Jones et al v. KPMG, LLP et al

Filing 36

ORDER denying 26 Motion to Certify Order for Interlocutory Appeal; finding as moot 26 Motion to Stay Proceedings. Signed by District Judge Louis Guirola, Jr., on 12/27/2018. (BR)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
THOMAS JONES, JOSEPH CHARLES
LOHFINK, SUE BEAVERS,
RODOLFOA REL, and HAZEL REED
THOMAS, on behalf of themselves
and others similarly situated

PLAINTIFFS

and
MARTHA EZELL LOWE, individually
and on behalf of a class of similarly
situated employees
v.

CONSOLIDATED
PLAINTIFF
CAUSE NO. 1:17CV319-LG-RHW

KPMG, LLP and TRANSAMERICA
RETIREMENT SOLUTIONS CORP.

DEFENDANTS

ORDER DENYING KPMG’S MOTION TO CERTIFY
ORDER FOR INTERLOCUTORY APPEAL
BEFORE THE COURT is the [26] Motion to Certify Order for Interlocutory
Appeal in which the defendant KPMG, LLP, asks the Court to certify its [21]
Memorandum Opinion and Order denying KPMG’s Motion to Dismiss for interlocutory
appeal. The parties have fully briefed the Motion to Certify. After reviewing the
submissions of the parties, the record in this matter, and the applicable law, the Court
finds that KPMG’s Motion to Certify should be denied.
BACKGROUND
This putative class action arose out of the alleged under-funding of the Singing
River Health System Employees’ Retirement Plan and Trust. Lowe has sued KPMG,
the company that audited the annual financial statements of Singing River Health
System, and the Plan. The sole claim against KPMG is that it “knowingly participated

in and/or aided and abetted in a breach of fiduciary duty by the Individual Trustees” in
its 2010 and 2011 audit reports by allowing or failing to correct misleading statements
that attributed the Trust’s under-funding to returns on investments and changed
actuarial assumptions.
KPMG filed a Motion to Dismiss arguing, inter alia, that no Mississippi court
has ever recognized a claim of aiding and abetting breach of fiduciary duty. When
denying KPMG’s Motion, the Court assumed, based on a prior case decided by this
Court, that Mississippi state courts would recognize a cause of action for aiding and
abetting breach of fiduciary duty under the Restatement (Second) of Torts § 876(b).
KPMG filed the present Motion to Certify the Memorandum Opinion and Order
denying its Motion to Dismiss, asserting for the first time that the Court erred by
creating a new Mississippi state law cause of action.
DISCUSSION
Permissive interlocutory appeals are governed by 28 U.S.C. § 1292(b), which
creates a “narrow exception” to the final judgment rule. In re Rolls Royce Corp., 775
F.3d 671, 676 (5th Cir. 2014). Therefore, an interlocutory appeal “is available only in
limited circumstances.” In re Lloyd's Register N. Am., Inc., 780 F.3d 283, 288 (5th Cir.
2015).
When a district judge, in making in a civil action an order not otherwise
appealable under this section, shall be of the opinion that such order
involves a controlling question of law as to which there is substantial
ground for difference of opinion and that an immediate appeal from the
order may materially advance the ultimate termination of the litigation,
he shall so state in writing in such order.
28 U.S.C. § 1292(b).

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KPMG requests certification of the following question: “Was it error for the
district court to make an Erie guess as to the existence of an aiding and abetting breach
of fiduciary duty claim under Mississippi law?” (Def.’s Mem. 2, ECF No. 27.) This
question is a controlling question of law.
The Court must next determine whether there is a substantial ground for
difference of opinion as to this question of law. KPMG cites In re DePuy Orthopaedics,
Inc., Pinnacle Hip Implant Products Liability Litigation, 888 F.3d 753, 781-82 (5th Cir.
2018), for the proposition that, “When sitting in diversity, a federal court exceeds the
bounds of its legitimacy in fashioning novel causes of action not yet recognized by the
state courts.” However, the plaintiff, Martha Ezell Lowe, has identified a case in which
the Mississippi Supreme Court has recognized a cause of action for aiding and abetting
breach of fiduciary duty. See Knox Glass Bottle Co. v. Underwood, 89 So. 2d 799, 820-24
(Miss. 1956). In Knox, a corporation sued several individuals, including former
corporate officer C. Alberta Luter, seeking to recover profits that the individuals
obtained by leasing trucks to the corporation. KPMG claims that the Knox decision did
not actually create a cause of action for aiding and abetting breach of fiduciary duty,
but the following excerpt of the opinion belies KPMG’s assertion:
[T]he Court holds, that Miss Luter actively participated and joined C.R.
Underwood, with actual knowledge of the breach of his fiduciary duties, in
obtaining profits by truck rentals from complainant corporation, and that
she is liable for the net profits received by her from the truck rentals on
and after January 1, 1952. All of these and other circumstances render it
manifest that C. R. Underwood and Luter were close personal friends and
business associates, and that she knowingly participated with him and E.
F. and J. H. Underwood in the breach of their fiduciary duties to the
corporation, by the continuance in effect of the leases by her to the
corporation after Roy’s death. She comes clearly within the universally
accepted rule that one who participates with a fiduciary in a breach of his

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duties, with knowledge that he is violating his obligations, is liable for the
profits received thereby from the corporation.
Id. at 824 (emphasis added).
Furthermore, this Court previously predicted that the Mississippi state courts
would recognize a cause of action for aiding and abetting. See Dale v. Ala Acquisitions,
Inc., 203 F. Supp. 2d 694, 700-01 (S.D. Miss. 2002). As a result, there are no conflicting
opinions concerning whether a cause of action for aiding and abetting breach of
fiduciary duty should be recognized under Mississippi law.
CONCLUSION
For the foregoing reasons, KPMG’s request for certification of this Court’s [21]
Memorandum Opinion and Order denying KPMG’s Motion to Dismiss for interlocutory
appeal is denied, because there is no substantial ground for difference of opinion as to
whether this Court erred in recognizing a cause of action for aiding and abetting breach
of fiduciary duty. KPMG’s request for a stay of discovery pending interlocutory appeal
is also denied as moot on this same basis.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the [26] Motion to
Certify Order for Interlocutory Appeal is DENIED.
SO ORDERED AND ADJUDGED this the 27th day of December, 2018.

s/

Louis Guirola, Jr.

Louis Guirola, Jr.
United States District Judge

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