Yamauchi v. Cotterman

Decision Date24 March 2015
Docket NumberNo. C–14–1378 EMC,C–14–1378 EMC
Citation84 F.Supp.3d 993
PartiesJonathan Yamauchi, Plaintiff, v. John Cotterman, et al., Defendants.
CourtU.S. District Court — Northern District of California

Jesse Landis Hill, Law Offices of Jesse L.B. Hill, San Luis Obispo, CA, for Plaintiff.

R. Bradford Huss, Michelle S. Lewis, Trucker Huss, APC Sara Ahmed, Bryan Cave LLP, Elyse Whitney Grant, Julie L. Taylor, Keesal, Young & Logan, San Francisco, CA, Blair R. Jackson, Invictus Law PC, American Fork, UT, Robert E. Boone, III, Bryan Cave LLP, Santa Monica, CA, for Defendants.


(Docket Nos. 64, 65, 70)

EDWARD M. CHEN, United States District Judge

Pending before the Court are Defendants Bank of America, N.A.,1 Citigroup, Inc., and John Cotterman's motions to dismiss Jonathan Yamauchi's amended complaint (Docket No. 61 (“Amended Complaint”)). Plaintiff Jonathan Yamauchi (Yamauchi) has alleged claims for breach of fiduciary duty, negligent misrepresentation, fraudulent misrepresentation, fraud, and declaratory relief against all Defendants.


In March of 2014, Yamauchi sued Defendants John Cotterman (Cotterman), Citigroup, Inc. (“Citigroup”), and Bank of America, N.A. (“BANA”).2 Yamauchi sued Cotterman in his individual capacity and as trustee for the Echelon Mortgage Corporation's 401(k) Profit Sharing Plan. Yamauchi sued Citigroup and BANA (collectively the “Banks” or “Bank Defendants) as successors in interest or assignees to certain residential loans or to payments/liabilities associated with those loans.

The Court previously granted Defendant Cotterman and Citigroup's motions to dismiss, because Yamauchi's claims were time-barred, and he did not plead any exception to the statute of limitations. Docket No. 60. The Court granted leave to amend. Id.

When the Court dismissed the original complaint, the Court specifically cautioned Yamauchi that if he intended to plead fraud or concealment as an exception to the running of the ERISA statute of limitations, then Yamauchi would need to plead active concealment. The Court also advised Yamauchi that he must meet the heightened pleading standard of Rule 9 with respect to any allegations sounding in fraud. Id. The Court further advised Yamauchi that he would need to identify and plead a clear factual and legal basis as to the liability of the Bank Defendants. Id.

The Amended Complaint alleges that Yamauchi was the CEO of the now-defunct Echelon Mortgage Corporation (“Echelon”) and was a beneficiary of Echelon's 401(k) Profit Sharing Plan (“Plan”). Amended Complaint ¶ 1. Yamauchi alleges that Defendant Cotterman was appointed as the trustee of the Plan by Judge Wilken in 1997 during his criminal prosecution. Id. ¶ 2 & Ex. 2.

At issue in the Amended Complaint is the disposition of Plan assets upon the termination of the Plan in 1998, approximately 16 years before Yamauchi brought suit. In June of 1991, Echelon entered into a Partial Purchase Agreement with Fleet Finance, assigning to Fleet Finance 10 residential mortgage notes, selling Fleet the right to 84% of the monthly payments on those notes, and retaining a subordinated interest in the remaining 16% of the monthly payments. Amended Complaint, Ex. 4. Yamauchi alleges that on February 18, 1998, he and Echelon's CFO at the time assigned Echelon's 16% interest to the Plan. Id. at ¶ 3 & Ex. 3. Under the terms of the purchase agreement, Fleet Finance was the servicer of the loans. Id., Ex. 4.

Around the same time, Cotterman sent a letter to an attorney named Albert J. Boro (Yamauchi's attorney) in Cotterman's capacity as Plan trustee. Amended Complaint, Ex. 2. In this letter, Cotterman identifies two types of assets owned by the Plan: (1) short term liquid assets (available for immediate distribution), and (2) long-term illiquid assets in the form of the mortgage participation interest retained through the Partial Purchase Agreement with Fleet Finance. Amended Complaint, Ex. 2. In the letter, Cotterman states that [d]epending on the district court criminal proceedings, the remainder of Jonathan Yamauchi's and James Lee's account balances could be paid upon receipt of payments received from the long term assets.” “Additional amounts received from the long term assets could then be allocated to all Plan Participants based on current account balances and thereafter distributed.” Id.

The Amended Complaint alleges that Cotterman told Yamauchi that Cotterman planned to exercise his authority as the Plan Trustee and Plan Administrator to terminate the Plan and turn the remaining “illiquid” assets over to the Plaintiff. Id. at ¶¶ 18–19. Plaintiff alleges that Cotterman then closed the Plan's MassMutual account on June 15, 1998. Id. at ¶ 4. Plaintiff alleges that [s]ince Cotterman did not turn the mortgages over to Plaintiff, [Yamauchi] assumed that Cotterman was keeping the Plan going.” Id. at ¶ 18. Plaintiff alleges that Cotterman “had a duty to collect funds and make sure the Plan continued,” but that, notwithstanding that duty, [n]o payments were ever remitted to MassMutual after Cotterman closed the account.” Id. at ¶ 4.3

Yamauchi does not allege in his Amended Complaint when and how he learned of the alleged fiduciary breaches and misrepresentations. Instead, in opposition to the motions to dismiss, Yamauchi's counsel reaches beyond the four corners of the Amended Complaint to refer back to a declaration that Yamauchi filed in connection with the previous motions to dismiss.4 In that declaration, Yamauchi attests that one of the mortgagors (the Paysinger borrower) contacted Yamauchi in September 2013. At that time, Yamauchi learned that the Paysinger borrower was making her mortgage payments to Grand Bank. Yamauchi then contacted MassMutual, which informed him that there was no money in the Plan. He then contacted Cotterman. As reflected in an exhibit attached to the Amended Complaint, in or around early January 2014, MassMutual confirmed to Yamauchi in writing that the Plan had been closed pursuant to a June 15, 1998 surrender request from Cotterman. Amended Complaint, Ex. 5.

Cotterman, now joined by all the Bank Defendants, again argues that Yamauchi's claims are time-barred on the face of the Amended Complaint. The Defendants further argue that ERISA preempts Yamauchi's common law claims. In general, the Bank Defendants argue that Cotterman's claims are not adequately pled under Rule 8, and, where applicable, Rule 9.

For the reasons stated on the record, and as supplemented herein, the Court GRANTS each of the motions to dismiss with prejudice.

A. Legal Standard

A motion to dismiss for failure to state a claim tests the legal sufficiency of the claims in the complaint. See Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is proper where there is either (1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal claim.” Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.1984) (citation omitted). For the purposes of testing the legal sufficiency of the complaint, a court must “accept all material allegations of fact as true and construe the complaint in a light most favorable to the nonmoving party.” Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir.2007).

To survive a Rule 12(b)(6) motion, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has “facial plausibility” if the plaintiff pleads facts that “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 677–78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. A plaintiff must allege “more than unadorned, the-defendant-unlawfully-harmed-me accusation[s].” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ); Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.2009) (“conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal.”). In sum, [f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true.” Id.

B. ERISA Preemption

Cotterman and Citigroup argue that ERISA preempts Yamauchi's state law claims. The Court agrees that the claims against Cotterman are preempted by ERISA. In enacting ERISA, Congress set out to “protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.”29 U.S.C. § 1001(b). To further ERISA's purpose to “provide a uniform regulatory regime over employee benefit plans ... ERISA includes expansive pre-emption provisions that are intended to ensure that employee benefit plan regulation would be exclusively a federal concern.” Aetna Health v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (citations omitted).

Consequently, ERISA Section 514(a) preempts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The Supreme Court has given the phrase “relate to” a “broad common-sense meaning, such that a state law ‘relate[s] to’ a benefit plan ‘in the normal sense of the phrase, if it has a connection with or reference to such a plan.’ Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107...

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