Flam v. Flam

Decision Date03 March 2016
Docket NumberCASE NO. 1:12-CV-1052 AWI DLB
PartiesLAURA J. FLAM, Plaintiff v. MARSHALL S. FLAM, M.D., Defendant
CourtU.S. District Court — Eastern District of California


This removed case involves a dispute between former spouses regarding funds in a retirement account. Now before the Court, following a remand from the Ninth Circuit, is Plaintiff's motion to remand back to the Fresno County Superior Court. For the reasons that follow, Plaintiff's motion will be denied.


On January 26, 2001, the Fresno County Superior Court issued a judgment of dissolution of marriage ("Dissolution") between Plaintiff and Defendant. See Defendant's Request for Judicial Notice ("RJN") Ex. A. On August 5, 2001, the Fresno County Superior Court issued a Qualified Domestic Relations Order ("QDRO"). See RJN Ex. B. These orders computed and documented Plaintiff's and Defendant's respective community and separate property interests in a retirement, pension, and/or profit sharing plan known as the "Hematology-Oncology Medical Group of Fresno, Inc." ("the Plan"). Pursuant to the Dissolution and QDRO, Defendant established segregated accounts within the Plan for the separate interests of himself and Plaintiff.1 See Doc. No. 1 Ex. A at p.1 ¶ 3. The separate interests of Plaintiff and Defendant in the Plan were maintained by InTrust (an entity that was later renamed Millennium Trust Company, LLC ("Millennium")). See id. Once the accounts in the Plan were segregated between Plaintiff and Defendant, Plaintiff was informed of the segregation but elected not to take any action to move her segregated account from the Plan. See id. at ¶ 5; June 2012 Dec. of Plaintiff at ¶ 2. Plaintiff never received any account statements or accountings while the funds were at Millennium. See Doc. No. 1 Ex. A at p.1 ¶ 4; June 2012 Dec. of Plaintiff at ¶ 3.

In 2004, Defendant transferred all of his segregated account in the Plan from Millennium to an account at Morgan Stanley. Plaintiff's account remained at Millennium.

In 2007, and without notice to Plaintiff, Defendant liquidated and closed Plaintiff's account in the Plan at Millennium, and transferred the money to a Morgan Stanley account. The amount of the transfer was $431,822.59. The name on the Morgan Stanley account was "Marshal S. Flam, Trustee Hematology Oncology Medical Group of Fresno, Inc. Employee Pension Plan fbo MS Flam." Plaintiff had no knowledge of the liquidation of her Plan account at Millennium or Defendant's reinvestment of her funds with Morgan Stanley in 2007.

In January 2010, Plaintiff began to make efforts to learn the status of her Plan account at Millennium. In November 2011, Plaintiff filed a Summons and Order to Show Cause Complaint ("November OSC") in the Fresno County Superior Court. See Ryden Dec. Ex. A. The November OSC was filed under the 2001 divorce case. See id. The November OSC sought an order for Defendant to segregate and distribute Plaintiff's Plan account funds, provide an accounting, and pay reasonable fees. See id.

In a February 2012 deposition of Defendant, Plaintiff learned about Defendant's 2007 liquidation and transfer of her Plan account from Millennium to Morgan Stanley. Near the time of the deposition, the Morgan Stanley account had a value of $280,658.78.

On May 24, 2012, Defendant filed a response to the November OSC. See Ryden Dec. Ex.B. Defendant responded that he had already completed all steps necessary to segregate Plaintiff's interest in the Plan, that he had voluntarily provided an accounting of the Plaintiff's Plan funds, that no attorney's fees should be awarded against him because the situation was caused by Plaintiff, and that Plaintiff should be ordered to perform all acts necessary to complete the transfer of accounts into her name pursuant to the Dissolution and QDRO. See id.

On June 8, 2012, Plaintiff filed another Summons and Order to Show Cause Complaint ("OSCC") in the Fresno County Superior Court, again as part of the 2001 divorce case. See Doc. No. 1 at Ex. A. The OSCC sought damages of $151,253.81 against Defendant under Family Code § 1101(g) for "breach of fiduciary duty to [Plaintiff] in the management and control of [Plaintiff's] pension account in the [Plan]." Id. at Bates pp. 4-5. The OSCC alleged that Defendant liquidated her Millennium account, transferred the proceeds to Morgan Stanley, and that Morgan Stanley engaged in multiple transfers/transactions, without her consent or knowledge. See id. at Bates pp. 6-7. The OSCC alleged that from 2001 through January 2012, Plaintiff received no statements regarding either her Millennium account or the Morgan Stanley account, despite the statements going to Defendant's office and Defendant having Plaintiff's address. See id. The OSCC alleged that Defendant was a continuing trustee who had an on-going duty to send Plaintiff statements so that she could track the status and location of her account. See id. at Bates p. 12. The OSCC averred that Defendant had an on-going fiduciary duty to Plaintiff under Family Code § 721, which included the duty to provide Plaintiff, without demand, information about the account that was reasonably required for Plaintiff to exercise her rights in the account. See id. at Bates pp. 14-15. The OSCC states that Plaintiff's claim "is not dependent on a finding that [Defendant] mismanaged her money," and that trustees have a duty to keep beneficiaries reasonably informed of the trust and its administration and to communicate material facts affecting the beneficiary's interest. Id. at Bates pp. 16-17. The OSCC alleges that Defendant had a statutory fiduciary duty to at least periodically provide statements to Plaintiff so that she would know what was going on with her account. See id. at Bates p.18. The OSCC explains that when Defendant deposited Plaintiff's liquidated account funds with Morgan Stanley, Defendant deprived Plaintiff of her ability to know where her money was, and she had no participation in investment decisions. Seeid. The OSCC explains that "exactly why [Plaintiff's] account sustained the loss that it did is not the issue here," because once Defendant "took it upon himself to exert management and control of assets that had already been awarded to Petitioner, treating them as his own without any notice or accounting to [Plaintiff], he became responsible for whatever ensued." Id. at Bates p.19. The $151,253.81 that Plaintiff sought to recover was the difference between the value of the Millennium account when it was transferred to Morgan Stanley in 2007, and the value of the Morgan Stanley account when Plaintiff discovered its existence in late January/early February 2012. See id.

On June 18, 2012, the superior court issued its ruling on the November OSC. See Ryden Dec. Ex. C. The superior court awarded Plaintiff approximately $12,500 in attorney's fees, which was meant to be in the nature of a sanction, pursuant to Family Code § 271. See id. The superior court declined to award the additional relief that Plaintiff had requested "based on counsels' representation that those issues had been resolved prior to the hearing." Id. The Superior Court did not order Plaintiff to take any steps to implement the Dissolution or QDRO, or mention the possibility of issuing an order like the one that had been raised in Defendant's response. See id.

On June 27, 2012, Defendant removed the OSCC to this Court. The basis for removal was a federal question based on the preemptive force of the Employment Retirement Income Security Act (29 U.S.C. § 1001 et seq.) ("ERISA").

On July 19, 2012, Plaintiff filed a motion to remand.

On September 6, 2012, the Magistrate Judge granted Plaintiff's motion and remanded the matter back to the Fresno County Superior Court.

On September 20, 2012, Defendant filed a motion to reconsider the Magistrate Judge's remand order.

On October 5, 2012, the Court denied the motion to reconsider because remand occurred due to a lack of subject matter jurisdiction, the case had already been received by the Fresno County Superior Court, 28 U.S.C. § 1447(d) prohibits review of such remands, and Defendant had not addressed § 1147(d).

On October 12, 2012, Defendant appealed to the Ninth Circuit.

On June 8, 2015, the Ninth Circuit held that magistrate judges lack the authority to remand a case. See Doc. No. 40. The Ninth Circuit vacated the Magistrate Judge's remand order, and remanded the case back to this Court to either rule on the motion to remand or refer the motion to remand for a Findings and Recommendation. See id. The Court now rules on the remand motion.


The removal statute (28 U.S.C. § 1441) is strictly construed against removal jurisdiction. Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010); Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). It is presumed that a case lies outside the limited jurisdiction of the federal courts, and the burden of establishing the contrary rests upon the party asserting jurisdiction. Geographic Expeditions, 599 F.3d at 1106-07; Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009). "The strong presumption against removal jurisdiction" means that "the court resolves all ambiguity in favor of remand to state court." Hunter, 582 F.3d at 1042; Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). That is, federal jurisdiction over a removed case "must be rejected if there is any doubt as to the right of removal in the first instance." Geographic Expeditions, 599 F.3d at 1107; Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). "If at any time prior to judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c); Gibson v. Chrysler Corp., 261 F.3d 927, 932 (9th Cir. 2001). Remand under 28 U.S.C. § 1447(c) "is mandatory, not discretionary." Bruns...

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