Cynthia Marie Vespa v. Singler-Ernster Inc. et al
Filing
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ORDER by Judge Richard Seeborg denying 52 Motion to Dismiss; denying 53 Motion to Dismiss. (cl, COURT STAFF) (Filed on 4/5/2017)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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CYNTHIA MARIE VESPA,
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Case No. 16-cv-03723-RS
Plaintiff,
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United States District Court
Northern District of California
v.
ORDER DENYING MOTIONS TO
DISMISS
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SINGLER-ERNSTER INC., et al.,
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Defendants.
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Pursuant to Civil Local Rule 7-1(b), defendants’ motions to dismiss the First Amended
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Complaint are suitable for disposition without oral argument, and the hearing set for April 7, 2017
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is hereby vacated. The motions will be denied.
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In this putative class action, plaintiff Cynthia Maria Vespa brings claims under ERISA on
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behalf of participants in an Employee Stock Ownership Plan (“ESOP”), formerly administered by
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defendant Singler-Ernster, Inc. (“The Company”).1 The Company was founded by Peter Singler,
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Sr. and a partner. The Company originally owned and operated a number of Round Table Pizza
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franchises in the San Francisco Bay area, on the Peninsula and in the North Bay. Vespa alleges, in
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essence, that upon the retirement and subsequent death of Peter Singler, Sr., his son, defendant
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Peter Singler, Jr., assumed control of the business and, through a series of imprudent management
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The original complaint also advanced claims under state law. Those claims have been omitted
from the First Amended Complaint.
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decisions, involving attempts to operate restaurants other than Round Table Pizza franchises,
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destroyed the value of the Company—thereby rendering the putative class’s interest in the ESOP
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worthless. Vespa particularly challenges defendants’ decision to have the ESOP expend
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$250,000—cash acquired in a bequest from Peter Singler, Sr.—to purchase additional Company
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stock at a time when they allegedly knew the value of the Company and its stock was collapsing.
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A prior motion to dismiss brought by Peter Singler, Jr. was granted, with leave to amend.
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A primary basis for that dismissal was the fact the majority of the substantive allegations in the
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complaint were qualified as being made “on information and belief.” As explained in the prior
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order, despite how commonplace that phrase may be in practice, it is not a recognized pleading
device under the Federal Rules. Rather, Rule 11(b) of the Federal Rules of Civil Procedure
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United States District Court
Northern District of California
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provides that by submitting a pleading to the court, the signatory is always certifying that, “to the
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best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under
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the circumstances . . . the factual contentions have evidentiary support or, if specifically so
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identified, will likely have evidentiary support after a reasonable opportunity for further
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investigation or discovery.” While use of the phrase therefore can often be dismissed as mere
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surplusage, in some circumstances it gives rise to an inference that the pleader lacks knowledge of
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underlying facts to support the allegations made, and is instead engaging in speculation to an
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undue degree.
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The prior order directed that in any amended complaint, plaintiff would be required to
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“make her averments without caveat and/or with additional detail explaining the basis of her
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beliefs.” The order further noted, however, that plaintiff would remain “free to invoke the
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provision of Rule 11 that permits a party specifically to identify averments as ones which it in
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good faith believes, ‘will likely have evidentiary support after a reasonable opportunity for further
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investigation or discovery.’”
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Plaintiff’s amended complaint liberally invokes that provision of Rule 11. The vast
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majority of the critical factual allegations are presented with a claim that plaintiff in good faith
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believes further investigation and discovery will lead to supporting evidence. Defendants’ present
ORDER DENYING MOTIONS TO DISMISS
CASE NO. 16-cv-03723-RS
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motions to dismiss2 argue that plaintiff has thereby effectively admitted she lacks facts sufficient
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to state a plausible claim, and that the complaint should now be dismissed with prejudice.
Defendants’ argument would render the provision of Rule 11 on which plaintiff relies a
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nullity. To be sure, a plaintiff should not be permitted to evade the pleading requirements of
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Twombly and Iqbal3 by making wholly conclusory allegations and then invoking a mantra that he
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or she hopes evidence supporting those allegations will subsequently emerge. Here, however,
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plaintiff has adequately stated—as assertions of fact—the elements of her claims. Indeed,
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defendants’ motions virtually concede the facts are alleged; they instead argue those allegations
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should be disregarded in light of plaintiffs’ admission that she does not presently possess
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supporting evidence.
Plaintiff’s counsel, of course, has taken responsibility under Rule 11 for having a good
United States District Court
Northern District of California
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faith basis to believe evidentiary support for those claims likely will be discovered. Because the
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allegations are now backed by that representation, they cannot simply be disregarded, as
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defendants urge.
The prior order also dismissed the second claim for relief—now embodied in the third and
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fourth claims of the First Amended Complaint—on grounds that the allegations of the complaint
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only supported a conclusion that the ESOP had no ownership interest in the allegedly mismanaged
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Company assets. Although the question remains close, plaintiff has adequately shown it to be a
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factual issue, not suitable for disposition at the pleading stage, whether those claims are tenable.
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Again, the fact that plaintiff has invoked Rule 11 does not warrant disregard of her factual
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averments.
Finally, Carol Singler’s separate argument that no basis for her liability has been
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Peter Singler, Jr., again is a moving party. By separate motion, defendants Singler-Ernster, Inc.,
Carol S. Singler, and the Singler-Ernster, Inc. Employee Stock Ownership Plan and Trust both
join in Peter Singler, Jr.’s arguments and contend that Carol Singler would not be liable in any
event.
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See Bell Atlantic Corp. v. Twombly, 550 US 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).
ORDER DENYING MOTIONS TO DISMISS
CASE NO. 16-cv-03723-RS
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adequately pleaded fails. While the allegation that Carol Singler had knowledge of Peter Singler’s
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conduct is indeed somewhat conclusory, under all the factual circumstances presented it is
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sufficiently plausible as to not require further evidentiary detail at the pleading stage.
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Accordingly, the motions to dismiss are denied.
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IT IS SO ORDERED.
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Dated: April 5, 2017
______________________________________
RICHARD SEEBORG
United States District Judge
United States District Court
Northern District of California
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ORDER DENYING MOTIONS TO DISMISS
CASE NO. 16-cv-03723-RS
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