United States District Court, D. Nevada
NOEL C. MURRAY, et al., Plaintiffs,
PROVIDENT TRUST GROUP, LLC, AND ASCENSUS, LLC, Defendants.
MIRANDA M. DU, CHIEF UNITED STATES DISTRICT JUDGE
Noel C. Murray, Swarna Perera, and Joyce Friedman 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”). Plaintiffs filed this action against
Defendant Provident Trust Group, who provided custodial and
administrative services for Plaintiffs' SDIRAs. Defendant
has moved to dismiss Plaintiffs' remaining contract claim
(the “Motion”) in the First Amended Complaint
(“FAC”). (ECF No. 49.) For the reasons explained
below, the Court will grant Defendant's Motion as to
Plaintiff Friedman and deny the Motion as to Plaintiffs
Murray and Perera.
Court incorporates by reference the background section in its
prior order (ECF No. 45 at 2-3) and does not recite it here.
In that order, the Court dismissed all claims in the initial
complaint with prejudice, but granted Plaintiffs leave to
file an amended complaint to assert a breach of contract
claim based on the allegation that “Defendant
impermissibly commingled funds.” (ECF No. 45 at 7.)
Defendants now move to dismiss this claim.
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)).
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.
Motion contends that Plaintiffs have not shown a breach of
contract (ECF No. 49 at 11-12) and, in any event,
Plaintiffs' contract claim is barred by an exculpatory
clause (id. at 14). The Court disagrees with
Defendant's first argument but agrees with its second
argument only as to Plaintiff Friedman's claim. The Court
will only permit Plaintiffs Murray and Perera's claim to
breach of contract claim requires a plaintiff to show: (1)
the existence of a valid contract; (2) a breach by the
defendant; and (3) damage because of the breach.”
Kerr v. Bank of Am., N.A., No. 3:15-cv-306-MMD-WGC,
2016 WL 54670, at *2 (D. Nev. Jan. 5, 2016) (citations
omitted). Here, neither party questions the existence of a
contract. Instead, the parties dispute whether Defendant
breached Article III(1) (the “Article”), which is
identical in both 2012 and 2017 Agreements and reads:
No part of the custodial account funds may be invested in
life insurance contracts, nor may the assets of the
custodial account be commingled with other property
except in a common trust fund or common investment fund
(within the meaning of section 408(a)(5)).
(ECF Nos. 46-2, 46-3 (emphasis added).)
argues that Woodbridge-not Defendant-commingled the proceeds
of sales securities, which Defendant had no duty to prevent.
(ECF No. 46 at 12.) Plaintiffs counter that Defendant
commingled investor assets by knowingly signing documents
that contemplated the pooling of investor funds into loans to
third parties (ECF No. 52 at 10-11). Defendant also argues
that Plaintiffs' funds ceased to be “assets of the
custodial account” when Defendant purchased Woodbridge
securities per Plaintiffs' instructions. (ECF No. 46 at
11.) Plaintiffs rebut that ...