Enea et al v. Jones et al
Filing
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Order by Hon. James Donato granting in part and denying in part 23 Financial Independence Group, Inc.'s Motion to Dismiss Complaint. (jdlc2, COURT STAFF) (Filed on 8/12/2014)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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CHARLES ENEA, et al.,
Plaintiffs,
v.
GALEN JONES, et al.,
Defendants.
Case No. 14-cv-01526-JD
ORDER GRANTING IN PART AND
DENYING IN PART FINANCIAL
INDEPENDENCE GROUP’S MOTION
TO DISMISS
Re: Dkt. No. 23
United States District Court
Northern District of California
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This case is a state court fraud action against six defendants that was removed to this
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Court. Currently before the Court is defendant Financial Independence Group, Inc.’s motion to
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dismiss. Dkt. No. 23. The Court grants it in part and denies in part.
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BACKGROUND
Plaintiffs are Charles Enea and John Enea, who are brothers and insurance agents, and their
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insurance services company, Enea Insurance Services Inc. Plaintiffs attended training seminars
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sponsored by defendants Galen Jones and Financial Independence Group (“FIG”), an organization
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that markets insurance products, to learn about “an exclusive marketing program” to offer
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annuities to veterans and their widows. Dkt. No. 1-1 ¶¶ 28, 29, 34, 38. Plaintiffs claim that the
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program turned out to be illegal, and that they were not informed that the law in fact required them
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to be “accredited by VA as an agent, attorney, or representative of a VA-recognized veterans
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service organization to assist in the preparation, presentation, and prosecution of a claim for VA
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benefits.” Id. ¶¶ 17-18. Plaintiffs claim they were “subjected to multiple lawsuits and a U.S.
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Senate hearing” as a result of defendants’ conduct. Id. ¶ 40.
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JURISDICTION
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This case was removed to federal court by defendant American Equity Investment Life
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Insurance Company. The primary ground invoked for removal was the Court’s diversity
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jurisdiction pursuant to 28 U.S.C. Sections 1332(a) and 1441(b). Dkt. No. 1 at 3.
This Court is a court of limited jurisdiction, and it has an independent duty to examine
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whether removal jurisdiction exists before proceeding to the merits of a case, even if no party has
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objected to the removal. See, e.g., Valdez v. Allstate Ins. Co., 372 F.3d 1115 (9th Cir. 2004).
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Accordingly, at the hearing on FIG’s motion to dismiss (and on other defendants’ motions to
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compel arbitration that have subsequently been withdrawn), the Court inquired into whether the
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amount in controversy requirement for diversity jurisdiction had properly been met.
United States District Court
Northern District of California
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American Equity has filed a supplemental brief on that issue as directed. Dkt. No. 37.
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Having reviewed that brief as well as the declarations filed with it (including those signed by
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plaintiffs Charles and John Enea themselves), the Court finds that the $75,000 amount in
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controversy requirement has properly been satisfied and that it therefore has subject matter
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jurisdiction over this case.
FIG’S MOTION TO DISMISS
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I.
STATUTE OF LIMITATIONS
Turning to FIG’s motion to dismiss, FIG first argues that “all of the claims in the
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complaint are barred by the statute of limitations because plaintiffs waited for three years after
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being sued to file this lawsuit and they could have, with reasonable diligence, discovered the basis
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for their claims against FIG prior to February 2011.” Dkt. No. 23 at 1. FIG states that plaintiffs
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were sued by their former clients “for alleged misconduct involving the sale of the annuities at
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issue in this case” on February 5, 2011, but did not file this complaint until February 5, 2014. Id.
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at 2.
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Plaintiffs’ complaint asserts five causes of action against all defendants including FIG:
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fraud, breach of fiduciary duty, civil conspiracy, intentional infliction of emotional distress and
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negligent infliction of emotional distress.
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For the intentional and negligent infliction of emotional distress claims, which are subject
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to a two-year statute of limitations, plaintiffs argue that their claims are not time-barred because
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they “arise out of the letter they received from the U.S. Senate on March 3, 2012.” Dkt. No. 32 at
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17. Plaintiffs allege that the letter initiated a U.S. Senate investigation into the plaintiffs’ conduct,
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“inquiring about the business and its methods” and “expressing the seriousness in which the U.S.
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Senate takes the rights of veterans.” Dkt. No. 1-1 ¶¶ 24, 69. As they also argued at the hearing,
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plaintiffs’ position is that it was that letter in particular that was “the triggering act when they
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suffered perceptible trauma” that forms the basis of these two claims. Dkt. No. 32 at 17. FIG
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argues that these are just “additional damages” and that plaintiffs “cannot manipulate the statute of
limitations by picking and choosing when they allegedly sustained emotional distress.” Dkt.
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United States District Court
Northern District of California
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No. 33 at 3. But the Court agrees with plaintiffs that receiving a letter of inquiry from the U.S.
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Senate can plausibly be characterized as a harm that is categorically different from being served
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with a civil lawsuit initiated by one’s former clients, which is a far more common occurrence.
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Because plaintiffs initiated their lawsuit within two years of receiving the letter from the U.S.
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Senate in March 2012, FIG’s statute of limitations argument is denied as to plaintiffs’ infliction of
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emotional distress causes of action.
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With respect to plaintiffs’ fraud and conspiracy causes of action, the parties agree that the
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applicable statute of limitations is three years. FIG asserts that plaintiffs’ three-year clock started
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to run “at some point between May 2006 [when Charles Enea participated in a FIG seminar] and
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February 2011,” when plaintiffs were served with the lawsuit filed by their former clients. Dkt.
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No. 23 at 4. This is because Charles Enea was “in a position to conduct research” into the relevant
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legal requirements (the non-disclosure of which is the basis of this lawsuit) after attending the
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seminar. But that would be requiring far too much of plaintiffs. The Court finds it plausible that
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plaintiffs did not discover facts pertaining to the alleged fraud until they were served with their
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former clients’ lawsuit on February 5, 2011, as alleged in their complaint, and is not persuaded
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that plaintiffs should be held to a higher standard. Accordingly, FIG’s argument is rejected for
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these causes of action as well.
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The Court does not reach FIG’s statute of limitations objection to the breach of fiduciary
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duty claim because that claim is dismissed on other grounds.
II.
FRAUD
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Although FIG is obviously correct that a heightened pleading standard applies to plaintiffs’
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fraud claims under FRCP 9(b), the Court finds that here, plaintiffs have pled enough regarding the
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who, what, when, where and how of the alleged fraud. The complaint provides sufficient details
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about which plaintiff spoke to which defendant when and how, and also quotes specific
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misrepresentations that were allegedly made to plaintiffs. The complaint therefore meets the bar
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set by FRCP 9(b). See Houghton v. Audio Leasing Corp., 841 F.2d 1129 (9th Cir. 1988)
(particularity requirement of Rule 9(b) satisfied when pleading “identifies the circumstances
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United States District Court
Northern District of California
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constituting fraud so that the defendant can prepare an adequate answer from the allegations,” and
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plaintiff need not set forth such facts which are in the exclusive possession of defendants).
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III.
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BREACH OF FIDUCIARY DUTY
Defendant argues that plaintiffs’ breach of fiduciary duty claim should be dismissed under
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FRCP 12(b)(6) because, “as to FIG, plaintiffs have not adequately pled the existence of a fiduciary
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relationship.” Dkt. No. 23 at 8.
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The existence of a fiduciary duty is generally a question of fact that cannot be resolved at
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the motion to dismiss stage. See, e.g., In re Daisy Sys. Corp., 97 F.3d 1171, 1178 (9th Cir. 1996)
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(citing Kudokas v. Balkus, 26 Cal. App. 3d 744, 750 (1972)). Here, however, the Court finds that
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“plaintiffs have not pled facts that would give rise to a fiduciary relationship, and the Court need
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not accept their conclusory allegation that such a relationship existed.” Cruz v. United States, 219
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F. Supp. 2d 1027, 1039 (N.D. Cal. 2002).
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The only basis upon which FIG is alleged to have formed a fiduciary relationship with
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plaintiffs is by virtue of “agreements with the plaintiffs . . . asserting control, through various
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clauses and sections, over the plaintiffs . . . .” Dkt. No. 1-1 ¶ 48. See also id. ¶ 49 (“As a result of
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the agency relationship created through contract, fiduciary and due care duty was obligated to be
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exercised on behalf of the plaintiffs and their company.”).
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In support of their opposition to FIG’s motion to dismiss, plaintiffs requested that the
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Court take judicial notice of two documents which plaintiffs say are “the Financial Independence
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Group Inc., agreements with the plaintiffs.” Dkt. No. 32-1 ¶ 1. The Court grants that request and
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takes judicial notice of Charles Enea’s June 15, 2006 Nondisclosure Agreement with FIG, as well
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as another “Agreement” with FIG that he signed on the same day. See Dkt. No. 32-2.
After reviewing those documents, however, the Court finds nothing that would support
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plaintiffs’ allegation that these agreements gave FIG control over plaintiffs or otherwise gave rise
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to a fiduciary relationship. In fact, the second agreement specifically refers to Charles Enea as
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“contractor.” “While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Here, that support
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United States District Court
Northern District of California
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is lacking and the claim must be dismissed because it is not “plausible on its face.” Bell Atl. Corp.
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v. Twombly, 550 U.S. 544, 570 (2007).
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The Court cannot say at this juncture that “the pleading could not possibly be cured by the
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allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000). Accordingly, the
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Court grants plaintiffs leave to amend this claim.
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IV.
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CIVIL CONSPIRACY
As many decisions hold, civil conspiracy is not an independent cause of action under
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California law. See, e.g., Mangindin v. Washington Mut. Bank, 637 F. Supp. 2d 700, 708 (N.D.
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Cal. 2009) (“A conspiracy is not an independent cause of action, but ‘a legal doctrine that imposes
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liability on persons who, although not actually committing a tort themselves, share with the
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immediate tortfeasors a common plan or design in its perpetration.’”) (quoting Applied Equip.
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Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 510-11 (1994)). The Court therefore grants
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FIG’s motion to dismiss this cause of action without leave to amend.
CONCLUSION
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FIG’s motion to dismiss is granted with leave to amend for plaintiffs’ breach of fiduciary
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duty cause of action and without leave to amend for plaintiffs’ civil conspiracy cause of action.
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FIG’s motion is otherwise denied.
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Plaintiffs may file an amended complaint within 21 days of the date of this order that omits
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the civil conspiracy cause of action and seeks to cure the deficiencies identified in this order for
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their breach of fiduciary duty cause of action as to FIG. The amended complaint may not,
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however, add any new claims or parties without leave of court or the agreement of the parties.
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IT IS SO ORDERED.
Dated: August 12, 2014
______________________________________
JAMES DONATO
United States District Judge
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United States District Court
Northern District of California
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