
         ***
             The Honorable Richard F. Boulware, District Judge for the U.S.
District Court for the District of Nevada, sitting by designation.
      The issue on appeal is whether Plaintiffs’ suit against Wachovia for alleged

misconduct in connection with a “stock loan program” is barred by the statute of

limitations. The district court held that it was and we affirm.

      Plaintiffs do not dispute that at the time their loans matured and they realized

they were not getting their stock back, they were on notice that something was

wrong and that this notice required an investigation on their part. They contend,

however, that they were on notice of only Derivium’s wrongdoing, not

Wachovia’s. They further contend that, despite their reasonable diligence in

investigating, they had no reason to suspect Wachovia until November 2010, when

Wachovia produced various documents in a separate bankruptcy matter. That is

when “smoking gun” evidence was discovered and Plaintiffs claim they finally

became aware that they could pursue claims against Wachovia. Plaintiffs argue

that the “delayed discovery rule” should apply to toll the statute of limitations until

they discovered those documents.

      Under California law (which provides the longest statute of limitations that

could apply in this case), the discovery rule “postpones accrual of a cause of action

until the plaintiff discovers, or has reason to discover, the cause of action.” Fox v.

Ethicon Endo-Surgery, Inc., 110 P.3d 914, 920 (Cal. 2005). “A plaintiff has

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reason to discover a cause of action when he or she ‘has reason at least to suspect a

factual basis for its elements.’” Id. (emphasis added) (quoting Norgart v. Upjohn

Co., 981 P.2d 79, 88 (Cal. 1999)). “Elements” does not refer to the legal elements

of a specific claim, merely the “‘generic’ elements of wrongdoing, causation, and

harm.” Id. In other words, “a potential plaintiff who suspects that an injury has

been wrongfully caused must conduct a reasonable investigation of all potential

causes of that injury. If such an investigation would have disclosed a factual basis

for a cause of action, the statute of limitations begins to run on that cause of action

when the investigation would have brought such information to light.” Id. at 921

(emphasis added). To take advantage of the discovery rule, a plaintiff must

“specifically plead facts to show (1) the time and manner of discovery and (2) the

inability to have made earlier discovery despite reasonable diligence.” Grisham v.

Philip Morris, USA, Inc., 151 P.3d 1151, 1159 (Cal. 2007).

      As the district court correctly explained, based on Wachovia’s involvement

in the loan program, Plaintiffs had reason to suspect possible wrongdoing by

Wachovia and to investigate Wachovia within the time limitations. Plaintiffs did

not adequately plead in their complaint what investigations they undertook and

why they were unable to discover earlier the facts that were later disclosed in the

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separate bankruptcy proceeding. None of Plaintiffs’ allegations regarding

Wachovia show what, if anything, Plaintiffs did to diligently investigate Wachovia

in this case, nor does the complaint provide any reason why Plaintiffs were unable

to discover information sufficient to file a complaint within the statutory period.

      Moreover, Plaintiffs’ contention that they could not have filed suit until the

November 2010 “smoking gun” disclosure is unavailing for at least two reasons:

First, the letter primarily referred to as the key disclosure does not actually say

Wachovia sold the borrowers’ securities or that anything untoward was happening

between Wachovia and Derivium. Second, “[a] plaintiff need not be aware of the

specific ‘facts’ necessary to establish the claim [in order for the claim to accrue];

that is a process contemplated by pretrial discovery. Once the plaintiff has a

suspicion of wrongdoing, and therefore an incentive to sue, she must decide

whether to file suit or sit on her rights.” Jolly v. Eli Lilly & Co., 751 P.2d 923,

928 (Cal. 1988) (in bank).

      Finally, Plaintiffs’ contention that the limitations period should be tolled

because of Wachovia’s fraudulent concealment of relevant materials fails for

similar reasons. “In order to establish fraudulent concealment, the complaint must

show: (1) when the fraud was discovered; (2) the circumstances under which it was

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discovered; and (3) that the plaintiff was not at fault for failing to discover it or had

no actual or presumptive knowledge of facts sufficient to put him on inquiry.”

Baker v. Beech Aircraft Corp., 114 Cal. Rptr. 171, 175 (Cal. Ct. App. 1974).

Again, Plaintiffs do not sufficiently allege any efforts to investigate, or that

Wachovia fraudulently withheld information. In their briefing before this court,

Plaintiffs also do nothing to suggest that they could so allege if given an

opportunity to amend—even after the district court faulted their allegations on

these very grounds. The district court was therefore correct in treating further

leave to amend as futile.

      AFFIRMED.

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