Masonek v. Wells Fargo Bank, N.A. (In re Med. Capital Sec. Litig.)

• Citation: 842 F.Supp.2d 1208
• Decision Date: 31 January 2012
• Docket Number: Case No. SACV 10–2145 DOC (RNBx).
• Parties: In re MEDICAL CAPITAL SECURITIES LITIGATION. This document relates to No. SACV 09–1048 DOC (RNBx). Steven Masonek, et al., Plaintiff(s), v. Wells Fargo Bank, N.A., et al., Defendant(s).
• Court: U.S. District Court — Central District of California

842 F.Supp.2d 1208

In re MEDICAL CAPITAL SECURITIES LITIGATION.This document relates to No. SACV 09–1048 DOC (RNBx).Steven Masonek, et al., Plaintiff(s),

v.Wells Fargo Bank, N.A., et al., Defendant(s).

Case No. SACV 10–2145 DOC (RNBx).

United States District Court, C.D. California.

Jan. 31, 2012.

Joel M. Cohen, Mark Kirsch, Rachel Lavery, Ladan F. Stewart, Gibson Dunn & Crutcher LLP, New York, NY, Joel Alan Feuer, Diana M. Feinstein, Timothy William Loose, Gibson Dunn & Crutcher LLP, Los Angeles, CA, for Bank of New York Mellon.

Lawrence C. Barth, Richard C. Chen, Marc T.G. Dworsky, Joshua P. Groban, Matthew A. MacDonald, Randall G. Sommer, Munger Tolles & Olson LLP, Los Angeles, CA, for Wells Fargo Bank, N.A.

David B. Dyer, Secore and Waller LLP, Dallas, TX, Susan C.V. Jones, Elkins, Kalt, Weintraub, Reuben, Gartside, LLP, Los Angeles, CA, for Cullum & Burks Securities, Inc.

Jeffrey K. Riffer, Susan C.V. Jones, Elkins, Kalt, Weintraub, Reuben, Gartside, LLP, Los Angeles, CA, for Cullum & Burks Securities, Inc./National Securities Corp.

Bruce Bettigole, Nicholas T. Christakos, Deborah G. Heilizer, Sutherland, Asbill & Brennan LLP, Washington, DC, Mike Margolis, Timothy J. Martin, Margolis & Tisman LLP, Los Angeles, CA, for Securities America, Inc./Securities America Financial Corp.

John S. Baker, Dorsey & Whitney LLP, Costa Mesa, CA, Peter W. Carter, Dorsey & Whitney LLP, Minneapolis, MN, for Ameriprise Financial, Inc.

David A. Baugh, Gara M. Sliwka, Baugh, Dalton, Carlson and Ryan, LLC, Chicago, IL, for Capital Financial Services, Inc.

Joseph P. Zampi, Zampi & Associates, San Diego, CA, for Signature Financial.

ORDER GRANTING MOTIONS TO DISMISS

DAVID O. CARTER, District Judge.

Before the Court are nine motions to dismiss filed by seven third-party broker dealer defendants (“BD Defendants”) seeking to dismiss the third-party complaints filed by Wells Fargo Bank, N.A. (“Wells Fargo”) and the Bank of New York Mellon (“BNYM”) (collectively, the “Banks”). These motions are as follows: Cullum & Burks Securities, Inc.'s (“Cullum & Burks”) Motion to Dismiss Wells Fargo's Third–Party Complaint (Docket 255); Cullum & Burks' Motion to Dismiss BYNM's Amended Third–Party Complaint (Docket 256); National Securities Corporation's (“NSC”) Motion to Dismiss BNYM's Amended Third–Party Complaint (Docket 257); NSC's Motion to Dismiss Wells Fargo's Third–Party Complaint (Docket 258); Securities America, Inc. (“SAI”) and Securities America Financial Corp.'s (“SAFC”) Motion to Dismiss Wells Fargo's Third–Party Complaint (Docket 259); SAI's Motion to Dismiss BNYM's Amended Third–Party Complaint (Docket 261); Ameriprise Financial, Inc.'s (“Ameriprise”) Motion to Dismiss Wells Fargo's Complaint (Docket 263); Capital Financial Services, Inc.'s (“Capital Financial”) Combined Motion to Dismiss Wells Fargo Third–Party Complaint and BNYM's Amended Third Party Complaint (Docket 233 in Case No. SACV 09–1048); and Signature Financial Group, Inc.'s (“Signature Financial”) Motion to Dismiss BNYM's Amended Third–Party Complaint (Docket 279) (collectively, the “Motions to Dismiss”). After careful consideration of the moving, opposing, and replying papers, the Court hereby GRANTS the Motions to Dismiss.

I. BACKGROUND

Masonek v. Wells Fargo Bank, N.A., et al., No. SACV 09–1048, a member action in the In re Medical Capital Securities Litigation, No. 10–ML–2145 MDL, is a class action asserting breach of contract claims against the Banks. The Masonek plaintiffs seek to recover alleged losses arising from their purchase of promissory notes issued by Medical Capital Holdings, Inc. and its affiliates (collectively, “MedCap”). They allege that the Banks, in their role as indenture trustees, breached contracts entered into with various MedCap special purpose corporations, which allegedly caused the Masonek plaintiffs' losses. The Banks, in turn, contend that it was the wrongful acts and omissions of the BD Defendants, who marketed and sold the promissory notes at issue, that caused any harm allegedly suffered by the Masonek plaintiffs. The Banks thus each filed a third party complaint against the BD Defendants, seeking equitable indemnification and contribution, to the extent the Banks are held liable in the Masonek action (Docket 178).

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to state a claim upon which relief can be granted. Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove “no set of facts” in support of its claim that would entitle it to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1968, 167 L.Ed.2d 929 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In order for a complaint to survive a 12(b)(6) motion, it must state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). A claim for relief is facially plausible when the plaintiff pleads enough facts, taken as true, to allow a court to draw a reasonable inference that the defendant is liable for the alleged conduct. Id. at 1949. If the facts only allow a court to draw a reasonable inference that the defendant is possibly liable, then the complaint must be dismissed. Id. Mere legal conclusions are not to be accepted as true and do not establish a plausible claim for relief. Id. at 1950. Determining whether a complaint states a plausible claim for relief will be a context-specific task requiring the court to draw on its judicial experience and common sense. Id.

In evaluating a 12(b)(6) motion, review is “limited to the contents of the complaint.” Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir.1994). However, exhibits attached to the complaint, as well as matters of public record, may be considered in determining whether dismissal was proper without converting the motion to one for summary judgment. See Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995); Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir.1986). Further, a court may consider documents “on which the complaint ‘necessarily relies' if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir.2006). “The Court may treat such a document as ‘part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6).’ ” Id.

Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir.2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir.1996)); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000).

III. DISCUSSIONA. Choice–of–Law

As an initial matter, the Court finds it necessary to undertake a choice-of-law inquiry and conclusively hold which state's law applies to the Banks' claims for equitable indemnification and contribution. Wells Fargo's Complaint is titled “Third Party Complaint for Equitable Indemnification and Contribution” and seeks a “judgment declaring Wells Fargo's right to total or partial indemnification and contribution,” yet in its Opposition and at oral argument, Wells Fargo clarifies that it is not seeking contribution under California law. See Wells Fargo Opposition, 11, n. 4. Rather, Wells Fargo seeks equitable indemnification under California law; or in the event the Court concludes that equitable indemnification is not permissible under California law, Wells Fargo seeks proportionate contribution under South Dakota or Minnesota law. Id. at 11. It is thus important at this threshold to determine the state law that will apply to the present case.

In ruling on choice-of-law issues, California courts apply a governmental interest analysis. Kearney v. Salomon Smith Barney, Inc., 39 Cal.4th 95, 100, 45 Cal.Rptr.3d 730, 137 P.3d 914 (2006). Under this analysis, a court must first determine whether there is a “true conflict” between jurisdictions. Id. If such a conflict exists, the court analyzes the respective interests of the jurisdictions to determine which jurisdiction's interest would be more severely impaired if its law were not applied. Id. As will be discussed below, California law does not support a claim for equitable indemnification in the present case. The first inquiry is thus whether there is any conflict between California law and the law of South Dakota or Minnesota, in that those states would find Wells Fargo's equitable indemnification claim viable as a matter of law.

Wells Fargo cites City of Bridgewater v. Morris for the proposition that South Dakota law permits the equivalent of equitable indemnification for a contract defendant seeking indemnification from a tortfeasor defendant. 594 N.W.2d 712 (1999). Wells Fargo's citation to this case is curious because Bridgewater explicitly holds that the trial court was in error to instruct the jury on relative fault in a case with two contract defendants. Id. at 717. A South Dakota statute provides for proportionate contribution between contract defendants that are jointly and severally liable; only because the jury verdict essentially established the percentage of fault required to apply the statute was the trial court's error was deemed harmless. Id.Bridgewater makes clear that there is no equitable indemnification between contract defendants under South Dakota law, much less between one contract defendant and one tort defendant. There is thus no conflict between South Dakota and California law.

The same is not true, however, for Minnesota law. In City of Willmar v. Short–Elliott–Hendrickson, Inc., the court held that ...