The Federal Deposit Insurance Corporation, et al v. Killinger et al
Filing
53
MOTION to Dismiss by Defendants Stephen J Rotella, David C Schneider. Oral Argument Requested. Noting date: 9/15/2011(Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Proposed Order)(Rummage, Stephen) Noting date added per request of counsel on 7/5/2011 (TF).
The Honorable Marsha J. Pechman
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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10 THE FEDERAL DEPOSIT INSURANCE
CORPORATION, AS RECEIVER OF
11 WASHINGTON MUTUAL BANK,
Plaintiff,
12
13
v.
14 KERRY K. KILLINGER, STEPHEN J.
ROTELLA, DAVID C. SCHNEIDER,
15 LINDA C. KILLINGER, and ESTHER T.
ROTELLA,
16
Defendants.
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Case No. 2:11-cv-00459 MJP
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S MOTION TO DISMISS
NOTE ON MOTION CALENDAR:
September 15, 2011
ORAL ARGUMENT REQUESTED
18
19
20
21
22
23
24
25
26
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS
CASE NO. 2:11-CV-00459 MJP
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
TABLE OF CONTENTS
1
Page
2
3
4
PRELIMINARY STATEMENT................................................................................................... 1
FACTUAL BACKGROUND ....................................................................................................... 4
A.
The FDIC Intervenes to the Detriment of Shareholders, Creditors,
Employees, and the Seattle Economy .................................................................... 6
C.
The FDIC Files Its Complaint Two-and-a-Half Years Later................................... 7
D.
6
During the Relevant Time Period, Neither the FDIC Nor the OTS Raised Any
Red Flags about WaMu ......................................................................................... 4
B.
5
The FDIC Files the Appraisal Vendor Lawsuits..................................................... 8
7
8
9
10
11
12
LEGAL STANDARD ................................................................................................................ 10
ARGUMENT ............................................................................................................................. 11
I.
13
THE FDIC’S COMPLAINT FAILS TO STATE A NEGLIGENCE-BASED CLAIM
AGAINST DEFENDANTS ............................................................................................ 11
A.
Washington’s Business Judgment Rule Insulates Officers from Lawsuits
Attacking Allegedly Mistaken but Good Faith, Informed Business Decisions ...... 11
B.
The Allegations in the Complaint Fall Well within the Protection of the
Business Judgment Rule ...................................................................................... 12
14
15
16 II.
17
THE FDIC CANNOT ADEQUATELY ALLEGE THAT THE DEFENDANTS’
CONDUCT PROXIMATELY CAUSED THE BANK’S FAILURE ............................... 13
III.
THE BREACH OF FIDUCIARY DUTY CLAIM DUPLICATES THE
NEGLIGENCE CLAIMS, AND THE COURT SHOULD DISMISS IT.......................... 15
19 IV.
20
THE FDIC’S ALLEGATIONS OF FRAUDULENT CONVEYANCE DO NOT
SATISFY THE PLEADING REQUIREMENTS OF RULES 9(b) OR 8(a) OF THE
FEDERAL RULES OF CIVIL PROCEDURE ................................................................ 16
21
A.
The FDIC Does Not Sufficiently Plead Its Allegation Concerning an Alleged
Transfer of $1 Million ......................................................................................... 16
B.
The FDIC’s Allegations Regarding the Transfer of “Their Residence” Fail As
a Matter of Law ................................................................................................... 17
18
22
23
24 V.
THE FDIC’S ASSET FREEZE CAUSE OF ACTION LIKEWISE FAILS ..................... 19
25 CONCLUSION .......................................................................................................................... 20
26
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE i
CASE NO. 2:11-CV-00459 MJP
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
TABLE OF AUTHORITIES
1
Page(s)
2
CASES
3
4 Am. W. Airlines, Inc. v. GPA Group, Ltd.,
877 F.2d 793 (9th Cir. 1989)............................................................................................... 13
5
Awai v. Kotin,
872 P.2d 1332 (Colo. App. 1993)........................................................................................ 16
6
7 Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007)..................................................................................................... passim
8
Beringer v. Standard Parking O’Hare Joint Venture,
Nos. 07 C 5027, 07 C 5119, 2008 WL 4890501 (N.D. Ill. Nov. 12, 2008)........................... 15
9
10 Bly-Magee v. Cal.,
236 F.3d 1014 (9th Cir. 2001)............................................................................................. 10
11
Churchill v. Barach,
863 F. Supp. 1266 (D. Nev. 1994)....................................................................................... 14
12
13 Citron v. Fairchild Camera & Instrument Corp.,
569 A.2d 53 (Del. 1989) ..................................................................................................... 12
14
CMMF, LLC v. J.P. Morgan Inv. Mgmt. Inc.,
915 N.Y.S.2d 2, 6 (App. Div. 2010).................................................................................... 15
15
16 Cooper v. Pickett,
137 F.3d 616 (9th Cir. 1997)............................................................................................... 17
17
Global View Ltd. Venture Capital v. Great Cent. Basin Exploration, L.L.C.,
288 F. Supp. 2d 473 (S.D.N.Y. 2003) ........................................................................... 11, 17
18
19 Grassmueck v. Barnett,
No. C03-122P, 2003 WL 22128263 (W.D. Wash. July 7, 2003).......................................... 12
20
Hakopian v. Mukasey,
551 F.3d 843 (9th Cir. 2008)............................................................................................... 14
21
22 Holden v. Hagopian,
978 F.2d 1115 (9th Cir. 1992)............................................................................................. 10
23
Hua v. Boeing Corp.,
No. C08-0010RSL, 2009 WL 1044587 (W.D. Wash. Apr. 17, 2009) .................................. 15
24
25 In re Citigroup Inc. S’holder Deriv. Litig.,
964 A.2d 106 (Del. Ch. 2009) ......................................................................................... 2, 11
26
In re Daisy Sys. Corp.,
No. C-92-1845-DLJ, 1993 WL 491309 (N.D. Cal. Feb. 3, 1993) .............................10, 11, 18
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE i
CASE NO. 2:11-CV-00459 MJP
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 In re GlenFed, Inc. Sec. Litig.,
42 F.3d 1541 (9th Cir. 1994)............................................................................................... 10
2
In re Motorwerks, Inc.,
371 B.R. 281 (Bankr. S.D. Ohio 2007)................................................................................ 17
3
4 In re Spokane Concrete Prods., Inc.,
126 Wn. 2d 269, 892 P.2d 98 (1995)................................................................................... 12
5
In re Sunrise Sec. Litig.,
138 F.R.D. 60 (E.D. Pa. 1991) ............................................................................................ 13
6
7 Jacobson v. Wash. State Univ.,
No. CV-05-0092-FVS, 2007 WL 26765 (E.D. Wash. Jan. 3, 2007)..................................... 15
8
Joy v. North,
692 F.2d 880 (2d Cir. 1982)................................................................................................ 11
9
10 Kearns v. Ford Motor Co.,
567 F.3d 1120 (9th Cir. 2009)..................................................................................10, 17, 18
11
Kranz v. Koenig,
240 F.R.D. 453 (D. Minn. 2007) ......................................................................................... 16
12
13 Lane v. City of Seattle,
164 Wn. 2d 875, 194 P.3d 977 (2008)................................................................................. 11
14
Minnick v. Clearwire US, LLC,
683 F. Supp. 2d 1179 (W.D. Wash. 2010)........................................................................... 14
15
16 Nat’l Ctr. for Emp’t of the Disabled v. Ross,
No. CV 05-2014-PHX-JAT, 2006 WL 778647 (D. Ariz. Mar. 27, 2006)............................. 16
17
Neubronner v. Milken,
6 F.3d 666 (9th Cir. 1993)............................................................................................. 16, 19
18
19 Nguyen v. Boeing Co.,
No. C10-0415MJP, 2010 WL 2102501 (W.D. Wash. May 25, 2010) .................................. 15
20
Nursing Home Bldg. Corp. v. DeHart,
13 Wn. App. 489, 535 P.2d 137 (1975)............................................................................... 11
21
22 Oki Semiconductor Co. v. Wells Fargo Bank,
298 F.3d 768 (9th Cir. 2002)............................................................................................... 13
23
Para-Medical Leasing, Inc. v. Hangen,
48 Wn. App. 389, 739 P.2d 717 (1987)............................................................................... 12
24
25 Premier Capital, Inc. v. Klein,
776 N.Y.S.2d 74 (N.Y. App. Div. 2004) ............................................................................. 18
26
Reddy v. Litton Indus., Inc.,
912 F.2d 291 (9th Cir. 1990)............................................................................................... 13
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE ii
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 Resolution Trust Corp. v. Vanderweele,
833 F. Supp. 1383 (N.D. Ind. 1993) .................................................................................... 16
2
Riss v. Angel,
131 Wn. 2d 612, 934 P.2d 669 (1997)................................................................................. 12
3
4 Schooley v. Pinch’s Deli Market, Inc.,
134 Wn. 2d 468, 951 P.2d 749 (1998)................................................................................. 14
5
Schwarzmann v. Ass’n of Apt. Owners,
33 Wn. App. 397, 655 P.2d 1177 (1982) ............................................................................. 12
6
7 Shwarz v. United States,
234 F.3d 428 (9th Cir. 2000)............................................................................................... 14
8
Steckman v. Hart Brewing, Inc.,
143 F.3d 1293 (9th Cir. 1998)............................................................................................. 14
9
10 Swartz v. KPMG LLP,
476 F.3d 756 (9th Cir. 2007)......................................................................................... 15, 17
11
Walaschek & Assocs., Inc. v. Crow,
733 F.2d 51 (7th Cir. 1984)................................................................................................. 14
12
13 Winter v. Natural Res. Def. Council, Inc.,
129 S. Ct. 365 (2008).......................................................................................................... 19
14
STATUTES
15
16 Fed. R. Civ. P. 12(b)(6) ............................................................................................................ 10
17 Fed. R. Civ. P. 8 ................................................................................................................. 10, 17
18 Fed. R. Civ. P. 9(b)....................................................................................................3, 10, 17, 19
19 RCW § 19.40.011..................................................................................................................... 16
20 RCW § 19.40.041............................................................................................................... 16, 19
21 RCW § 19.40.071..................................................................................................................... 16
22
REGULATIONS
23
12 C.F.R. § 325.103(b) (2011).................................................................................................... 7
24
62 Fed. Reg. 752 (Jan. 6, 1997) .................................................................................................. 5
25
26
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE iii
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1
OTHER AUTHORITIES
2
3
Dealbook,
WaMu Fails, and JPMorgan Steps In, N.Y. Times, Sept. 26, 2008........................................ 6
4 FDIC, JPMorgan Chase Acquires Banking Operations of Washington Mutual,
Press Release, Sept. 25, 2008................................................................................................ 1
5
Grind, Kirsten
The Washington Mutual Decision, Puget Sound Bus. Journal, Dec. 6, 2009 ...................... 6, 7
6
7 Grind, Kirsten
The Downfall of Washington Mutual, Puget Sound Bus. Journal, Sept. 27,
2009 ..................................................................................................................................... 6
8
9 Hearing on the Role of Regulators in Exercising Their Supervision of Washington
Mutual Bank from 2004–2008: Hearing before the Perm. Subcomm. On
Investigations of the Committee on Homeland Security and Governmental
10
Affairs of the U.S. Senate, 111th Congress, Statement of Jon T. Rymer,
Inspector General, FDIC (April 16, 2010)............................................................................. 3
11
12 Moore, Heidi N.
How J.P. Morgan Raised $11.5 Billion in 24 Hours, Wall Street Journal, Sept.
29, 2008................................................................................................................................ 6
13
14 Office of Inspectors General, Department of the Treasury and Federal Deposit
Insurance Corporation, Evaluation of Federal Regulatory Oversight of
Washington Mutual Bank, EVAL 10-002 (April 2010) ..................................................... 4, 5
15
16 Restatement (Second) of Torts § 440, Comment B (2010) ........................................................ 14
17 Uniform Financial Institutions Rating System............................................................................. 5
18 Wall Street & the Financial Crisis: Anatomy of a Financial Collapse,
Staff Report by the Perm. Subcomm. on Investigations of the Comm. on
Homeland Sec. & Governmental Affairs of the U.S. Senate, Apr. 13, 2011........................... 5
19
20
21
22
23
24
25
26
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE iv
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
Defendants Stephen J. Rotella and David C. Schneider (together, “Defendants”)
1
2 respectfully move pursuant to Federal Rule of Civil Procedure 12(b)(6) and Local Civil Rule 7 to
3 dismiss Counts I-III, V and VI of the Complaint (Doc. No. 1) (“Complaint” or “Compl.”) of the
4 Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank (“FDIC”).
PRELIMINARY STATEMENT
5
This lawsuit amounts to a pure public relations stunt designed to deflect criticism away
6
7 from the FDIC, which has been—and continues to be—under fire for its regulatory failures with
8 respect to WaMu and refuses to take any responsibility for its central role in the financial crisis.
9 In March 2011, two and a half years after Washington Mutual Bank was seized, the FDIC filed
10 its politically-motivated complaint purporting to stand in the shoes of a bank that no longer exists
11 and whose assets the FDIC hastily and improvidently sold off without regard to the impact on
12 creditors, shareholders, employees, or the Seattle economy. The same day the FDIC wiped out
13 more than $7 billion in shareholder equity, the FDIC issued a press release declaring that its fire
14 sale of WaMu’s banking operations to JPMorgan Chase for $1.9 billion ensured that “neither the
15 uninsured depositors nor the insurance fund absorbed any losses.”1 The reckless and widely16 criticized seizure and sale of a well-capitalized bank with $29 billion in net liquidity had
17 catastrophic effects on Seattle’s local economy and thrust Washington Mutual into bankruptcy.
18 Despite the FDIC’s role in causing staggering losses to creditors, shareholders, and employees it
19 has inserted itself at the eleventh hour into the WaMu-related director and officer litigation under
20 the pretext of seeking to recover unspecified losses for unidentified creditors.
Despite exhaustively investigating the former Washington Mutual officers for over two
21
22 years at enormous taxpayer expense—with complete and unfettered access to Washington
23 Mutual’s books and records (but without ever asking to interview the officers themselves), and
24 with an obvious agenda to find scapegoats—the FDIC alleges no fraud, no intentional
25
26
1
FDIC, JPMorgan Chase Acquires Banking Operations of Washington Mutual, Press Release,
Sept. 25, 2008, http://www.fdic.gov/news/news/press/2008/pr08085.html (last visited June 14,
2011).
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 1
CASE NO. 2:11-CV-00459 MJP
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 wrongdoing, no bad faith, and no corporate looting. Rather, the FDIC simply contends that
2 Messrs. Rotella and Schneider were “negligent” in executing their duties during their relatively
3 brief careers at WaMu. With the benefit of hindsight, the FDIC criticizes statements made in a
4 handful of emails, memoranda and presentations and surmises that the officer defendants
5 negligently pursued a high-risk strategy—one sanctioned by the FDIC itself at all times relevant
6 to this lawsuit—that resulted in significant losses to WaMu.
Leaving aside the obvious impropriety of the FDIC’s shameless blame-shifting exercise,
7
8 the Court should dismiss the FDIC’s Complaint for the following reasons:
First, the FDIC is looking back on the country’s worst economic crisis since the Great
9
10 Depression in search of anyone other than itself to blame and improperly attacking Defendants’
11 good faith business decisions. “Business decision-makers must operate in the real world, with
12 imperfect information, limited resources, and an uncertain future.” In re Citigroup Inc. S’holder
13 Deriv. Litig., 964 A.2d 106, 126 (Del. Ch. 2009). In these circumstances, based upon the
14 allegations in the Complaint, Washington’s business judgment rule mandates dismissal. Indeed,
15 from 2004 until 2008, neither the FDIC nor the OTS raised any significant concerns about
16 WaMu. The FDIC knew in the Summer of 2004 (before the 2005 arrivals of Messrs. Rotella and
17 Schneider at WaMu) that WaMu’s Board of Directors reviewed and later approved a five-year
18 strategic plan pursuant to which WaMu intended to implement a higher risk mortgage loan
19 strategy. Neither the FDIC nor the OTS questioned this strategy; in fact, both agreed with the
20 OTS’s “fundamentally sound” rating of WaMu until July 2008—just two months before WaMu
21 was seized.2 The high-risk lending strategy that the FDIC now decries is the very lending
22 strategy that the federal government promoted through the “government-sponsored” secondary
23 market for subprime loans that the Government-Sponsored Enterprises (Fannie Mae and Freddie
24
25
26
2
See Office of Inspectors General, Department of the Treasury and Federal Deposit Insurance
Corporation, Evaluation of Federal Regulatory Oversight of Washington Mutual Bank, EVAL
10-002 (April 2010) (“OIG Report”) at 45, http://fdicoig.gov/reports10%5C10-002EV.pdf (last
visited June 16, 2011).
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 2
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 Mac) in large part created. It is also the lending strategy that the OTS, WaMu’s primary
2 regulator, and the FDIC countenanced throughout the relevant time period. In these
3 circumstances, where high-profit, high-risk lending was effectively a government-sponsored
4 lending strategy for a government-sponsored market, the FDIC cannot establish that Defendants
5 acted with negligence—much less gross negligence. During the limited time Messrs. Rotella and
6 Schneider worked at WaMu, the FDIC—like many others—failed to foresee the depth or
7 severity of the looming financial crisis. Indeed, “FDIC examiners explained that no one could
8 have predicted the precipitous fall in home prices and the complete shut-down of the secondary
9 market.”3
Second, the FDIC’s causation allegations do not pass muster under Twombly and Iqbal’s
10
11 “plausibility” requirement given that the FDIC has alleged in separate, later-filed federal lawsuits
12 that the real cause of the losses in the Bank’s held-for-investment portfolio was the gross
13 negligence of two appraisal companies, eAppraiseIT and LSI. Just weeks after filing this action,
14 the FDIC filed two lawsuits in the Central District of California alleging that the Bank’s outside
15 appraisal companies proximately caused the same losses that the FDIC alleges the officer
16 defendants supposedly caused. See FDIC v. Corelogic Valuation Servs., LLC, No. SACV11-704
17 DOC (ANx) (C.D. Cal. May 9, 2011); FDIC v. LSI Appraisal, LLC, No. SACV11-706 JST
18 (MLGx) (C.D. Cal. May 9, 2011) (the “Appraisal Vendor Lawsuits”). The FDIC’s assertion that
19 the appraisal companies’ superseding acts caused the losses here is fatal to the FDIC’s claims.
20 And, the FDIC’s contradictory causation allegations cannot be accepted as true.
Finally, the FDIC has failed to make any particularized allegations under Rule 9(b) of the
21
22 Federal Rules of Civil Procedure that would transform the Rotellas’ ordinary financial planning
23 into fraudulent conveyances. The truly commonplace estate planning measure of putting a home
24
25
26
3
Hearing on the Role of Regulators in Exercising Their Supervision of Washington Mutual Bank
from 2004–2008: Hearing before the Perm. Subcomm. On Investigations of the Committee on
Homeland Security and Governmental Affairs of the U.S. Senate, 111th Congress, Statement of
Jon T. Rymer, Inspector General, FDIC (April 16, 2010) at 10, http://www.fdicoig.gov/testimony
/T10-01_04-16-10.shtml (last visited June 16, 2011).
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 3
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 into a qualified trust, for example, hardly rises to the level of a fraudulent conveyance. That
2 there were pending lawsuits against Mr. Rotella at the time of the alleged transfers is of no
3 moment given that—as the FDIC knows—Mr. Rotella was protected at all times both by
4 directors and officers insurance as well as an indemnification agreement with Washington
5 Mutual. And the meritless claims the FDIC is asserting against Mrs. Rotella (who is separately
6 moving to dismiss for lack of personal jurisdiction) and Mrs. Killinger demonstrate the in
7 terreroem purpose of this lawsuit.
8
Accordingly, the Court should dismiss the Complaint in its entirety.
FACTUAL BACKGROUND
9
10
A.
During the Relevant Time Period, Neither the FDIC Nor the OTS Raised
Any Red Flags about WaMu
11
As WaMu’s federal regulators, the FDIC and OTS oversaw the bank. Unlike Messrs.
12
Rotella and Schneider, who did not join WaMu until January 2005 and August 2005,
13
respectively (see Compl. ¶¶ 15, 16), the FDIC and OTS knew in the Summer of 2004 that the
14
WaMu Board of Directors reviewed and later approved a five-year plan guiding WaMu to
15
undertake a higher risk business strategy. (See Compl. ¶¶ 22–25.) Although the FDIC now
16
vigorously takes issue with the five-year plan, at the time the plan was conceived and approved,
17
neither the FDIC nor the OTS questioned this strategy. In fact, both the FDIC and the OTS
18
agreed that WaMu deserved a “fundamentally sound” rating until July 2008—just two months
19
before WaMu was seized. (See OIG Report, supra note 2, at 45 (“FDIC did not challenge the
20
OTS CAMELS composite rating for WaMu in any year except for the composite 3 rating
21
assigned by OTS in July 2008. FDIC did not challenge those prior ratings… because FDIC
22
believed the CAMELS composite ratings were appropriate.”).)
23
The following chart shows the OTS’s “CAMELS” ratings of WaMu since 2003—well
24
before the five-year plan was approved—and illustrates that the five-year plan did not affect the
25
rating. The composite ratings range on a scale from 1 (best) to 5 (worst), and reflect the
26
agency’s assessment according to the following definitions: 1=Sound in every respect;
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 4
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 2=Fundamentally Sound; 3=Exhibits some degree of supervisory concern in one or more of the
2 component areas (i.e., capital adequacy, asset quality, management, earnings, liquidity,
3 sensitivity to market risk); 4=Generally exhibits unsafe and unsound practices or conditions;
4 5=Exhibits extremely unsafe and unsound practices or conditions; exhibits a critically deficient
5 performance; often contains inadequate risk management practices relative to the institution’s
6 size, complexity, and risk profile; and is of the greatest supervisory concern. (See Uniform
7 Financial Institutions Rating System, http://www.fdic.gov/regulations/laws/rules/5000-900.html
8 at 16; 62 Fed. Reg. 752, 753 (Jan. 6, 1997).)
9
10
Report
Transmittal
Date
Capital
Adequacy
Asset
Quality
Management
Earnings
Liquid
Assets
Sensitivity
to Risk
Composite
Rating
11
8/22/2003
2
2
2
2
2
3
2
9/13/2004
2
2
2
2
2
3
2
12
8/29/2005
2
2
2
2
2
2
2
13
8/29/2006
2
2
2
2
2
2
2
9/18/2007
2
2
2
2
1
2
2
2/27/2008
2
3
2
4
3
2
3
15
6/30/2008
3
4
3
4
3
2
3
16
9/19/2008
3
4
3
4
4
2
4
14
17
In addition, the FDIC assigned its own CAMELS rating to WaMu. (See Wall Street &
18 the Financial Crisis: Anatomy of a Financial Collapse, Staff Report by the Perm. Subcomm. on
19 Investigations of the Comm. on Homeland Sec. & Governmental Affairs of the U.S. Senate, Apr.
20 13, 2011, at 37, http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf
21 (last visited June 16, 2011).) But it was not until September 18, 2008 that the FDIC
22 independently downgraded the bank for the first time. (Id. at 229.) As the OIG report explained,
23 “WaMu remained in the highest-rated (lowest-risk) deposit insurance risk category from January
24 2003 until December 2007 and in the second highest-rated deposit insurance category from
25 March to June 2008. FDIC monitoring did not influence WaMu’s deposit insurance risk
26 category because the risk category was based on WaMu’s consistent CAMELS composite 2—
27 ‘fundamentally sound’—rating and WaMu’s regulatory capital level.” (OIG Report, supra note
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 5
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 2, at 36.) Thus, the FDIC did not foresee the looming financial meltdown when it was WaMu’s
2 regulator—but has filed a complaint predicated on the fanciful notion that Defendants were
3 negligent because they should have predicted what the FDIC did not.
4
B.
The FDIC Intervenes to the Detriment of Shareholders, Creditors,
Employees, and the Seattle Economy
5
During the country’s financial meltdown, WaMu faced repeated runs on deposits and in
6
early September 2008, the FDIC—through Chairman Sheila Bair—gave WaMu until September
7
30, 2008 to find a buyer for the bank. (See Kirsten Grind, The Downfall of Washington Mutual,
8
Puget Sound Bus. Journal, Sept. 27, 2009, http://www.bizjournals.com/seattle/stories/2009/09/28
9
/story1.html (last visited June 28, 2011) (“Sept. 27 PSBJ”).) In the following weeks, WaMu’s
10
management worked tirelessly to find a possible buyer—shopping the bank on the East Coast,
11
and inviting potential buyers to WaMu’s headquarters in Seattle to pore over the bank’s books.
12
(Id.) During this time, the FDIC undercut WaMu’s efforts to sell the bank in an open-market
13
transaction. (Id.) The FDIC began to secretly solicit bids—a clear sign to potential buyers that
14
seizure was imminent and a signal they could obtain the bank at a bargain price rather than a
15
more lucrative private sale price. (See Kirsten Grind, The Washington Mutual Decision, Puget
16
Sound Bus. Journal, Dec. 6, 2009, http://www.bizjournals.com/seattle/stories/2009/12/07/
17
story1.html (last visited June 28, 2011) (“Dec. 6, 2009 PSBJ”); Heidi N. Moore, How J.P.
18
Morgan Raised $11.5 Billion in 24 Hours, Wall Street Journal, Sept. 29, 2008, Wall Street
19
Journal, http://blogs.wsj.com/deals/2008/09/29/how-jp-morgan-raised-115-billion-in-24-hours/
20
(last visited June 29, 2011); Dealbook, WaMu Fails, and JPMorgan Steps In, N.Y. Times, Sept.
21
26, 2008, http://dealbook.nytimes.com/2008/09/26/jpmorgan-buys-wamu-assets-after22
government-seizure/?pagemode=print (last visited June 29, 2011).) The FDIC’s actions
23
undermined any ability of WaMu management to preserve shareholder value by independently
24
selling the bank. Despite Ms. Bair’s stated deadline of September 30, the FDIC and OTS entered
25
WaMu’s headquarters on the evening of September 25, 2008, seized the bank, and
26
choreographed the sale of WaMu to JPMorgan Chase & Co. the same evening. (Sept. 27 PSBJ.)
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 6
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 The FDIC’s premature actions wiped out $7 billion in shareholder equity, created the very
2 creditors it now purports to represent, and imposed thousands of job losses and significant
3 economic hardship in the Seattle area. (Dec. 6, 2009 PSBJ.) If the FDIC had not undermined
4 WaMu’s efforts to sell the bank, these damages would have been significantly reduced—if not
5 eliminated.
6
More fundamentally, the FDIC’s actions took place despite the fact that WaMu’s
7 liquidity and capital thresholds remained well above the levels typically required for seizure.
8 (Id.) For example, a bank is considered in danger of being seized if its net liquidity dips below
9 5% of total assets. (Id.) WaMu had $29 billion in net liquidity—about 9.4% of assets and nearly
10 twice the closure threshold on the day it was seized. (Id.) Likewise, WaMu’s capital exceeded
11 all regulatory minimums. (Id.) Its leverage ratio stood at 7.66% of total assets while regulators
12 consider a level of 5% to be well-capitalized. (Id.; 12 C.F.R. § 325.103(b) (2011).)
13
C.
The FDIC Files Its Complaint Two-and-a-Half Years Later
14
The FDIC’s 215-paragraph Complaint spends a paltry 11 paragraphs addressing specific
15 acts by Mr. Rotella and 15 paragraphs addressing specific acts by Mr. Schneider. Elsewhere, the
16 FDIC makes broad claims against all three defendants collectively and fails to differentiate what
17 purportedly wrongful acts each committed. (See, e.g., Compl. ¶¶ 1 (“their negligence . . .”); 2, 8,
18 182, 184, 185, 188–190, 193 (“Killinger, Rotella, and Schneider . . . ”); 2, 3, 5–12, 57, 70, 86,
19 88, 90, 91, 93, 95, 96, 98, 100, 103, 107, 116, 119, 136, 141, 142, 153, 155, 156, 161, 165, 170,
20 176, 177, 180, 186, 191, 194–196 (“Defendants . . . ”); 4, 72, 88, 99, 109, 137, 138, 143–145,
21 148, 151, 152, 157, 157, 166, 169, 171, 174 (“WaMu . . . ”); 7 (“They . . ..”); 26–27, 29, 31–32,
22 44–45 (“Killinger and Rotella . . .”).) The allegations specific to Messrs. Rotella and Schneider
23 merely establish that they kept the Board apprised of their activities, continually assessed risks,
24 carried out their duties, and attempted to survive the financial crisis.
25
With respect to the FDIC’s fraudulent conveyance claim against the Rotellas, the FDIC
26 alleges that in early 2008, Mr. and Mrs. Rotella transferred their interest in their home to trusts
27 bearing their own names. (Compl. ¶ 204.) The FDIC’s allegations do not explain how this
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 7
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 common financial planning tool amounts to fraud. And, with respect to Mrs. Rotella in
2 particular, the FDIC does not plead any facts that explain how a transfer by Mrs. Rotella (who
3 the FDIC does not claim to be an FDIC creditor) of her unknown—and not described—interest
4 in the residence to the Esther T. Rotella QPRT 2008 Trust can be a fraudulent conveyance.
5
The FDIC concedes the remaining fraudulent conveyance allegations lack any factual
6 basis as the FDIC makes these allegations of fraud “on information and belief.” (See Compl.
7 ¶ 205.) The FDIC’s allegation “[o]n information and belief, Stephen Rotella transferred in
8 excess of one million dollars to Esther Rotella after WaMu failed in September 2008” (id.), fails
9 to set forth the “what,” “when,” and “how” of the purported fraud.
10
D.
11
On May 9, 2011, the FDIC filed the Appraisal Vendor Lawsuits against eAppraiseIT and
The FDIC Files the Appraisal Vendor Lawsuits
12 LSI. These complaints are attached hereto as Exhibits A and B, respectively, and Defendants
13 respectfully request that the Court take judicial notice of the allegations pled by the FDIC
14 pursuant to Rule 201 of the Federal Rules of Evidence.
15
In the Appraisal Vendor Lawsuits, the FDIC alleges that unbeknownst to WaMu—and
16 the Defendants here—eAppraiseIT and LSI were grossly negligent in conducting appraisals for
17 WaMu, resulting in substantially inflated appraised values. (Ex. A ¶ 3; Ex. B ¶ 3.) The FDIC
18 also alleges that the appraisal companies breached their contracts with WaMu by failing to
19 follow federal and state law, regulatory guidelines, and the Uniform Standards of Professional
20 Appraisal Practice (“USPAP”) in performing their appraisal function. (Id.)
21
According to the Appraisal Vendor Lawsuits, eAppraiseIT and LSI engaged in the
22 following grossly negligent conduct resulting in artificially inflated appraisals: (1) use of
23 improper comparables; (2) failure to include adequate comparables; (3) failure to disclose prior
24 sales history; (4) failure to perform site visits; (5) use of appraisers unfamiliar with the area;
25 (6) failure to identify information obtained from interested parties; (7) use of improper factors
26 that impact value; (8) failure to consider factors that impact value; (9) failure to address long
27 unsold listing periods; and (10) inadequate or improper licensing of appraisers. (See Ex. A ¶ 43;
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 8
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 Ex. B ¶ 43.) In turn, the FDIC alleges WaMu relied on those grossly-inflated appraisals when it
2 provided mortgage loans to borrowers and was forced to charge-off portions of those loans when
3 borrowers subsequently defaulted. (Ex. A ¶¶ 31, 33–34; Ex. B ¶¶ 30, 32–33.)
4
The FDIC’s complaints against eAppraiseIT and LSI demonstrate conflicting theories of
5 fault for WaMu’s alleged damages. The FDIC claims WaMu relied upon appraisals performed
6 by LSI and eAppraiseIT for loans WaMu held for investment rather than selling into the
7 secondary market—the same portfolio the FDIC targets in the instant suit. (Compare Compl. ¶ 2
8 with Ex. A ¶ 3 and Ex. B ¶ 3.) The FDIC claims that “but for” the inflated appraisal services
9 provided by LSI and eAppraiseIT (and corresponding breaches of contract), WaMu would not
10 have made the residential mortgage loans at issue and would not have suffered losses on those
11 loans. (Ex. A ¶ 3:13, 12:16–17; Ex. B ¶ 3:11, 12:21–22.) The FDIC further claims that it was
12 clearly foreseeable to eAppraiseIT and LSI that WaMu would incur losses on loans made in
13 reliance on the inflated appraisals. (Ex. A ¶ 3; Ex. B ¶ 3.)
14
The FDIC calculates that as a direct and proximate result of eAppraiseIT’s and LSI’s
15 gross negligence, WaMu suffered damages in the amount of at least $129,102,303.77 and
16 $154,519,071.10, respectively. (Ex. A ¶ 45, 18:4-5; Ex. B ¶ 45, 17:24-25). The FDIC also
17 claims that as a direct and proximate result of eAppraiseIT’s and LSI’s breaches of their
18 respective agreements, WaMu suffered damages in the amount of at least $113,140,271.76 and
19 $146,168,762.34, respectively. Finally, the FDIC states that it bases its complaints on mere
20 “samples” of a few hundred of the hundreds of thousands of appraisals eAppraiseIT and LSI
21 performed—specifically, 259 of the 260,000 eAppraiseIT appraisals and 292 of the 386,000 LSI
22 appraisals provided to WaMu. (Ex. A ¶¶ 26, 31; Ex. B ¶¶ 28, 30.) Incredibly, the FDIC alleges
23 97% of the appraisals contained USPAP violations and 75% of the appraisals “contained
24 multiple egregious violations of USPAP and appraisal industry standards.” (See Ex. A ¶ 31; Ex.
25 B ¶ 30.) Thus, once the FDIC analyzes the remaining 259,741 eAppraiseIT appraisals and the
26 385,708 LSI appraisals, it will likely seek billions of dollars in damages.
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 9
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
LEGAL STANDARD
1
2
Federal Rules of Civil Procedure 8(a)(2) and 12(b)(6) govern motions to dismiss for
3 failure to state a claim upon which relief can be granted. A complaint must allege enough facts
4 to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544,
5 570 (2007). To avoid dismissal, a complaint must contain more than a “formulaic recitation of
6 the elements of a cause of action;” it must contain factual allegations sufficient to “raise a right
7 to relief above the speculative level.” Id. at 555. “The pleading must contain something more . .
8 . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of
9 action.” Id. (citation omitted). The Court need not accept conclusory allegations in the
10 complaint as true; rather, it must “examine whether [they] follow from the description of facts as
11 alleged by the plaintiff.” Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992).
12
Where a plaintiff alleges fraud, Rule 9(b) of the Federal Rules of Civil Procedure requires
13 the plaintiff to plead “particularized allegations of the circumstances constituting fraud.” In re
14 GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547 (9th Cir. 1994) (superseded by statute on other
15 grounds). See also Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (finding that
16 any claim “grounded in fraud,” even where fraud is not a necessary element of the claim, “must
17 satisfy the particularity requirement of Rule 9(b)); In re Daisy Sys. Corp., No. C-92-1845-DLJ,
18 1993 WL 491309, *9 (N.D. Cal. Feb. 3, 1993) (applying Rule 9(b) to fraudulent transfer claim).
19 The purpose of Rule 9(b) is to ensure a defendant has adequate notice of the “precise
20 misconduct” with which it is charged and safeguard its reputation and goodwill from groundless
21 accusations of fraud. See, e.g., Bly-Magee v. Cal., 236 F.3d 1014, 1018 (9th Cir. 2001)
22 (affirming the lower court’s dismissal of qui tam claims because they contained only conclusory
23 assertions without supporting factual allegations). Thus, “[t]o allege fraud with particularity, a
24 plaintiff must set forth more than the neutral facts necessary to identify the transaction,” it must
25 set forth specific facts demonstrating what is fraudulent about the transaction and why it is
26 fraudulent. In re GlenFed., 42 F.3d at 1548. In the context of a fraudulent transfer claim, failure
27 to allege “how” or “under what conditions” the transfer occurred is a fatal pleading defect under
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 10
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 Rule 9(b). In re Daisy, 1993 WL 491309, at *11; see Global View Ltd. Venture Capital v. Great
2 Cent. Basin Exploration, L.L.C., 288 F. Supp. 2d 473, 479 (S.D.N.Y. 2003) (fraudulent
3 conveyance claim should allege the specifics of the purported fraud including the time and
4 amount of transfer, the identification of what was transferred, and how the transfer occurred).
ARGUMENT
5
6 I.
7
8
9
THE FDIC’S COMPLAINT FAILS TO STATE A NEGLIGENCE-BASED CLAIM
AGAINST DEFENDANTS
A.
Washington’s Business Judgment Rule Insulates Officers from Lawsuits
Attacking Allegedly Mistaken but Good Faith, Informed Business Decisions
“Business decision-makers must operate in the real world, with imperfect information,
10 limited resources, and an uncertain future.” In re Citigroup Inc. S’holder Deriv. Litig., 964 A.2d
11 106, 126 (Del. Ch. 2009). The corporate officer’s function “is to encounter risks and to confront
12 uncertainty, and a reasoned decision at the time made may seem a wild hunch viewed years later
13 against a background of perfect knowledge.” Joy v. North, 692 F.2d 880, 886 (2d Cir. 1982).
14 The “circumstances surrounding a corporate decision are not easily reconstructed in a courtroom
15 years later,” and thus “a corporate officer who makes a mistake in judgment as to economic
16 conditions” will “rarely, if ever, be found liable for damages suffered by the corporation.” Id. at
17 885-86. Accordingly, “[c]ourts are reluctant to interfere with the internal management of
18 corporations and generally refuse to substitute their judgment for that of the directors.” Nursing
19 Home Bldg. Corp. v. DeHart, 13 Wn. App. 489, 498, 535 P.2d 137, 143 (1975) (explaining that
20 business judgment rule “immunizes” management from liability for good faith decisions).
21
Washington courts “review business decisions under the business judgment rule and
22 infrequently reverse a business decision.” Lane v. City of Seattle, 164 Wn. 2d 875, 885, 194 P.3d
23 977, 979 (2008). Under the business judgment rule, corporate officers cannot be held liable “for
24 mere mistake or errors of judgment . . . when they act without corrupt motive and in good faith.”
25 DeHart, 13 Wn. App. at 498-99, 535 P.2d at 144 (citation and internal quotation marks omitted).
26 This is true even if the errors are “so gross that they may demonstrate the unfitness of the
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 11
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 directors to manage the corporate affairs.” Id. at 499, 144 (citation and internal quotation marks
2 omitted). The business judgment rule applies to both directors and officers of a corporation.
3 Para-Med. Leasing, Inc. v. Hangen, 48 Wn. App. 389, 395, 239 P.2d 717, 721 (1987);
4 Grassmueck v. Barnett, No. C03-122P, 2003 WL 22128263, at *3 (W.D. Wash. July 7, 2003)
5 (Pechman, J.).
6
The business judgment rule permits liability only if management reached its decision in
7 bad faith or made an uninformed decision. “Absent a showing of fraud, dishonesty, or
8 incompetence, it is not the court’s job to second-guess the actions of directors.” Schwarzmann v.
9 Ass’n of Apt. Owners, 33 Wn. App. 397, 403, 655 P.2d 1177, 1181 (Wash. Ct. App. 1982). See
10 also Riss v. Angel, 131 Wn. 2d 612, 632, 934 P.2d 669, 681 (1997) (courts will not substitute
11 judgment for that of management absent fraud, dishonesty, or incompetence); In re Spokane
12 Concrete Prods., Inc., 126 Wn. 2d 269, 279, 892 P.2d 98, 104 (1995) (same); Citron v. Fairchild
13 Camera & Instrument Corp., 569 A.2d 53, 66 (Del. 1989) (requiring failure “to act in an
14 informed manner” to overcome business judgment rule).
B.
The Allegations in the Complaint Fall Well within the Protection of the
15
Business Judgment Rule
16
The FDIC’s Complaint against Mr. Rotella and Mr. Schneider for gross and ordinary
17 negligence fail as a matter of law. Specifically, the FDIC’s Complaint contains no allegations
18 that Rotella and Schneider acted in bad faith or were uninformed; instead, it attacks Messrs.
19 Rotella’s and Schneider’s historical business decisions—and the business judgment rule insulates
20 them against such allegations. See supra, Section I.A. Indeed, the FDIC alleges WaMu’s credit
21 risk managers regularly informed Mr. Rotella and Mr. Schneider of the risks associated with the
22 business strategy. (See, e.g., Compl. ¶¶ 27-30, 39, 44, 47, 51, 58, 85.) The Complaint further
23 alleges that Mr. Rotella and Mr. Schneider weighed those risks against the potential returns for
24 shareholders and determined to continue with the business strategy despite the known risks.
25 (Id. ¶¶ 48, 113 (alleging Mr. Rotella identified a “laundry list of risk factors that WaMu faced” in
26 December 2005); id. ¶ 105 (alleging Mr. Rotella was “worried” about taking on more credit risk
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 12
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 “if a credit downturn occurred”); id. ¶ 67 (alleging Mr. Schneider “advocated for continued focus
2 on subprime originations” even though the subprime market “experienced a market correction”);
3 id. ¶ 73 (alleging Mr. Schneider thought “[c]urrent mortgage market conditions” presented an
4 “opportunity” to gain a “competitive advantage and add higher quality assets at attractive risk
5 adjusted returns”); id. ¶ 74 (alleging Mr. Schneider saw “[o]pportunities to grow” by “applying
6 risk-based pricing and economic capital”).)
Because the Complaint contains no allegations that Messrs. Rotella or Schneider acted in
7
8 bad faith or without knowledge of the risks in reaching their decisions, the business judgment
9 rule shields them from liability. The Court should dismiss the negligence-based claims.
10 II.
11
12
THE FDIC CANNOT ADEQUATELY ALLEGE THAT THE DEFENDANTS’
CONDUCT PROXIMATELY CAUSED THE BANK’S FAILURE
In its Complaint, the FDIC contends Defendants caused Washington Mutual Bank to
13 incur losses as a result of their purported focus on higher risk products. See id. ¶¶ 175-177. In
14 the Appraisal Vendor Complaints filed less than two months later, the FDIC pled that WaMu’s
15 outside appraisal vendors engaged in grossly negligent conduct resulting in artificially inflated
16 appraisals and that “[b]ut for the inflated appraisal services by [eAppraiseIT and LSI], WaMu
17 would not have made the residential mortgage loans at issue and would not have suffered losses
18 on those loans.” (Ex. A ¶ 3; Ex. B ¶ 3 (emphasis added).) These allegations are fatal to the
19 FDIC’s proximate cause allegations which, in turn, is fatal to the negligence claims. Oki
20 Semiconductor Co. v. Wells Fargo Bank, 298 F.3d 768, 777 (9th Cir. 2002) (affirming dismissal
21 of action for failure to meet all elements of negligence); see also, e.g., Reddy v. Litton Indus.,
22 Inc., 912 F.2d 291, 296-97 (9th Cir. 1990) (affirming denial of leave to amend because plaintiff
23 could only plead the elements of a cause of action by contradicting prior pleading); Am. W.
24 Airlines, Inc. v. GPA Group, Ltd., 877 F.2d 793, 801 (9th Cir. 1989) (affirming dismissal and
25 denial of leave to amend when revised allegations could not be proven because they would
26 contradict sworn affidavits); In re Sunrise Sec. Litig., 138 F.R.D. 60 (E.D. Pa. 1991) (“In order to
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 13
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 prove its negligence claims . . . the FDIC must demonstrate first that the defendants were
2 negligent and second that such negligence was a proximate cause of the losses sustained.”);.
3
First, the Appraisal Vendor Complaint’s allegations amount to judicial admissions that
4 WaMu’s losses in its held-for investment portfolio were not caused by Defendants’ alleged
5 action or inaction—but by a third party’s gross negligence in virtually every appraisal the FDIC
6 reviewed. See Hakopian v. Mukasey, 551 F.3d 843, 846 (9th Cir. 2008) (“Allegations in a
7 complaint are considered judicial admissions”) (citation omitted)); Walaschek & Assocs., Inc. v.
8 Crow, 733 F.2d 51, 54 (7th Cir. 1984) (“[p]leading in one proceeding is admissible and
9 cognizable as an admission in another”). “A superseding cause relieves [a defendant] from
10 liability.” Restatement (Second) of Torts § 440, Comment B (2010). “A superseding cause is an
11 act of a third person or other force which by its intervention prevents the actor from being liable
12 for harm to another which his antecedent negligence is a substantial factor in bringing about.”
13 Id. § 440. See Schooley v. Pinch’s Deli Market, Inc., 134 Wn. 2d 468, 482, 951 P.2d 749, 756
14 (1998) (“A defendant’s negligence is a proximate cause of the plaintiff’s injury only if such
15 negligence, unbroken by any new independent cause produces the injury complained of.”).
16
Second, in light of the causation allegations in the Appraisal Vendor Lawsuits, the FDIC
17 has failed to allege a claim to relief that is “plausible on its face.” Twombly, 550 U.S. at 555,
18 570. The Court need not accept as true the FDIC’s allegations that the FDIC itself contradicts in
19 other pleadings filed in different courts. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir.
20 2000) (court need not accept as true allegations that contradict facts that may be judicially
21 noticed by the court); see also Minnick v. Clearwire US, LLC, 683 F. Supp. 2d 1179, 1188 (W.D.
22 Wash. 2010) (Pechman, J.) (“the documents Plaintiffs incorporate by reference undermine the
23 allegations in the Complaint. . . . The Court is left with Plaintiffs’ conclusions of law, which are
24 insufficient to state a claim.”) (citing Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295–96
25 (9th Cir. 1998)). Indeed, in Churchill v. Barach, 863 F. Supp. 1266, 1276–77 (D. Nev. 1994)—a
26 case directly on point—the court granted a motion to dismiss because the plaintiff accused two
27 defendants of causing her termination in two different lawsuits. In one suit, plaintiff alleged that
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 14
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 defendant committed tortious interference in her employment relationship. Id. at 1276. In
2 response, defendant explained that plaintiff had filed a separate suit against another defendant
3 alleging that the other defendant caused her termination. Id. The court granted the first
4 defendant’s motion to dismiss because plaintiff’s allegations in the second case revealed
5 defendant was not the proximate cause of her damage. Id. at 1276–77.
Accordingly, because the FDIC has failed to plausibly plead proximate cause, the Court
6
7 should dismiss its Complaint. See, e.g., Nguyen v. Boeing Co., No. C10-0415MJP, 2010 WL
8 2102501, at *4 (W.D. Wash. May 25, 2010) (dismissing negligence claim for failing “the
9 Iqbal/Twombly requirements completely” as plaintiff did “not plead with any specificity what the
10 duty is, what injury was suffered, or the proximate cause of the breach”).
11 III.
12
13
THE BREACH OF FIDUCIARY DUTY CLAIM DUPLICATES THE
NEGLIGENCE CLAIMS, AND THE COURT SHOULD DISMISS IT
Count III of the Complaint for “breach of fiduciary duty” is based upon and incorporates
14 by reference the same facts supporting the negligence claims. (Compl. ¶¶ 192–196.) It thus
15 duplicates Counts I and II. As such, the Court should dismiss it. See Swartz v. KPMG LLP, 476
16 F.3d 756, 766 (9th Cir. 2007) (per curiam) (claim that was “merely duplicative” was “properly
17 dismissed”); Hua v. Boeing Corp., No. C08-0010RSL, 2009 WL 1044587, at *5 (W.D. Wash.
18 Apr. 17, 2009) (“Plaintiff’s negligent supervision claim is based on the same facts that support
19 his claim against Boeing for unlawful discrimination. It is therefore duplicative, and, under
20 Washington law, must be dismissed.”); Jacobson v. Wash. State Univ., No. CV-05-0092-FVS,
21 2007 WL 26765, at *11 (E.D. Wash. Jan. 3, 2007) (“A claim is duplicative and must be
22 dismissed under Washington law when the plaintiff asserts the same factual basis for two
23 claims.”); Beringer v. Standard Parking O’Hare Joint Venture, Nos. 07 C 5027, 07 C 5119,
24 2008 WL 4890501, at *4 (N.D. Ill. Nov. 12, 2008) (dismissing negligence and breach of
25 fiduciary duty claims because “both counts involve the same operative facts, the same injury, and
26 require proof of essentially the same elements”); CMMF, LLC v. J.P. Morgan Inv. Mgmt. Inc.,
27 915 N.Y.S.2d 2, 6 (App. Div. 2010) (affirming dismissal of negligence and breach of fiduciary
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 15
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 duty claims as duplicative of breach of contract claim); Awai v. Kotin, 872 P.2d 1332, 1337
2 (Colo. App. 1993) (affirming dismissal of breach of fiduciary duty claim as duplicative where
3 “[t]he factual allegations in support of this claim are the same as those in support of the claim of
4 negligence”); Resolution Trust Corp. v. Vanderweele, 833 F. Supp. 1383, 1386 (N.D. Ind. 1993)
5 (dismissing breach of fiduciary duty claim because it “amount[ed] to nothing more than a
6 reformulation of the negligence claim”).
7
Accordingly, Count III should be dismissed.
8 IV.
THE FDIC’S ALLEGATIONS OF FRAUDULENT CONVEYANCE DO NOT
SATISFY THE PLEADING REQUIREMENTS OF RULES 9(b) OR 8(a) OF THE
FEDERAL RULES OF CIVIL PROCEDURE
9
10
The FDIC purports to seek relief pursuant to the Washington Uniform Fraudulent
11 Transfer Act, RCW §§ 19.40.011 et seq., which provides remedies to “creditors” in the event of
12 fraudulent transfers by debtors. RCW §§ 19.40.041, 19.40.071. A “creditor” under the statute
13 means “a person who has a claim.” RCW § 19.40.011(4). Where the purported creditor has no
14 underlying “enforceable claim, the UFTA does not provide the Plaintiff with a remedy.” Nat’l
15 Ctr. for Emp’t of the Disabled v. Ross, No. CV 05-2014-PHX-JAT, 2006 WL 778647, at *8 (D.
16 Ariz. Mar. 27, 2006) (finding “only one who has a valid claim and right to payment[] may attack
17 a conveyance as fraudulent”). Because the FDIC has no enforceable claims under Counts I, II,
18 and III, its claim for relief under the fraudulent transfer statute (Count V) fails as a matter of law.
19 Moreover, for the reasons set forth below, Count V does not satisfy the pleading requirements of
20 Rules 9(b) or 8(a) of the Federal Rules of Civil Procedure.
21
A.
The FDIC Does Not Sufficiently Plead Its Allegation Concerning an Alleged
Transfer of $1 Million
22
Paragraph 205 of the FDIC’s Complaint alleges, in full: “On information and belief,
23 Stephen Rotella transferred in excess of one million dollars to Esther Rotella after WaMu failed
24 in September 2008.” Where allegations of fraud thus rest only on information and belief, the
25 complaint must “state the factual basis for the belief.” Neubronner v. Milken, 6 F.3d 666, 672
26 (9th Cir. 1993); see also Kranz v. Koenig, 240 F.R.D. 453, 456 (D. Minn. 2007) (dismissing
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 16
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 fraudulent transfer claim for failing to satisfy Rule 9(b) by, inter alia, not identifying the source
2 of the information for the allegations based on information and belief). The FDIC’s Complaint
3 fails to do so. For this reason alone, the Court should dismiss the FDIC’s bald assertions of fraud
4 concerning the purported one million dollar fraudulent conveyance.
5
Moreover, Paragraph 205 fails to identify “what” was transferred, “when” the transfer
6 took place, or “how” the transfer was made. Kearns v. Ford Motor Co., 567 F.3d 1120, 1124
7 (9th Cir. 2009); see also Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997); Swartz, 476 F.3d
8 at 764 (fraud allegations should include “an account of the time, place, and specific content of
9 the false representations as well as the identities of the parties to the misrepresentations”); Global
10 View, 288 F. Supp. 2d at 479 (a claim of fraudulent conveyance should allege the specifics of the
11 purported fraud including the time and amount of transfer, the identification of what was
12 transferred, and how the transfer occurred). Identifying an amount “in excess of one million
13 dollars” does not identify the “what” of a fraudulent transfer with particularity under Rule 9(b).
14 In fact, “in excess of one million dollars” includes more numbers than it excludes. Similarly, the
15 allegation that the transfer occurred sometime “after” September 2008 cannot satisfy the “when”
16 prong of Rule 9(b) because it includes a time period spanning over two years. Further, the FDIC
17 makes no allegations as to “how” the alleged transfer was made. In sum, the FDIC alleges
18 Stephen Rotella gave Esther Rotella, in some unspecified way, some unspecified amount of
19 money, at some point in time after September 2008. Such vague allegations will not satisfy Rule
20 8, much less Rule 9(b)’s heightened standards. See, e.g., In re Motorwerks, Inc., 371 B.R. 281,
21 293–94 (Bankr. S.D. Ohio 2007) (trustee’s allegations fail to satisfy Rule 8 where trustee’s “lack
22 of specificity fail[ed] to provide [the bank] with notice of the underlying transfers to be
23 avoided[,] hindering the bank’s ability to prepare an adequate answer and affirmative defenses”).
24
B.
The FDIC’s Allegations Regarding the Transfer of “Their Residence” Fail As
a Matter of Law
25
Paragraph 204 of the FDIC’s Complaint alleges, in full:
26
27
In or about March or April 2008, Stephen Rotella and his wife, Esther Rotella,
transferred their residence in Orient, New York, to two irrevocable QPRTs dated
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 17
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1
2
March 14, 2008, named the ‘Stephen J. Rotella QPRT 2008 Trust’ (which
appointed Stephen Rotella as trustee) and the ‘Esther T. Rotella QPRT 2008
Trust’(which appointed Esther Rotella as trustee).
3 Compl. ¶ 204.
4
The FDIC’s allegation that Esther Rotella transferred her interest in the residence into the
5 Esther Rotella Trust has no significance under Washington’s Uniform Fraudulent Transfer Act
6 because the FDIC does not allege that Esther Rotella is a “debtor” under the statute or that the
7 FDIC is a creditor of Esther Rotella. See Premier Capital, Inc. v. Klein, 776 N.Y.S.2d 74, 76
8 (N.Y. App. Div. 2004) (finding transfer of real property to defendant’s wife was not fraudulent
9 as to defendant’s wife because she was not alleged to be a debtor of the plaintiff’s assignor). As
10 such, the Complaint provides no factual basis for the assertion that Esther Rotella intended a
11 transaction to “hinder, delay or defraud” creditors. In re Daisy, 1993 WL 491309, at *9.
12 Further, nowhere in the Complaint does the FDIC allege that Esther Rotella believed or should
13 have reasonably believed that she would incur debts beyond her ability to pay as they became
14 due. Therefore, the FDIC does not—and cannot—claim that it suffered injury by Esther
15 Rotella’s transfer to the Esther Rotella Trust. Indeed, these allegations fail even under Rule 8’s
16 standard as they are implausible on their face. See Twombly, 550 U.S. at 570.
17
The FDIC’s allegations of “actual intent” (Compl. ¶ 206(a)–(e)) are likewise insufficient.
18 The FDIC does not allege that Esther Rotella was a named defendant in any lawsuits at the time
19 of the transfer, that the transfer of her interest in the residence was concealed, or that she failed to
20 properly record the trust according to the laws and regulations governing the public recording of
21 real property. The only “actual intent” allegation is that Esther Rotella retained an interest in her
22 share of the residence by remaining a trustee, and that she continued to live in the property after
23 the trust was created. These two facts are not sufficient to uphold a fraudulent transfer allegation
24 against Esther Rotella. Kearns, 567 F.3d at 1124 (“Averments of fraud must be accompanied by
25 ‘the who, what, when, where, and how’ of the misconduct charged”).
26
Likewise, the FDIC’s allegations of “actual intent” fall short as to Stephen Rotella. For
27 example, the FDIC alleges “Stephen Rotella had been personally named as a defendant in
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 18
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1 numerous lawsuits at the time of these transfers, which posed a potential exposure far in excess
2 of his means.” (Compl. ¶ 206(a).) Such vague and conclusory allegations cannot satisfy Rule
3 9(b). Though the FDIC alleges that these so-called “numerous lawsuits” exposed Stephen
4 Rotella to debts “far in excess of his means,” the FDIC fails to allege with any particularity how
5 these suits, against which Mr. Rotella was insured, posed a risk to his personal assets. At the
6 time of the alleged transfers, Mr. Rotella’s “means” included $250 million in insurance coverage
7 and an obligation by WaMu to indemnify him in connection with the lawsuits. In addition, the
8 FDIC’s claim that “the transfers were not disclosed to or were concealed from his present and
9 future creditors” cannot be made “on information and belief” without citing the source of the
10 belief. See Neubronner, 6 F.3d at 672
Finally, the FDIC’s constructive fraud allegations fail. Esther Rotella is altogether absent
11
12 from such allegations (see Compl. ¶ 207), and they impermissibly parrot the statutory language
13 without providing sufficient supporting facts. See Twombly, 550 U.S. at 555 (a “formulaic
14 recitation of the elements of a cause of action” will not survive a motion to dismiss); compare
15 Compl. ¶ 207 to Wash. Unif. Fraud. Transfer Act, RCW § 19.40.041(a)(2) & (2)(ii).
Accordingly, for these reasons, the Court should dismiss the FDIC’s fraudulent
16
17 conveyance allegations.
18 V.
THE FDIC’S ASSET FREEZE CAUSE OF ACTION LIKEWISE FAILS
19
In Count VI of the Complaint, the FDIC seeks a preliminary injunction: (i) freezing the
20 supposedly fraudulently transferred assets and (ii) requiring Defendants “to provide 30 days
21 advance notice to the FDIC, during the pendency of this litigation and any subsequent judgment
22 in favor of FDIC, of any intended future transfers of their remaining assets in the amount of
23 $10,000 or more in a single transaction.” (Compl. ¶ 212.) Because Counts I, II and III fail as a
24 matter of law, the FDIC’s claim for injunctive relief fails as a matter of law. See, e.g., Winter v.
25 Natural Res. Def. Council, Inc., 129 S. Ct. 365, 374 (2008) (requiring plaintiff seeking
26 preliminary injunction to demonstrate likelihood of success on the merits).
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 19
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
1
CONCLUSION
2
The FDIC’s complaint against Messrs. Rotella and Schneider does not allege fraud,
3 intentional wrongdoing, bad faith, corporate looting, or uninformed conduct. Absent such
4 allegations, the Court should dismiss the Complaint’s negligence-based claims (and duplicative
5 breach of fiduciary duty claim) because Defendants are entitled to the protection of
6 Washington’s business judgment rule. Moreover, the FDIC’s causation allegations fail given the
7 FDIC’s admissions in separate, later-filed federal lawsuits that the gross negligence of two
8 appraisal companies was the real cause of the losses in the Bank’s held-for-investment portfolio.
9 Because the FDIC’s substantive claims fail, the Complaint’s fraudulent conveyance claim (which
10 also fails under Rules 9(b) and 8(a)) and asset freeze claim cannot withstand a motion to dismiss.
11 Accordingly, this Court should dismiss the Complaint against Messrs. Rotella and Schneider in
12 its entirety.
13
14
Dated this 1st day of July, 2011.
DAVIS WRIGHT TREMAINE LLP
SIMPSON THACHER & BARTLETT LLP
15 Barry R. Ostrager (pro hac vice)
Mary Kay Vyskocil (pro hac vice)
16 425 Lexington Avenue
By: /s/ Stephen M. Rummage
Stephen M. Rummage, WSBA #11168
New York, New York 10017
17 Tel.:
Steven P. Caplow, WSBA #19843
(212) 455-2000
1201 Third Avenue, Suite 2200
Fax:
(212) 455-2502
18 Email: bostrager@stblaw.com
Seattle, Washington 98101-3045
Tel.:
(206) 757-3150
mvyskocil@stblaw.com
19
Fax:
(206) 757-7700
-andEmail: steverummage@dwt.com
20 Deborah L. Stein (pro hac vice)
stevencaplow@dwt.com
1999 Avenue of the Stars, 29th Floor
21 Los Angeles, California 90067
Tel.:
(310) 407-7500
(310) 407-7502
22 Fax:
Email: dstein@stblaw.com
23
Attorneys for Stephen J. Rotella and David C. Schneider
24
25
26
27
STEPHEN J. ROTELLA AND DAVID C.
SCHNEIDER’S M OTION TO DISMISS—PAGE 20
CASE NO. 2:11-CV-00459
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
CERTIFICATE OF SERVICE
1
I hereby certify that on July 1, 2011, the foregoing was electronically filed with the Clerk
2
3 of the Court using the CM/ECF system which will send notification of such filing to all counsel
4 of record who receive CM/ECF notification and that the remaining parties shall be served in
5 accordance with the Federal Rules of Civil Procedure.
DATED this 1st day of July, 2011.
6
7
DAVIS WRIGHT TREMAINE LLP
8
9
By: /s/ Stephen M. Rummage
Stephen M. Rummage, WSBA #11168
1201 Third Avenue, Suite 2200
Seattle, Washington 98101-3045
Tel.:
(206) 757-8136
Fax:
(206) 757-7136
Email:
steverummage@dwt.com
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
CERTIFICATE OF SERVICE FOR STEPHEN J.
ROTELLA AND DAVID C. SCHNEIDER’S M OTION
TO DISMISS
CASE NO. 2:11-CV-00459
PAGE 21
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
-and1999 Avenue of the Stars, 29th Floor
Los Angeles, California 90067
DAVIS WRIGHT TREMAINE LLP
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
Tel.: (206) 622-3150
Fax: (206) 757-7700
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