Zazzali v. Ellison

Filing 41

ORDER ON REPORT AND RECOMMENDATION; incorporating and adopting 31 Report and Recommendations; granting in part and denying in part 13 Motion to Dismiss for Failure to State a Claim. Plaintiff may file their amended complaintwithin 30 days of the date of this Order. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

JAMES R. ZAZZALI, as Trustee for the
DBSI Estate Litigation Trust and as
Trustee for the DBSI Private Actions
Trust,

Case No. 1:12-CV-00284-EJL-MHW
ORDER ON REPORT AND
RECOMMENDATION

Plaintiff,
v.
MARK ELLISON,
Defendant.

On May 9, 2013,United States Magistrate Judge Mikel H. Williams issued a
Report and Recommendation in this matter, Dkt. 31. Pursuant to 28 U.S.C. § 636(b)(1),
the parties had fourteen days in which to file written objections to the Report and
Recommendation. Plaintiff filed his limited objection on May 23, 3013, Dkt. 32. No
objections or response to Plaintiff’s limited objection was filed by Defendant. The matter
is now ripe for the Court’s consideration.

ORDER - 1

DISCUSSION
Pursuant to 28 U.S.C. § 636(b)(1)(C), this Court may accept, reject, or modify, in
whole or in part, the findings and recommendations made by the magistrate judge. Where
the parties object to a report and recommendation, this Court shall make a de novo
determination of those portions of the report which objection is made. Id. Where,
however, no objections are filed the district court need not conduct a de novo review. In
United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003), the court interpreted
the requirements of 28 U.S.C. § 636(b)(1)(C):
The statute [28 U.S.C. § 636(b)(1)(C)] makes it clear that the district judge
must review the magistrate judge's findings and recommendations de novo
if objection is made, but not otherwise. As the Peretz Court instructed, “to
the extent de novo review is required to satisfy Article III concerns, it need
not be exercised unless requested by the parties.” Peretz, 501 U.S. at 939
(internal citation omitted). Neither the Constitution nor the statute requires a
district judge to review, de novo, findings and recommendations that the
parties themselves accept as correct. See Ciapponi, 77 F.3d at 1251
(“Absent an objection or request for review by the defendant, the district
court was not required to engage in any more formal review of the plea
proceeding.”); see also Peretz, 501 U.S. at 937-39 (clarifying that de novo
review not required for Article III purposes unless requested by the parties)
....
See also Wang v. Masaitis, 416 F.3d 993, 1000 & n.13 (9th Cir. 2005). Furthermore, to
the extent that no objections are made, arguments to the contrary are waived. See Fed. R.
Civ. P. 72; 28 U.S.C. § 636(b)(1) (objections are waived if they are not filed within
fourteen days of service of the Report and Recommendation). In this case, an objection
was filed so the Court is required to conduct a de novo determination of the portion of the
Report and Recommendation objected to.
ORDER - 2

FACTUAL BACKGROUND
The Court adopts and incorporates by reference the factual background from the
Report and Recommendation on pages 1- 5.

OBJECTION
Judge Williams recommends that the negligent misrepresentation claim contained
in Count 15 be dismissed without leave to amend as Idaho law does not allow such a
claim except between an accountant and his client. Judge Williams indicates the Trustee
has argued in favor of Idaho law applying to the other state law claims and the court
should be consistent and dismiss a claim that is not allowed under Idaho law. The Trustee
argues that it is premature to dismiss the claim as the alleged negligent misrepresentations
by Ellison may have occurred towards investors outside Idaho and other states may allow
a negligent misrepresentation claim.
The Court finds the most prudent course of action at this time is to grant the
motion to dismiss Count 15 but grant Plaintiff leave to amend the allegations in the
Complaint with specificity as to what states (for which a claim for negligent
misrepresentation is recognized as a cause of action under the facts of this case) the
Defendant made alleged negligent misrepresentations. Any alleged negligent
misrepresentations that occurred in Idaho towards Idaho investors will not be allowed to

ORDER- 3

proceed as Idaho does not recognize such a claim under the facts of this case and those
facts should not be included in the amended allegations.

ORDER
IT IS ORDERED:
1.

The Order and Report and Recommendation (Dkt. 31) shall be
INCORPORATED by reference and ADOPTED in its entirety unless
otherwise modified by this Order.

2.

Defendant’s Motion to Dismiss (Dkt. 13) is GRANTED IN PART AND
DENIED IN PART consistent with the Report and Recommendation and
this Order. Counts 12 (general negligence) and those portions of Counts 11
and 16 which deal with misappropriation are dismissed without leave to
amend. Counts 7, 8, 9, and 18 (legal malpractice, breach of fiduciary duty,
and aiding and abetting breach of fiduciary duty) are dismissed with leave
to amend as stated in the Report and Recommendation. Count 15 (negligent
misrepresentation) is dismissed with leave to amend to incorporate specific
allegations of negligent misrepresentation outside the State of Idaho and in
such states that recognize a claim of negligent misrepresentation. Idaho
claims of negligent misrepresentation by Defendant are dismissed without
leave to amend. Claims for punitive damages arising from state law cause

ORDER- 4

of action are dismissed, with leave to amend as stated in the Report and
Recommendation and in accordance wit the requirements of Idaho Code
§ 6-1604. The motion to dismiss is denied as to all other Counts not
specifically identified above. Plaintiff may file their amended complaint
within thirty (30) days of the date of this Order.

DATED: September 24, 2013

Honorable Edward J. Lodge
U. S. District Judge

ORDER- 5