Mandelbaum v. Fiserv Inc.
| Decision Date | 29 March 2011 |
| Docket Number | 09–cv–01356–CMA–CBS.,Civil Action Nos. 09–cv–00752–CMA–CBS,09–cv–01222–CMA–CBS |
| Citation | 107 A.F.T.R.2d 2011,787 F.Supp.2d 1226 |
| Parties | Rochelle MANDELBAUM, individually and as executrix of The Estate of Donald Mandelbaum; Giuseppe Santinello; Anne J. Del Casino, and Robert and Stephanie Halio, on behalf of themselves and other persons similarly situated, Plaintiffs,v.FISERV, INC., Fiserv Trust Company, Retirement Accounts, Inc., NTC & Co.LLP, Trust Industrial Bank, and Lincoln Trust Company, Defendants. |
| Court | U.S. District Court — District of Colorado |
OPINION TEXT STARTS HERE
Brian Keith Matise, David K. Teselle, Burg, Simpson, Eldredge, Hersh & Jardine, PC, Englewood, CO, Christopher Lovell, Lovell Stewart Halebian, LLP, Jacob H. Zamansky, Kevin D. Galbraith, Zamansky & Associates, LLC, New York, NY, for Plaintiffs.Tamir I. Goldstein, Brian G. Eberle, Kenneth Barry Siegel, Sherman & Howard, L.L.C., Denver, CO, Darci F. Madden, John Michael Clear, Bryan Cave Powell Goldstein, LLP, St. Louis, MO, N. Louise Ellingsworth, Bryan Cave Powell Goldstein, LLP, Kansas City, MO, for Defendants.
ORDER DISMISSING CLAIMS
This matter is before the Court on the following motions filed by Defendants 1 Fiserv, Inc., Fiserv Trust Company, Retirement Accounts, Inc., NTC & Co. LLP, Trust Industrial Bank, and Lincoln Trust Company: (1) Motion to Dismiss All Claims As to All Defendants (Doc. # 78),2 (2) Defendants' Motion to Dismiss All Claims Based on SLUSA (the Securities Litigation Uniform Standards Act of 1998) (Doc. # 79),3 and (3) Motion to Dismiss Defendant Fiserv, Inc. (Doc. # 80.) 4 The Motions are fully-briefed. On August 9, 2010, the parties presented oral argument in connection with the Motions to Dismiss. (“August 9 Motions Hearing.”) (Doc. # 109.) This matter is also before the Court on Defendants' Motion for Reconsideration of Order Regarding Election of Arbitration Rights (Doc. # 111), to which Plaintiffs' responded (Doc. # 113) and Defendants replied (Doc. # 116).
Having reviewed the various briefs and relevant case law and heard the parties' arguments, the Court GRANTS Defendants' Motion to Dismiss All Claims As to All Defendants (Doc. # 78), GRANTS the Motion to Dismiss Defendant Fiserv, Inc. (Doc. # 80), and GRANTS Defendants' Motion to Dismiss All Claims Based on SLUSA (Doc. # 79). Additionally, Defendants' Motion for Reconsideration of Order Regarding Election of Arbitration Rights (Doc. # 111) is DENIED AS MOOT.
Plaintiffs filed their initial class action complaint on April 2, 2009. (Doc. # 1.) The complaint was amended on April 22, 2009. (Doc. # 4.) On June 30, 2009, the instant action was consolidated with two other actions involving common questions of law and fact, 09–cv–01222–CMA–CBS and 09–cv–01356–CMA–CBS (the “Consolidation Order”). (Doc. # 28.) Pursuant to the Consolidation Order, an amended consolidated class action complaint was filed on November 6, 2009. (Doc. # 65.) The complaint was again amended on November 10, 2009 (the “Complaint”). (Doc. # 69.) Plaintiffs assert that this Court has original jurisdiction over all claims, including state claims, pursuant to the Class Action Fairness Act of 2005 and 28 U.S.C. § 1332(d)(2)(A).
This putative class action concerns allegations of various holders of self-directed individual retirement accounts (“IRAs”) 6 administered by Defendants Fiserv, Inc.7, Fiserv Trust Company, Retirement Accounts, Inc., Trust Industrial Bank, Lincoln Trust Company, NTC & Co. LLP (and Beriault Holdings, Inc. and Beriault, who have since been voluntarily dismissed). As set forth in various agreements underlying the IRAs (“IRA Agreements”), Plaintiffs, the account owners, made all investment decisions. The Trustee Defendants gave no financial or investment advice, conducted no valuations or due diligence, and charged only nominal annual fees to prepare tax paperwork and provide specified, limited administrative services. (Doc. # 78 at 10.) Pursuant to instructions received from Plaintiffs, the Defendants sent Plaintiffs' funds to Bernard Madoff's brokerage firm, Bernard L. Madoff Investment Securities LLC (“BMIS”), for investment in securities. The Plaintiffs' funds were ultimately lost in Bernard Madoff's notorious Ponzi scheme.
The various IRA Agreements contain clearly-stated and explicit provisions that indemnify the Trustee Defendants from liability resulting from any claims arising from the accounts at issue. These IRA Agreements also clearly state that the Plaintiff investors are solely responsible for making investment decisions in connection with their funds and that the Trustee Defendants will not provide any investment advice. The pertinent provisions of the various IRA Agreements 8 are set forth in Appendix A, attached hereto.
Plaintiffs contend that the Defendants owed, and failed to fulfill, certain duties as fiduciaries/trustees of Plaintiffs' IRAs, which duties included the duty to hold, preserve, and keep safe the trust's res, and to avoid commingling of the trust res with other assets. (Complaint, Doc. # 69, ¶¶ 9, 10.) Plaintiffs assert that these duties arise from the contractual agreements and federal and state common law. In particular, Plaintiffs contend that Defendants:
(1) turned the trust assets over to a third party (Bernard Madoff), rather than hold the assets in trust (Doc. # 81–3, at 12);
(2a) failed to verify whether and how Bernard Madoff continued to hold the assets;
(2b) failed to take steps consistent with the investment industry's customs and standards such as keeping track, maintaining custody over, and keeping safe the trust assets;
(2c) failed to maintain title to the (non-existent) assets;
(3) knew from prior experience with other questionable funds the importance of holding and preserving trust assets;
(4) enabled Madoff's theft of the assets, due to their lack of oversight;
(5) were engaged in a “ quid pro quo ” arrangement with Madoff, which caused them to disregard various red flags concerning Madoff's fraudulent activities; and
(6) received information about the questionable nature of Madoff's operations. (Complaint, Doc. # 69, ¶¶ 11, 14, 20, 21, 62(a)-(c), 169(a)-(d), 174–81).
Plaintiffs assert the following 32 claims against Defendants:
A. Breach of Contract:
(1) Claims 1 & 21: Based on Federal Common Law
(2) Claims 6, 11, 16 & 26: Based on State Common Law
B. Ordinary and Gross Negligence
(1) Claims 2 & 22: Based on Federal Common Law
(2) Claims 7, 12, 17, & 27: Based on State Common Law
(1) Claims 3 & 23: Based on Federal Common Law
(2) Claims 8, 13, 18, & 28: Based on State Common Law
(3) Claims 32: Based on ERISA
(1) Claims 4 & 24: Based on Federal Common Law
(2) Claims 9, 14, 19 & 29: Based on State Common Law
(1) Claims 5 & 25: Based on Federal Common Law
(2) Claims 10, 15, 20 & 30: Based on State Common Law
In reviewing a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court “accept[s] all the well-pleaded allegations of the complaint as true” and “construe[s] them in the light most favorable to the plaintiff.” David v. City & County of Denver, 101 F.3d 1344, 1352 (10th Cir.1996). The Court must decide “whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.’ ” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir.2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that” the alleged claim might have occurred. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009) (citation and quotation marks omitted). “[T]he complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, L.L.C., 493 F.3d at 1177.
In evaluating the plausibility of a given claim, the Court “need not accept conclusory allegations” without supporting factual averments. S. Disposal, Inc. v. Tex. Waste Mgmt., 161 F.3d 1259, 1262 (10th Cir.1998). Iqbal, 129 S.Ct. at 1949.
In evaluating a Rule 12(b)(6) motion to dismiss, courts may consider not only the complaint itself, but also documents incorporated into the complaint by reference. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007); TMJ Implants, Inc. v. Aetna, Inc., 498 F.3d 1175, 1180 (10th Cir.2007). Although the various IRA Agreements were not attached to the Complaint, they are referred to in the Complaint, they are central to Plaintiffs' claims, and their authenticity is not in dispute. As such, this court may consider the various IRA Agreements. Alvarado v. KOB–TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir.2007) (internal quotation omitted).
In the Complaint, Plaintiffs have not made any specific allegations against Fiserv, Inc. Rather, Plaintiffs refer generally to all defendants, including Fiserv, Inc., as “Trustee Defendants” or the “Fiserv Defendants” and lodge general allegations against such defendants, including the following, as examples:
• The Trustee Defendants systematically violated such minimum federal fiduciary standards for more than fifteen years which foreseeably lost the trust res of each Plaintiff and member of the Class. These continuous...
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