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Murray v. Provident Trust Group, LLC

United States District Court, D. Nevada

April 23, 2019

NOEL C. MURRAY, et al., Plaintiffs,



         I. SUMMARY

         Plaintiffs Noel C. Murray and Swarna Perera seek to represent a class of investors who lost substantial amounts of money they were saving for retirement when they invested in the Woodbridge real-estate Ponzi scheme through their self-directed individual retirement accounts (“SDIRAs”), against Defendant Provident Trust Group, [1]who provided custodial and administrative services for Plaintiffs' SDIRAs. Defendant has moved to dismiss all of Plaintiffs' claims against it under Federal Rule of Civil Procedure 12(b)(6) (the “Motion”).[2] (ECF No. 21.) Because the contract that Plaintiffs allege governs their relationship with Defendant contradicts Plaintiffs' breach of contract and fiduciary duty allegations in their Complaint, the economic loss doctrine applies to their negligence claim, and the applicable contract precludes their unjust enrichment claim- and as further discussed below-the Court will grant Defendant's Motion.


         The following facts are adapted from Plaintiffs' Complaint, which asserts a class action under the Class Action Fairness Act. Plaintiffs seek to represent a class of investors who invested in the Woodbridge group of companies (through the “Woodbridge Securities”) by moving retirement money into SDIRAs for which Defendant was the custodian. (ECF No. 1 at 2.) While some other financial services companies declined to allow their customers to hold Woodbridge Securities in their SDIRA accounts, Defendant did, and failed to take any steps to ascertain the nature, assets underlying, or value of the Woodbridge Securities. (Id. at 5.) It turned out the Woodbridge Securities were part of a Ponzi scheme orchestrated by Robert H. Shapiro. (Id. at 5-6, 23-37.)

         Defendant continued to accept Woodbridge Securities as custodian from other customers that Woodbridge steered towards Defendant even after federal and state regulatory agencies had concluded Shapiro was operating Woodbridge in a way that broke various laws. (Id. at 6-9.) Despite the fact these investigations and related charges were public, Defendant did not notify any of its customers who held Woodbridge Securities in their SDIRAs about them. (Id. at 9.) At least one company similarly situated to Defendant did. (Id. at 42.) And while the Woodbridge Securities were valueless, Defendant continued to list their value at or near the price Plaintiffs paid for them in Plaintiffs' periodic account statements. (Id. 42-43.) Plaintiff Noel C. Murray invested $54, 148.84 in Woodbridge Securities held in a SDIRA for which Defendant was the custodian, and Plaintiff Dr. Swarna Perera invested $600, 000. (Id. at 11.) Plaintiffs' relationship with Defendant is governed by a contract Plaintiffs attached to, and explicitly referred to in, their Complaint (ECF No. 1-2, the “2017 Contract”). (Id. at 4-5, 14-15, 20-21, 45.)

         The Complaint asserts the following claims: (1) breach of contract under state and federal law; (2) breach of fiduciary duty under state and federal law; (3) negligence and gross negligence; and (4) unjust enrichment. (Id. at 45-49.) Defendant's Motion seeks dismissal of all four claims. (ECF No. 21.)


         A court may dismiss a plaintiff's complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555.) “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal citation omitted). And it must contain either direct or inferential allegations concerning “all the material elements necessary to sustain recovery under some viable legal theory.” Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1989) (emphasis in original)).

         In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, a district court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. See Iqbal, 556 U.S. at 678-79. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. See id. at 678. Second, a district court must consider whether the factual allegations in the complaint allege a plausible claim for relief. See Id. at 679. A claim is facially plausible when the plaintiff's complaint alleges facts that allow a court to draw a reasonable inference that the defendant is liable for the alleged misconduct. See Id. at 678. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has “alleged-but it has not show[n]-that the pleader is entitled to relief.” Id. at 679 (internal quotation marks omitted). This is insufficient. When the claims in a complaint have not crossed the line from conceivable to plausible, the complaint must be dismissed. See Twombly, 550 U.S. at 570.


         While the Court sympathizes with Plaintiffs regarding their alleged substantial losses of retirement funds, they have failed to state a claim against Defendant at this time. Their breach of contract and breach of fiduciary duty claims fail for the most part because their allegations are directly contradicted by the terms of 2017 Contract upon which they rely to establish them. Plaintiffs' negligence claim is barred by the economic loss doctrine. Plaintiffs' unjust enrichment claim fails because Plaintiffs acknowledge the existence of the valid 2017 Contract. The Court will further address Defendant's Motion with respect to each of Plaintiffs' alleged causes of action below.

         A. Preliminary Matters

         But before the Court addresses Defendant's Motion in the context of Plaintiffs' asserted causes of action, the Court briefly addresses several preliminary matters. First, Plaintiffs cite the Employee Retirement Income Security Act of 1974 (“ERISA”) throughout their Complaint. (ECF No. 1 at 3, 13, 14.) However, Plaintiffs do not allege in their Complaint that the SDIRAs at issue were established or maintained by an employer or employee organization. (See generally id.) Therefore, ERISA does not apply. See, e.g., Charles Schwab & Co. v. Debickero, 593 F.3d 916, 919 (9th Cir. 2010) (finding that an individual retirement account created and ...

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