898 F.3d 553 (5th Cir. 2018), 17-30273, Firefighters’ Retirement System v. EisnerAmper, L.L.P.

Docket Nº:17-30273
Citation:898 F.3d 553, 101 Fed.R.Serv.3d 632
Opinion Judge:STEPHEN A. HIGGINSON, Circuit Judge:
Party Name:FIREFIGHTERS’ RETIREMENT SYSTEM; Municipal Employees Retirement System of Louisiana; New Orleans Firefighters’ Pension & Relief Fund, Plaintiffs-Appellants Cross-Appellees v. EISNERAMPER, L.L.P., Defendant-Appellee Cross-Appellant EisnerAmper (Cayman) Limited, Defendant-Appellee.
Attorney:Phillip W. Preis, Esq., Charles Malcolm Gordon, Jr., Esq., Preis Gordon, A.P.L.C., Baton Rouge, LA, for Plaintiffs-Appellants Cross-Appellees. William Everard Wright, Jr., Esq., Melissa M. Lessell, Deutsch Kerrigan, L.L.P., New Orleans, LA, William M. Connolly, Esq., Drinker, Biddle & Reath, L.L....
Judge Panel:Before KING, HAYNES, and HIGGINSON, Circuit Judges.
Case Date:August 02, 2018
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 553

898 F.3d 553 (5th Cir. 2018)

101 Fed.R.Serv.3d 632

FIREFIGHTERS’ RETIREMENT SYSTEM; Municipal Employees Retirement System of Louisiana; New Orleans Firefighters’ Pension & Relief Fund, Plaintiffs-Appellants Cross-Appellees

v.

EISNERAMPER, L.L.P., Defendant-Appellee Cross-Appellant

EisnerAmper (Cayman) Limited, Defendant-Appellee.

No. 17-30273

United States Court of Appeals, Fifth Circuit

August 2, 2018

Page 554

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Appeals from the United States District Court for the Middle District of Louisiana, Shelly Deckert Dick, U.S. District Judge

Phillip W. Preis, Esq., Charles Malcolm Gordon, Jr., Esq., Preis Gordon, A.P.L.C., Baton Rouge, LA, for Plaintiffs-Appellants Cross-Appellees.

William Everard Wright, Jr., Esq., Melissa M. Lessell, Deutsch Kerrigan, L.L.P., New Orleans, LA, William M. Connolly, Esq., Drinker, Biddle & Reath, L.L.P., Philadelphia, PA, Brian Patrick Morgan, Michael Pompeo, Drinker, Biddle & Reath, L.L.P., New York, NY, for Defendant-Appellee Cross-Appellant EisnerAmper, L.L.P.

William Everard Wright, Jr., Esq., Melissa M. Lessell, Deutsch Kerrigan, L.L.P., New Orleans, LA, Brian Patrick Morgan, Drinker, Biddle & Reath, L.L.P., New York, NY, for Defendant-Appellee EisnerAmper (Cayman) Limited.

Before KING, HAYNES, and HIGGINSON, Circuit Judges.

OPINION

STEPHEN A. HIGGINSON, Circuit Judge:

Plaintiff-Appellants Firefighters’ Retirement System, Municipal Employees’ Retirement System, and New Orleans Firefighters’ Pension & Relief Fund sued Defendant-Appellee EisnerAmper LLP, alleging fraud and related claims. The district court dismissed Plaintiffs’ claims as premature because Plaintiffs failed to seek pre-suit review by a Louisiana public accountant review panel. We affirm the dismissal and remand for the district court to decide in the first instance whether Defendants are entitled to dismissal with prejudice.

I.

In April 2008, Plaintiff-Appellants Firefighters’ Retirement System, Municipal Employees’ Retirement System, and New Orleans Firefighters’ Pension & Relief Fund purchased shares in an investment fund, FIA Leveraged Fund, for a combined $100 million. By the time this suit was filed in 2014, Leveraged was in bankruptcy and Plaintiffs’ shares had lost much or all of their value.

According to offering documents prepared before the sale, Leveraged sought to achieve returns of 10% to 15% per year by investing in equity and fixed income securities. Plaintiffs’ investment in Leveraged was protected by redemption rights, which

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provided that Plaintiffs’ shares: (1) "must be redeemed" before certain other investors redeemed their shares, and (2) would be "automatically" redeemed if the value of the other investors’ accounts fell below 20% of the value of Plaintiffs’ shares.

Defendant-Appellee EisnerAmper LLP is a large, New York-based accounting firm. In March 2010, Leveraged retained Eisner to perform an audit of the fund. The audit was never completed. Plaintiffs allege that an audit would have revealed that Leveraged made improper investments outside the fund’s mandate. A completed audit would also have allegedly shown that Plaintiffs’ redemption rights had been triggered, causing Plaintiffs to redeem their shares and mitigate or eliminate their loss. Rather than disclose these facts, Plaintiffs allege that Eisner— seeking to maintain its relationship with Leveraged and some related funds— participated in a scheme to trick Plaintiffs into waiving their redemption rights.

Plaintiffs sued Eisner and a Cayman Islands-based subsidiary in Louisiana state court, alleging fraud, negligence, negligent misrepresentation, breach of contract as to a third party beneficiary, and violation of Louisiana securities and unfair trade practices laws.1 Eisner removed to the Middle District of Louisiana. Following denial of a motion to remand, Eisner moved to dismiss all of Plaintiffs’ claims for lack of personal jurisdiction, improper venue, and failure to state a claim. The district judge referred Eisner’s motion to a magistrate judge.

The magistrate judge recommended that Eisner’s motion be granted. In her Report and Recommendation, the magistrate judge concluded that the court lacked personal jurisdiction over Eisner’s Cayman Islands-based subsidiary. As to Eisner, the Report recommended that Plaintiffs’ claims be dismissed as premature for failure to comply with a Louisiana statute requiring pre-suit review of certain claims by a public accountant review panel. Despite objections from both sides to the Report and Recommendation, the district court adopted it in full.

In this appeal, Plaintiffs challenge only the conclusion that they were required to present their claims to a public accountant review panel. Eisner cross-appeals, seeking to convert the existing dismissal to a dismissal with prejudice.

II.

We review the dismissal of a complaint under Rule 12(b)(6) de novo. Swenson v. United of Omaha Life Ins. Co., 876 F.3d 809, 810 (5th Cir. 2017). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as...

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