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L.J. Gibson, Beau Blixseth v. Credit Suisse Ag

March 30, 2012

L.J. GIBSON, BEAU BLIXSETH;
AMY KOENIG, DEAN FRESONKE, VERN JENNINGS, TERRI FROEHLICH, MONIQUE LEFLEUR, AND
GRIFFEN DEVELOPMENT, LLC, EACH INDIVIDUALLY, AND ON BEHALF OF PLAINTIFF MEMBERS OF TAMARACK RESORT, YELLOWSTONE CLUB, LAKE LAS VEGAS AND GINN SUR MER, PLAINTIFFS,
v.
CREDIT SUISSE AG, A SWISS CORPORATION;
CREDIT SUISSE SECURITIES (USA), LLC, A DELAWARE LIMITED LIABILITY COMPANY,
CREDIT SUISSE FIRST BOSTON, A DELAWARE LIMITED LIABILITY CORPORATION;
CREDIT SUISSE CAYMAN ISLAND BRANCH, AN ENTITY OF UNKNOWN TYPE;
CUSHMAN & WAKEFIELD, INC., A DELAWARE CORPORATION AND DOES 1 THROUGH 100 INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Honorable Edward J. Lodge U. S. District Judge

ORDER ON REPORT AND RECOMMENDATION PROPOSED CLASS

On February 17, 2012, United States Magistrate Judge Ronald E. Bush issued a Report and Recommendation ("Report"), recommending the Defendants' Motions to Dismiss be granted in part and denied in part and that the Motion to Intervene be denied. (Dkt. 198.)*fn1 Any party may challenge a magistrate judge's proposed recommendation by filing written objections within ten days after being served with a copy of the Report and Recommendation. 28 U.S.C. § 636(b)(1)(C). The district court must then "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. The district court may accept, reject, or modify in whole or in part, the findings and recommendations made by the magistrate judge. Id.; see also Fed. R. Civ. P. 72(b).

Neither Plaintiffs nor the proposed intervenors have filed any objections to the Report.*fn2 Defendants, Credit Suisse and Cushman & Wakefield, each filed objections to the Report.*fn3 (Dkt. 199, 200.) The parties have filed their responsive briefs and the matters are now ripe for the Court's review. (Dkt. 208, 209.) Having considered the parties' contentions and conducted a de novo review of the record, the Court finds as follows.

Discussion

On March 31, 2011, this Court adopted in part and rejected in part, Magistrate Judge Bush's February 17, 2011 Report and Recommendation concerning the Defendants' first round of Motions to Dismiss as to the Second Amended Complaint ("SAC"). (Dkt. 126.) In doing so, the Court allowed Plaintiffs an opportunity to file a Third Amended Complaint ("TAC") as well as granting the Defendants leave to file the instant Motions to Dismiss. (Dkt. 126 at 29-30.) Plaintiffs timely filed their TAC and the Defendants filed their Motions to Dismiss. (Dkt. 131, 134, 136.) On January 12, 2012, Magistrate Judge Bush held a hearing on the Motions and took the matters under advisement. (Dkt. 192.) After investing a great deal of time and effort into the case, Magistrate Judge Bush then issued the Report, the objections to which this Court now takes up. (Dkt. 198.)

1. Applicable Standards

A. Rule 9(b)

Cushman & Wakefield make a general objection that the Magistrate Judge failed to apply Rule 9(b)'s fraud requirements to Plaintiffs' claims. (Dkt. 200.) Had Rule 9(b) been applied, they argue, all of the claims against it would be dismissed. Plaintiffs counter arguing the Report properly applied both Rule 8 and Rule 9(b) to the claims. (Dkt. 208 at 2--6.)

In the prior Order discussing the Negligence Claim, this Court concluded that Plaintiffs' claims generally "sounded in fraud." (Dkt. 126 at 21-22.) There, the Court determined the SAC failed to satisfy Rule 9(b)'s particularity requirement as to the Negligence Claim and, upon that basis, granted the Motions to Dismiss without prejudice as to that claim. (Dkt. 126 at 22.) Plaintiffs were specifically granted leave to amend those claims dismissed without prejudice. (Dkt. 126 at 29.) Thereafter, Plaintiffs filed their TAC which is challenged in the instant Motions to Dismiss and is the subject of review in the Report and this Order. (Dkt. 131.) This Court again finds Rule 9(b)'s heightened pleading standards apply to Plaintiffs' claims that sound in fraud.

"Rule 9(b) requires that, when fraud is alleged, 'a party must state with particularity the circumstances constituting fraud....'" Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Fed. R. Civ. P. 9(b)). "Where fraud is not an essential element of a claim, only those allegations of a complaint which aver fraud are subject to Rule 9(b)'s heightened pleading standard." Id. (citation omitted). "To the extent a party does not aver fraud, the party's allegations need only satisfy the requirements of Rule 8(a)(2)." Id. "Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud (even if the word 'fraud' is not used)." Id.*fn4

Cushman & Wakefield argue the allegations in the TAC repeat the same allegations this Court previously determined to be insufficient in the SAC. (Dkt. 200 at 4-5.) In particular, Cushman & Wakefield note the TAC never explains how their appraisals were false and deceptive or massively inflated; false or misleading; or in violation of FIRREA or USPAP. (Dkt. 200 at 5.)*fn5 Furthermore, Cushman & Wakefield argue the TAC lacks particularized allegations of an unlawful agreement or understanding, i.e. a conspiracy, between it and Credit Suisse. (Dkt. 200 at 9.)

This Court finds the Magistrate Judge applied both Rules 8 and 9(b) to the claims in this case. The Report recognized this Court's application of Rule 9(b) to the prior Order. (Dkt. 198 at 39.) Additionally, the Report examined the revised allegations contained in the TAC with particularity as to the Negligence Claim (Dkt. 198 at 40-43) as well as the other claims; i.e. Fraud (Dkt. 198 at 19-24, 26), Breach of Fiduciary Duty (Dkt. 198 at 33), and Tortious Interference (Dkt. 198 at 35-36). In addressing the Consumer Protection Act Claim, the Report acknowledged that "fraud claims must be plead with a certain level of specificity and particularity." (Dkt. 198 at 45.) Moreover, this Court has independently reviewed the claims in the TAC and applied Rule 9(b)'s pleading requirement as necessary in reaching its ruling in this Order.

As to Cushman & Wakefield's specific objections, i.e. that the claims in the TAC merely recycle those found to be insufficient in the SAC, the lack of any allegation that the appraisals were false, deceptive, massively inflated, or misleading; no showing of any violation of FIRREA or USPAP; and that the TAC lacks particularized allegations of a conspiracy with Credit Suisse; the Court will address these arguments as to the particular claims below.

B. Iqbal and Twombly

Credit Suisse objects to the Report's denial of its Motion as to the claims of negligence, tortious interference, breach of fiduciary duty and conspiracy, arguing undue deference was given to the allegations in the TAC contrary to the Twombly and Iqbal standard. (Dkt. 199 at 3.) The Report clearly and correctly laid out the Rule 8 pleading standard found in Twombly and Iqbal. (Dkt. 198 at 13-15.) This Court finds the Report also properly applied that standard to the Motions to Dismiss in this case. The applicable principles require that the court accept as true all factual allegations of the complaint and that the complaint state a plausible claim for relief. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). The Court finds the Magistrate Judge adhered to these principles in the Report and the objection is denied.

2. Breach of Fiduciary Duty Claim

Cushman & Wakefield object to the Report's conclusion to the Breach of Fiduciary Duty claim on the grounds that: 1) the Magistrate Judge improperly revived the claim previously dismissed, 2) no facts have been plead establishing a relationship of trust and confidence between it and Plaintiffs, and 3) the TAC fails to allege any conspiracy between Cushman & Wakefield and Credit Suisse. (Dkt. 200.) Credit Suisse argues the Report improperly applied the pleading standards to Plaintiffs' TAC and that the TAC fails to allege facts giving rise to a fiduciary duty owed by it to Plaintiffs. (Dkt. 199 at 6.)

A. Granting Leave to Amend the Complaint

The day after filing their TAC, Plaintiffs filed a Motion to Amend Third Cause of Action to include a claim for breach of fiduciary duty against Cushman & Wakefield based on newly-discovered facts. (Dkt. 130.) That claim had been dismissed with prejudice as to Cushman & Wakefield in this Court's prior Order on the first Report and Recommendation. (Dkt. 126.) In this Report, Magistrate Judge Bush considered the Motion to Amend and issued an Order granting the same in the Report. (Dkt. 198 at 10-13.) Cushman & Wakefield object, challenging Judge Bush's authority to reverse or revisit this Court's Order dismissing the claim and any basis for allowing Plaintiffs to "resurrect" their claim. (Dkt. 200 at 13.)

In recommending dismissal of the claim, the prior Report noted only that Plaintiffs had not responded or argued against dismissal of the claim in their briefing or oral argument. (Dkt. 106 at 44 n. 30.) It was upon that basis that this Court ordered the claim be dismissed with prejudice. (Dkt. 126.) In that Order, Plaintiffs were granted leave to amend their complaint as to other claims that were dismissed without prejudice; the Breach of Fiduciary Duty Claim was not among those claims subject to amendment. (Dkt. 126 at 29.) This is the background upon which Plaintiffs filed their Motion for Leave to Amend the TAC to include the breach of fiduciary duty claim against both Defendants. (Dkt. 130.) The Magistrate Judge took up the Motion and issued an Order granting the same. (Dkt. 198 at 10.) In so ordering, Judge Bush recognized that this case remains in an early procedural stage and that the prior dismissal of the claim was not on the merits but rather by ...


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