Lundstrom v. Young et al, No. 3:2018cv02856 - Document 64 (S.D. Cal. 2019)

Court Description: ORDER Granting Defendants' Motion to Dismiss; Granting Defendants' Motions to Seal; Denying Defendant Young's Motion for Sanctions ( 46 , 47 , 48 , 50 , 56 , 58 ). Signed by Judge Gonzalo P. Curiel on 12/5/19. (dlg)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 10 SOUTHERN DISTRICT OF CALIFORNIA 11 12 BRIAN LUNDSTROM, 13 14 Plaintiff, Case No. 3:18-CV-2856-GPC-MSB v. 15 CARLA YOUNG, an individual; LIGAND PHARMACEUTICALS 16 INCORPORATED, LIGAND 17 PHARMACEUTICALS INCORPORATED 401(k) PLAN; and 18 DOES 1 through 20, 19 Defendants. 20 ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS; GRANTING DEFENDANTS’ MOTIONS TO SEAL; DENYING DEFENDANT YOUNG’S MOTION FOR SANCTIONS [ECF Nos.: 46, 47, 48, 50, 56, 58] 21 22 Before the Court are Defendant Carla Young’s (“Young”) motion to dismiss the 23 first amended complaint (“FAC”), ECF No. 46, and Defendant Ligand Pharmaceuticals 24 Incorporated’s (“Ligand”) motion to dismiss the FAC. ECF No. 50. Oppositions were 25 filed on July 22, 2019. ECF Nos. 52, 53. Replies were filed on July 29, 2019. ECF Nos. 26 54, 55. 27 28 1 18-CV-2856-GPC-MSB 1 On September 19, 2019, Young also filed a motion for sanctions. ECF No. 58. An 2 opposition was filed on October 4, 2019. ECF No. 60. A reply was filed on October 11, 3 2019. ECF No. 61. 4 The Court held a hearing on October 25, 2019. Based on the reasoning below, the 5 Court GRANTS Defendants’ motions to dismiss and DENIES Young’s motion for 6 sanctions. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 I. Background Plaintiff and Defendant Young married on or around August 21, 1998 in Seattle, Washington, and divorced on July 30, 2014 in Texas. ECF No. 45 (“FAC”) ¶¶ 13, 15. The FAC alleges that Lundstrom became employed by Defendant Ligand on or about January 8, 2016 and began participating in the Ligand 401(k) Plan on or about April 1, 2016. Id. ¶¶ 16, 18. As part of Plaintiff’s employment compensation package, Ligand granted Plaintiff 18,010 company stock options in two lots (“Incentive Stock Options”). Id. ¶¶ 20, 21. On September 13, 2017, the District Court 231st Judicial District of Tarrant County issued an order requiring Plaintiff to pay $55,533.03 in child support arrearages to Young. Id. ¶ 22. According to the FAC, Young subsequently submitted a 401(k) Qualified Domestic Relations Order (“401(k) QDRO”) and Stock Domestic Relations Order (“Stock DRO”) to the District Court 231st Judicial District of Tarrant County for the court’s signature. Id. ¶¶ 24, 32. Plaintiff alleges that the 401(k) QDRO submitted sought to transfer to Young 100 percent of the benefits held in Plaintiff’s account in the 401(k) Plan, and the Stock DRO sought the transfer of 18,010 Incentive Stock Options to Young. Id. ¶¶ 23, 31. Plaintiff also alleges that he was not given an opportunity to review, approve, or contest the validity of the 401(k) QDRO or the Stock DRO prior to Young’s submission of both documents to the District Court 231st Judicial District of Tarrant County. Id. ¶¶ 26, 27, 34, 35. The Texas court signed the 401(k) QDRO on or 28 2 18-CV-2856-GPC-MSB 1 about November 21, 2017, and signed the Stock DRO on or about January 22, 2018. Id. 2 ¶¶ 28, 36. 3 According to the FAC, Young sent Ligand copies of the 401(k) QDRO and the 4 Stock DRO in late 2017 and early February 2018, respectively. Id. ¶¶ 39, 48. On 5 January 4, 2018, Ligand forwarded a copy of the 401(k) QDRO to Plaintiff. Id. ¶ 41. 6 Plaintiff subsequently raised a number of issues concerning the validity of the 401(k) 7 QDRO with Ligand. Id. ¶ 42. On January 27, 2018, Plaintiff notified Ligand that he was 8 appealing the 401(k) QDRO with the 2nd Court of Appeals in Fort Worth, Texas. Id. ¶¶ 9 44. On February 1, 2018, the 2nd Court of Appeals in Fort Worth, Texas denied 10 Plaintiff’s appeal of the 401(k) and on February 9, 2018, Ligand transferred $62,063.47 11 from Plaintiff’s 401(k) account to Young. Id. ¶¶ 45, 46. 12 On February 7, 2018, a Ligand employee notified Plaintiff that Ligand had 13 received the Stock DRO which dictated the transfer all of Plaintiff’s Incentive Stock 14 Options to Young. Id. ¶ 49. Plaintiff subsequently raised a number of issues concerning 15 the validity of the Stock DRO with Ligand. Id. ¶ 50. Plaintiff also notified Ligand that 16 he was appealing the Stock DRO with the 2nd Court of Appeals in Fort Worth, Texas. 17 Id. ¶¶ 44, 51. Plaintiff subsequently filed appeals with the Texas Supreme Court seeking 18 to invalidate the 401(k) QDRO and Stock DRO. Id. ¶ 53. The FAC does not indicate the 19 dates when these appeals were filed or the outcomes of the appeals. 20 On March 14, 2018, Ligand informed Plaintiff that if Ligand did not receive a hold 21 or other standing order issued by a presiding judge before March 23, 2018, the company 22 would proceed with distributing the Incentive Stock Options to Young on March 28, 23 2018. Id. ¶ 52. On March 14, 2018, Plaintiff informed Ligand that his appeals of the 24 401(k) QDRO and Stock DRO were pending in the Texas Supreme Court. Id. ¶ 53. On 25 May 8, 2018, Ligand informed Plaintiff that the Incentive Stock Option transfer to Young 26 would be processed on that day. Id. ¶ 55. Plaintiff alleges that 18,010 Incentive Stock 27 Options were transferred to Young pursuant to the Stock DRO. Id. ¶ 57. 28 3 18-CV-2856-GPC-MSB 1 2 3 The FAC was filed on June 19, 2019. ECF No. 45. The FAC alleges the following causes of action: First Cause of Action: Breach of fiduciary duty under ERISA as to 4 Defendants Ligand and Does 1-20 for improperly 5 approving the 401(k) QDRO 6 Second Cause of Action: Breach of fiduciary duty as to Defendant Ligand 7 for ignoring information that called into question 8 the validity of the 401(k) QDRO 9 Third Cause of Action: 10 11 Breach of fiduciary duty as to Defendant Ligand for failure to follow ERISA procedures Fourth Cause of Action: Declaratory relief as to all Defendants to establish 12 that the 401(k) QDRO is not a QDRO as defined 13 by ERISA and the Internal Revenue Code and 14 attorneys’ fees 15 Fifth Cause of Action: 16 17 Supplemental state claim seeking declaratory relief as to all Defendants Sixth Cause of Action: 18 Equitable and injunctive relief as to Ligand and Young 19 Seventh Cause of Action: Equitable and injunctive relief as to Young 20 Eighth Cause of Action: 21 22 Unjust enrichment supplemental state claim as to Young Ninth Cause of Action: Breach of common law fiduciary duty 23 supplemental state claim against Defendants 24 Ligand and Does 1-20 25 26 27 28 4 18-CV-2856-GPC-MSB 1 2 II. Requests for Judicial Notice Defendants filed requests for judicial notice accompanying their motions to 3 dismiss. ECF No. 46-3 (“Young RJN”); ECF No. 50-19 (Ligand RJN). Plaintiff 4 opposes. ECF No. 52 at 21-22. 5 As a general rule, “a district court may not consider any material beyond the 6 pleadings in ruling on a Rule 12(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d 668, 7 688 (9th Cir. 2001). However, two exceptions to this rule exist. First, a district court 8 may consider “material which is properly submitted as part of the complaint.” Id. If the 9 documents are not attached to the complaint, an exception exists if the documents’ 10 “authenticity . . . is not contested” and “the plaintiff’s complaint necessarily relies” on 11 them. Id. (citations omitted). Second, a court may take judicial notice of “matters of 12 public record” under Federal Rule of Evidence (“Rule”) 201. Id. at 688-89. However, 13 under Rule 201, a court may not take judicial notice of a fact that is “subject to 14 reasonable dispute.” Fed. R. Evid. 201(b). If the contents of a matter of public record are 15 in dispute, the court may take notice of the fact of the document at issue but not of the 16 disputed information contained within. See id. at 689-90. 17 Young requests that the Court take judicial notice of the following twenty 18 documents, comprised of filings and orders in Tarrant County District Court in Texas or 19 San Diego Superior Court: 20 21 22 23 24 25 26 27 28 5 18-CV-2856-GPC-MSB A true and correct copy of Tarrant County’s 231st Judicial District’s Court 1 1. 2 Order on September 13, 2017 which enters judgment for child support. 3 2. 4 Order on April 27, 2017 Regarding Capias Order. 5 3. 6 Order April 27, 2017 Regarding Commitment Order. 7 4. 8 Order on April 5, 2017 Regarding Relief to Collect Outstanding Judgments. 9 10 11 12 13 14 15 16 17 18 19 5. A true and correct copy of Tarrant County’s 233rd Judicial District’s Court A true and correct copy of Tarrant County’s 233rd Judicial District’s Court A true and correct copy of Tarrant County’s 231st Judicial District’s Court A true and correct copy of Tarrant County’s 233rd Judicial District’s Court Order on March 4, 2015 Regarding Contempt Order. 6. A true and correct copy of Tarrant County’s 231st Judicial District’s Court Order on November 21, 2017 Regarding Qualified Domestic Relations Order. 7. A true and correct copy of Tarrant County’s 231st Judicial District’s Court Order on January 22, 2018 Regarding Domestic Relations Order. 8. A true and correct copy of February 1, 2018 Second District Court of Appeal Opinion. 9. A true and correct copy of February 26, 2018 Second District Court of Appeal Opinion. 20 10. A true and correct copy of June 8, 2018 Supreme Court of Texas Order. 21 11. A true and correct copy November 16, 2018 Supreme Court of Texas Order. 22 12. A true and correct copy of Plaintiff’s August 8, 2018 Notice of Registration 23 filed in San Diego Superior Court, Case No. 18FL009397C. 24 13. 25 to Plaintiff’s Ex Parte Application to Stay Earnings Withholdings Order, Case No. 26 18FL009397C, wherein Ms. Young objects to jurisdiction of California 27 14. 28 Order denying Plaintiff’s Ex Parte Application. A true and correct copy of Ms. Young’s declaration in support of opposition A true and correct copy of San Diego Superior Court’s January 8, 2019 6 18-CV-2856-GPC-MSB A true and correct copy Tarrant County’s 231st Judicial District’s Court 1 15. 2 Order on March 22, 2017 to Seal Court Records. 3 16. 4 Order on December 3, 2013 Regarding Enforcement by Contempt. 5 17. 6 Order on February 13, 2015 Revoking Suspension. 7 18. 8 Order on February 17, 2016 Regarding Order for Capias. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 19. A true and correct copy Tarrant County’s 233rd Judicial District’s Court A true and correct copy Tarrant County’s 233rd Judicial District’s Court A true and correct copy Tarrant County’s 233rd Judicial District’s Court A true and correct copy of Plaintiff’s Writs of Mandamus to the Second Court of Appeals regarding the QDRO and DRO. 20. A true and correct copy of Plaintiff’s Petitions for Review to the Supreme Court of Texas regarding the QDRO and DRO. Ligand joins Young’s request for judicial notice of Young Exhibits 3-5 and 16-18. ECF No. 50-19. Ligand also requests judicial notice of the following sixteen documents, comprised of state court pleadings, state court orders, a U.S. Securities and Exchange Commission filing, and the record of a state court docket: 1. A true and correct copy of the Qualified Domestic Relations Order – Ligand Pharmaceuticals Inc. 401(k) Plan related to Case No. 233-515485-12, 233rd Judicial District, Tarrant County, Texas, dated November 21, 2017 2. A true and correct copy of the Domestic Relations Order for the Ligand Pharmaceuticals Incorporated 2002 Stock Incentive Plan, as Amended and Restated Effective May 23, 2016 related to Case No. 233-515485-12, 233rd Judicial District, Tarrant County, Texas, dated January 22, 2018. 25 3. A true and correct copy of a Memorandum Opinion in the Court of Appeals, 26 Second District of Texas, Fort Worth, No. 02-18-00033-CV, dated February 1, 27 2018. 28 7 18-CV-2856-GPC-MSB 1 4. 2 Court of Texas, No. 18-0093, dated February 5, 2018 3 5. 4 Court of Texas, No. 18-0192, dated March 2, 2018 5 6. 6 Mandamus as amended in the Supreme Court of Texas, No. 18-0093, dated June 8, 7 2018 8 7. 9 Mandamus as amended in the Supreme Court of Texas, No. 18-0192, dated June 8, 10 11 12 13 14 15 16 17 18 19 20 21 A true and correct copy of a redacted Petition for Review in the Supreme A true and correct copy of a redacted Petition for Review in the Supreme A true and correct copy of an Order Denying the Petition for Writ of A true and correct copy of an Order Denying the Petition for Writ of 2018 8. A true and correct copy of a redacted Motion for Rehearing in the Supreme Court of Texas, No. 18-0093, dated June 12, 2018 9. A true and correct copy of a redacted 1st Amended Motion for Rehearing in the Supreme Court of Texas, No. 18-0093, dated June 22, 2018. 10. A true and correct copy of Relator’s Second Amended Motion for Rehearing in the Supreme Court of Texas, No. 18-0093, dated July 23, 2018. 11. A true and correct copy of Relator’s Second Amended Motion for Rehearing in the Supreme Court of Texas, No. 18-0192, dated July 23, 2018 12. A true and correct copy of an Order Denying the Motion for Rehearing in the Supreme Court of Texas, No. 18-0093, dated November 16, 2018. 22 13. A true and correct copy of an Order Denying the Motion for Rehearing in 23 the Supreme Court of Texas, No. 18-0192, dated November 16, 2018. 24 14. 25 Incentive Plan, as Amended and Restated Effective May 23, 2016, attached as 26 Exhibit 10.1 to Ligand’s Form S-8 filed with the SEC on July 29, 2016 (accessible 27 from www.sec.gov). A true and correct copy of Ligand Pharmaceuticals Incorporated 2002 Stock 28 8 18-CV-2856-GPC-MSB 1 15. 2 Young (No. 233-515485) in the Tarrant County District Court retrieved through 3 the Lexis CourtLink service on March 11, 2019. 4 16. 5 Domestic Relations Orders” downloaded from the United States Department of 6 Labor website on July 2, 2019 (accessible from 7 https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/ouractivities/ 8 resource-center/faqs/qdro-overview.pdf). 9 A. 10 A true and correct copy of correct copy of the docket sheet for Lundstrom v. A true and correct copy of a document titled “FAQs about Qualified 401(k) QDRO and Stock DRO A district court may consider “material which is properly submitted as part of the 11 complaint.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). If the 12 documents are not attached to the complaint, an exception exists if the documents’ 13 “authenticity . . . is not contested” and “the plaintiff’s complaint necessarily relies” on 14 them. Id. (citations omitted). “Even if a document is not attached to a complaint, it may 15 be incorporated by reference into a complaint if the plaintiff refers extensively to the 16 document or the document forms the basis of the plaintiff's claim.” United States v. 17 Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). “For ‘extensively’ to mean anything 18 under Ritchie, it should, ordinarily at least, mean more than once.” Khoja v. Orexigen 19 Therapeutics, Inc., 899 F.3d 988, 1003 (9th Cir. 2018). 20 Here, all of Plaintiff’s claims are premised on the substance and administration of 21 the 401(k) QDRO and Stock DRO. Furthermore, throughout the FAC, Plaintiff engages 22 in a thorough discussion of and quotes directly from the 401(k) QDRO, FAC ¶¶ 4, 6, 8, 9, 23 16-18, 21-23, 27-28, 32, 34-36, and the Stock DRO, FAC ¶¶ 24-26, 30-35. Plaintiff has 24 certainly incorporated these two documents by reference in the FAC. 25 Both Ligand and Young have provided copies of the 401(k) QDRO and Stock 26 DRO in their requests for judicial notice. Ligand Exs. 1, 2; Young Exs. 6, 7. Although 27 the 401(k) QDRO and Stock DRO provided by Ligand and Young are not originals, they 28 are certified copies and are therefore self-authenticating. Fed. R. Evid. 902(4) (certified 9 18-CV-2856-GPC-MSB 1 copies of public records require the custodian or other authorized person to certify that 2 the copies are correct). Thus, Court takes judicial notice of the fact of these 401(k) 3 QDRO and Stock DRO and the contents therein. 4 B. 5 Young and Ligand have also filed requests for judicial notice of several court 6 orders (Young Exs. 1-7, 10-11, 14-18; Ligand Exs.1-2, 7, 12-13), court opinions (Young 7 Exs. 8-9, Ligand Ex. 3), court filings (Young Exs. 12-13, 19-20; Ligand Exs. 4, 9-11); 8 and a court docket sheet (Ligand Ex. 15) (collectively, “Texas State Court Documents”). 9 Several of these documents are identical; for example, Ligand Exhibits 4-7 are identical 10 Texas State Court Documents to Young Exhibits 10, 11, and 20. 11 While some of these documents are filed under seal in Texas state court, they 12 nonetheless are readily verifiable and, therefore, the proper subject of judicial notice. See 13 Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 (9th Cir. 2006). 14 Additionally, since these documents are either pleadings or documents otherwise 15 recorded by the court, they are the proper subject of judicial notice. See Burbank- 16 Glendale-Pasadena Airport Auth. v. City of Burbank, 136 F.3d 1360, 1364 (9th Cir. 17 1998) (granting judicial notice of pleadings filed in a related state court action); Reynolds 18 v. Applegate, No. C 10-04427 CRB, 2011 WL 560757, at *1 n.2 (N.D. Cal. Feb. 14, 19 2011) (granting judicial notice of documents recorded in the county recorder office since 20 “the Court may properly see them”); Ewing v. Superior Court of California, 90 F. Supp. 21 3d 1067 (S.D. Cal. 2015) (granting judicial notice of documents filed in state court case, 22 including trial court's judgment and opinion of state appellate court); Amato v. Narconon 23 Fresh Start, No. 3:14-CV-0588-GPC-BLM, 2014 WL 5390196, at *4 (S.D. Cal. Oct. 23, 24 2014) (“Orders in federal court cases and state licenses are matters of public record and 25 are capable of accurate and ready determination.”). 26 On a Rule 12(b)(6) motion to dismiss, when a court takes judicial notice of another 27 court’s opinion, it may do so “not for the truth of the facts recited therein, but for the 28 existence of the opinion, which is not subject to reasonable dispute over its authenticity.” 10 18-CV-2856-GPC-MSB 1 Lee, 250 F.3d at 690. Ligand argues that orders and pleadings referenced in the FAC 2 may be considered on this motion because they are incorporated by reference in the FAC. 3 Young RJN at 5-9. For example, Plaintiff refers to the fact that he filed appeals in the 4 Texas Supreme Court. FAC ¶¶ 32-33. However, unlike the 401(k) QDRO and Stock 5 DRO, Plaintiff’s discussion of these proceedings and relevant filings are insufficiently 6 extensive to be incorporated by reference under the Ritchie standard. 7 Plaintiff opposes Defendants’ requests for judicial notice on the grounds that, 8 while courts may take judicial notice of undisputed matters of public record, the court 9 may not take judicial notice of disputed facts stated in public records. A court may take 10 judicial notice of “matters of public record” under Rule 201, but may not take judicial 11 notice of a fact that is “subject to reasonable dispute.” Fed. R. Evid. 201(b). If the 12 contents of a matter of public record are in dispute, the court may take notice of the fact 13 of the document at issue but not of the disputed information contained within. See Lee v. 14 City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). 15 Here, Defendants seek judicial notice of the Court of Appeals, Second District of 16 Texas, Forth Worth’s denial of Plaintiffs’ writ of mandamus on Febraury 1, 2018, 17 (Ligand Ex. 3; Young Ex. 8); plaintiffs’ petitions for writ of mandamus with the Texas 18 Supreme Court challenging the 401(k) QDRO and Stock DRO filed on February 5, 2018 19 and March 2, 2018, respectively (Ligand Exs. 4, 5); the Texas Supreme Court denial of 20 both of Plaintiff’s petitions for writ of mandamus on June 8, 2018 (Ligand Exs. 6, 7); 21 Plaintiff’s motion for rehearing on June 12, 2018 (Ligand Ex. 8); the Texas Supreme 22 Court denied the motions for rehearing on November 16, 2018 (Ligands Exs. 12, 13; 23 Young Ex. 11). In response, Plaintiffs dispute the content of these documents. 24 Because Plaintiffs dispute their contents, the Court can take judicial notice of the 25 fact that these orders were issued by the Texas appellate courts but not the contents 26 contained therein. Thus, the Court GRANTS Defendants’ requests for judicial notice of 27 28 11 18-CV-2856-GPC-MSB 1 the fact of the existence of the Texas State Court Documents, but DENIES Defendants’ 2 requests for judicial notice of the contents of these documents.1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 III. Legal Standard on Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a defendant may seek to dismiss a complaint for lack of jurisdiction over the subject matter. The federal court is one of limited jurisdiction. See Gould v. Mutual Life Ins. Co. v. New York, 790 F.2d 769, 774 (9th Cir. 1986). As such, it cannot reach the merits of any dispute until it confirms its own subject matter jurisdiction. See Steel Co. v. Citizens for a Better Environ., 523 U.S. 83, 95 (1998). When considering a Rule 12(b)(1) motion to dismiss, the district court is free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary. See Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). In such circumstances, “[n]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Id. (quoting Thornhill Publishing Co. v. General Telephone & Electronic Corp., 594 F.2d 730, 733 (9th Cir. 1979)). Plaintiff, as the party seeking to invoke jurisdiction, has the burden of establishing that jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Federal Rule of Civil Procedure 12(b)(6) permits dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 1990). Under Rule 8(a)(2), the plaintiff is required only to set 25 26 27 28 1 Ligand also requests judicial notice of the Ligand Pharmaceuticals Incorporated 2002 Stock Incentive Plan (“Stock Incentive Plan”), Ligand Ex. 14, and the FAQs about Qualified Domestic Relations Orders (“FAQs”). Ligand Ex. 16. For similar reasons as stated above, the Court GRANTS Ligand’s request for judicial notice of the Stock Incentive Plan and FAQs, but DENIES Defendants’ requests for judicial notice of the contents of these documents. 12 18-CV-2856-GPC-MSB 1 forth a “short and plain statement of the claim showing that the pleader is entitled to 2 relief,” and “give the defendant fair notice of what the . . . claim is and the grounds upon 3 which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). 4 A complaint may survive a motion to dismiss only if, taking all well-pleaded 5 factual allegations as true, it contains enough facts to “state a claim to relief that is 6 plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 7 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual 8 content that allows the court to draw the reasonable inference that the defendant is liable 9 for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause of 10 action, supported by mere conclusory statements, do not suffice.” Id. “In sum, for a 11 complaint to survive a motion to dismiss, the non-conclusory factual content, and 12 reasonable inferences from that content, must be plausibly suggestive of a claim entitling 13 the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) 14 (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as true all 15 facts alleged in the complaint, and draws all reasonable inferences in favor of the 16 plaintiff. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). The Court evaluates 17 lack of statutory standing under the Rule 12(b)(6) standard. Maya v. Centex Corp., 658 18 F.3d 1060, 1067 (9th Cir. 2011). 19 Where a motion to dismiss is granted, “leave to amend should be granted ‘unless 20 the court determines that the allegation of other facts consistent with the challenged 21 pleading could not possibly cure the deficiency.’” DeSoto v. Yellow Freight Sys., Inc., 22 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture 23 Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would 24 be futile, the Court may deny leave to amend. See Desoto, 957 F.2d at 658; Schreiber, 25 806 F.2d at 1401. 26 27 28 13 18-CV-2856-GPC-MSB 1 IV. LEGAL DISCUSSION 2 The FAC presents nine causes of action, five of which are based upon ERISA 3 (first, second, third, fourth, and sixth causes of action) and four of which are premised on 4 state law claims (fifth, seventh, eighth, and ninth causes of action). 5 Defendants advance numerous arguments as to why Plaintiff’s FAC should be 6 dismissed. Specifically, they contend that: (1) the Rooker-Feldman doctrine bars 7 consideration of Plaintiff's claims; (2) Plaintiff lacks standing; (3) the claims are barred 8 by collateral estoppel; (4) Defendant Young is not subject to personal jurisdiction; and 9 (5) Plaintiff has failed to state a claim as to several causes of action. 10 Because the Court concludes that Plaintiff lacks standing and that the Rooker- 11 Feldman doctrine bars consideration of Plaintiff’s claim, the Court GRANTS 12 Defendants’ motions to dismiss Plaintiff’s FAC for lack of subject matter jurisdiction. 13 Since the federal claims are dismissed under Rule 12(b)(1) on the basis of lack of subject 14 matter jurisdiction, the Court concludes that it lacks the authority to exercise 15 supplemental jurisdiction over Plaintiff’s state law claims. 16 A. 17 As courts of original jurisdiction, federal district courts lack jurisdiction to review 18 the final determinations of a state court in judicial proceedings. See Doe & Assocs. Law 19 Offices v. Napolitano, 252 F.3d 1026, 1029 (9th Cir. 2001). However, federal district 20 courts do have jurisdiction over a “general constitutional challenge,” i.e., one that does 21 not require review of a final state court decision in a particular case. Id. (citing Dubinka 22 v. Judges of the Superior Court, 23 F.3d 218, 221 (9th Cir. 1994)). This distinction 23 between a permissible general constitutional challenge and an impermissible appeal of a 24 state court determination may be subtle and difficult to make. See id. (citing Worldwide 25 Church of God v. Mcnair, 805 F.2d 888, 891 (9th Cir. 1986)). To draw out this 26 distinction, the court must ask whether it is “in essence being called upon to review the 27 state court decision.” Id. A de facto appeal exists “when the federal plaintiff both asserts 28 as her injury legal error or errors by the state court and seeks as her remedy relief from Rooker-Feldman Doctrine 14 18-CV-2856-GPC-MSB 1 the state court judgment.” Kougasian v. TMSL, Inc., 359 F.3d 1136, 1139-40 (9th Cir. 2 2004). Once the court has found a de facto appeal, it must identify and decline to 3 exercise jurisdiction over any issues that are “inextricably intertwined” with that appeal. 4 Doe, 415 F.3d at 1043 (9th Cir. 2005). If the federal constitutional claims presented to 5 the district court are ‘inextricably interwined’ with the state court’s judgement, then 6 [plaintiff] is essentially asking the district court to review the state court’s decision, 7 which the district court may not do.” Id. If “consideration and decision have been 8 accomplished, action in federal court is an impermissible appeal from the state court 9 decision.” Id. (citing Worldwide Church of God, 805 F.2d at 892). “Where the district 10 court must hold that the state court was wrong in order to find in favor of the plaintiff, the 11 issues presented to both courts are inextricably intertwined.” Id. 12 The Ninth Circuit has cautioned against a broad application of the Rooker-Feldman 13 doctrine and has noted that its application tends to be limited to the following types of 14 claims: (1) when the plaintiff complains of harm caused by a state court judgment that 15 directly withholds a benefit from (or imposes a detriment on) the plaintiff based on an 16 allegedly erroneous ruling by the state court; or (2) when the plaintiff complains of a 17 legal injury caused by a state court judgment, based on an allegedly erroneous legal 18 ruling, in a case in which the plaintiff was one of the litigants. Noel v. Hall, 341 F.3d 19 1148, 1163 (9th Cir. 2003). 20 The analysis of Rooker-Feldman in Carmona v. Carmona, 603 F.3d 1041, 1051 21 (9th Cir. 2010) is instructive. There, the plaintiff claimed that qualified domestic 22 relations orders issued by a family court were based upon an erroneous application of 23 ERISA. Accordingly, the plaintiff sought relief from the state court orders and the 24 dismissal of a Family Court order, and prayed for the federal district court to order that 25 the proceedings in family court be dismissed with prejudice and to enjoin enforcement of 26 27 28 15 18-CV-2856-GPC-MSB 1 the orders.2 The Ninth Circuit found that Rooker-Feldman applied given that the plaintiff 2 asked the district court to set aside the state court orders. 3 1. 4 ERISA Claims Asserting Breaches of Fiduciary Duty The first three causes of action assert claims that Ligand failed to perform its duties 5 as a fiduciary. In the first cause of action, Plaintiff alleges that Ligand violated its duty 6 under ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1) by erroneously approving the 401(k) 7 QDRO even though it failed to comply with the requirements of ERISA and the terms of 8 the 401(k) Plan. FAC ¶ 73. Plaintiff also alleges that Ligand and Does 1-20 violated 9 their fiduciary duties by failing to properly investigate the 401(k) QDRO prior to 10 distributing the 401(k) funds to Young. Id. ¶ 75. 11 In the second cause of action, Plaintiff alleges that Ligand ignored information that 12 called the validity of the 401(k) QDRO into question and failed to take reasonable steps 13 to determine the credibility of the 401(k). Plaintiff raises the following issues with 14 Ligand concerning the validity of the 401(k) QDRO: (1) although the 401(k) QDRO expressly states that it relates “to the provision of marital property rights for Alternate Payee,” it seeks the transfer of Plaintiff’s postmarital property because Plaintiff began making contributions to the 401(k) Plan in January of 2016 long after his divorce to Ms. Young was finalized on July 30, 2014; (2) Plaintiff advised Ligand that he did not owe any spousal support (per divorce decree) and that the child support he did owe (approximately $55,000 at the time) was being paid through wage garnishments from his Ligand paychecks ($3,500 per month); and (3) the fact that the 401(k) QDRO itself did not specify a fixed dollar amount that Plaintiff allegedly owed to Ms. Young that would be satisfied through the 401(k) QDRO. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Similarly DJ St. Jon is instructive for the present case since there the Plaintiffs asserted that that they should have been given a “fairness hearing” in accordance with Cal. Rules of Court Rule 3.769 thereby challenging the state court’s decision that notice of entry be given to the class pursuant to Cal. Rules of Court Rule 3.771. DJ St. Jon v. Tatro, No. 15-CV-2552-GPC-JLB, 2016 WL 1162678, at *8 (S.D. Cal. Mar. 23, 2016), aff'd sub nom. Jon v. Tatro, 698 F. App’x 917 (9th Cir. 2017). 16 18-CV-2856-GPC-MSB 1 FAC ¶ 85. Plaintiff argues that Ligand, as the plan administrator, had the duty to take 2 reasonable steps to determine the credibility of evidence questioning the validity of a 3 QDRO, and therefore breached its fiduciary duty owed to Plaintiff by “blindly” 4 transferring $62,063.47 from Plaintiff’s 401(k) account to Young. Id. ¶¶ 81, 82, 87. 5 While the first and second causes of action avoid a direct challenge of the state 6 court orders, they are inextricably intertwined with the state court judgment. The alleged 7 failures to investigate and failure to take steps to determine credibility of the 401(k) 8 QDRO are nothing more than challenges to the state court orders. Plaintiff’s argument 9 supposes that the plan administrator could operate as a tribunal free to question the 10 credibility of evidence submitted to the Texas court and ignore the effect of a court order. 11 It further requires this Court to examine the factual and legal basis for state court order in 12 determining whether the QDRO was valid. “Where the district court must hold that the 13 state court was wrong in order to find in favor of the plaintiff, the issues presented to both 14 courts are inextricably intertwined.” Worldwide Church of God, 805 F.2d at 892. When 15 the federal constitutional claims presented to the district court are ‘inextricably 16 interwined’ with the state court’s judgement, then [plaintiff] is essentially asking the 17 district court to review the state court’s decision, which the district court may not do.” 18 Doe, 415 F. 3d at 1043. As to these two causes of action, Plaintiff is ultimately seeking a 19 review of the state court decision. Accordingly, the Court DISMISSES the first and 20 second causes of action. 21 In the third cause of action, Plaintiff alleges that Ligand breached its fiduciary duty 22 under 29 U.S.C. § 1056(d)(3)(G) to (1) establish reasonable, written procedures to 23 determine the qualified status of a domestic relations order; (2) communicate those 24 procedures to alternate payees; and (3) administer the distribution of benefits under 25 qualified orders. According to the FAC, Ligand either does not have a written policy in 26 place for determining the qualified status of a domestic relations order or has been 27 unwilling to share such since first requested in November of 2018, and Ligand also failed 28 to send Plaintiff a written communication advising him that the 401(k) QDRO satisfied 17 18-CV-2856-GPC-MSB 1 the requirements under the 401(k) Plan and the Internal Revenue Code and was in fact 2 determined to be a QDRO. FAC ¶ 94. At first glance, it would appear the third cause of 3 action is not inextricably intertwined with the state court orders since it would be 4 unnecessary for this Court to review the Texas court decision to find a breach of fiduciary 5 duty. As such, ostensibly, Rooker-Feldman does not provide the basis to dismiss the 6 third cause of action. 7 On the other hand, Plaintiff essentially attacks the lack of an established protocol 8 to examine the validity of state court orders. Plaintiff does not describe what the written 9 procedures would have provided. However, in order to be meaningful to Plaintiff, such 10 procedures would likely involve the examination of the legal and factual basis for the 11 state court order in violation Rooker-Feldman. Ultimately, as to the third cause of action, 12 the distinction between a permissible general constitutional challenge and an 13 impermissible appeal of a state court determination is more subtle and difficult to make. 14 While it is a close call, the Court elects not to dismiss the third cause of action under 15 Rooker-Feldman. 16 Accordingly, the Court will DISMISS the first and second causes of action with 17 prejudice. As to the third cause of action, it survives Rooker-Feldman analysis but will 18 be dismissed on the alternate grounds analyzed below. 19 20 2. ERISA Claims Seeking Declaratory and Injunctive Relief The fourth cause of action names all of the Defendants and attacks the state court 21 judgment directly, petitioning the Court to declare that both the 401(k) QDRO and the 22 Stock DRO are invalid. FAC ¶ 102. In so far as Plaintiff seeks the invalidation of the 23 QDRO and DRO, his claim is barred by Rooker-Feldman. Therefore, the Court 24 DISMISSES the fourth cause of action with prejudice. 25 The sixth cause of action is brought against both Ligand and Young based on 26 Ligand’s transfer and Young’s receipt of the funds from Plaintiff’s 401(k) fund pursuant 27 to the QDRO and stock options pursuant to the DRO. This claim is also inextricably 28 intertwined with the validity of the QDRO and DRO. Young received funds by virtue of 18 18-CV-2856-GPC-MSB 1 a QDRO and DRO issued by a state court judge and the relief sought by Plaintiff 2 necessitates the invalidation of the QDRO and Stock DRO, which, for the reasons stated 3 above would be barred by Rooker-Feldman. Therefore, the Court DISMISSES the sixth 4 cause of action with prejudice. See Williams-Ilunga v. Directors/Trustees of Producer- 5 Writers Guild of Am. Pension Plan, 682 F. App’x 633, 634 (9th Cir. 2017) 6 (“Under Rooker-Feldman, there is no defect to be cured: a subsequent federal claim is 7 completely barred if it amounts to ‘a de facto appeal from a state court judgment.’”) 8 (citing Kougasian v. TMSL, Inc., 359 F.3d 1136, 1139 (9th Cir. 2004)). 9 10 In sum, the Court DISMISSES the fourth and sixth causes of action with prejudice. 11 B. 12 Defendants allege that Plaintiff does not have standing to pursue the ERISA claims Standing Pursuant to 12(b)(1) 13 because he has failed to assert an injury in fact. Plaintiff counters that he has standing 14 under ERISA, 29 U.S.C. §§ 1001, Et Seq. 15 “To establish standing to sue under ERISA, [plaintiffs] must show that they are 16 plan ‘participants.’” Poore v. Simpson Paper Co., 566 F.3d 922, 925 (9th Cir. 2009). 17 Under Section 502(a)(2), standing is granted to a plan participant to bring an action 18 against a defendant who breaches a fiduciary duty with respect to that plan. See 29 19 U.S.C. § 1132(a)(2). An ERISA plan participant is “any employee or former employee 20 of an employer . . . who is or may become eligible to receive a benefit of any type from 21 an employee benefit plan which covers employees of such employer.” 29 U.S.C. § 22 1002(7). 23 “To bring an ERISA lawsuit, a plaintiff must not only have standing under the 24 statute, but must also meet the standing requirements of Article III of the U.S. 25 Constitution.” Wells v. California Physicians’ Serv., No. C05-01229 CRB, 2007 WL 26 926490, at *3 (N.D. Cal. Mar. 26, 2007) (citing cases). “[T]he irreducible constitutional 27 minimum of [Article III] standing” contains three elements, namely, “[t]he plaintiff must 28 have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of 19 18-CV-2856-GPC-MSB 1 the defendant, and (3) that is likely to be redressed by a favorable judicial 2 decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (citing Lujan v. Defs. of 3 Wildlife, 504 U.S. 555, 560 (1992)). 4 “To establish injury in fact, a plaintiff must show that he or she suffered ‘an 5 invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or 6 imminent, not conjectural or hypothetical.’” Id. at 1548 (quoting Lujan, 504 U.S. at 560). 7 An injury may be “concrete” even if it is intangible, and “in determining whether an 8 intangible harm constitutes injury in fact, both history and the judgment of Congress play 9 important roles.” Id. at 1549. The judgment of Congress is “instructive and important” 10 because “Congress is well positioned to identify intangible harms that meet minimum 11 Article III requirements.” Id. Thus, “Congress has the power to define injuries and 12 articulate chains of causation that will give rise to a case or controversy where none 13 existed before.” Id. (quoting Lujan, 504 U.S. at 580 (Kennedy, J., concurring)). 14 Nonetheless, “Congress’ role in identifying and elevating intangible harms does not mean 15 that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute 16 grants a person a statutory right and purports to authorize that person to sue to vindicate 17 that right.” Id. at 1549. Thus, while a procedural violation “can be sufficient in some 18 circumstances to constitute injury in fact,” for example, where there is a “risk of real 19 harm,” a “bare procedural violation, divorced from any concrete harm” does not “satisfy 20 the injury-in-fact requirement of Article III.” Id. (emphasis added). Cf. Harris v. Amgen, 21 Inc., 573 F.3d 728, 733 (9th Cir. 2009) (plaintiffs had standing under ERISA to recover 22 losses occasioned by breach of fiduciary duty based on the plan administrators’ purchase 23 of stocks with artificially inflated prices); Ziegler v. Connecticut Gen. Life Ins. Co., 916 24 F.2d 548, 551 (9th Cir. 1990) (plaintiffs need not allege injuries for certain ERISA 25 violations, including a plan fiduciary’s failure to perform for the exclusive benefit of 26 participants and their beneficiaries). In CIGNA, the Supreme Court maintained a required 27 showing of “actual harm” with respect to the question of standing. CIGNA Corp. v. 28 Amara, 563 U.S. 421, 444 (2011). 20 18-CV-2856-GPC-MSB 1 Here, Plaintiff has alleged that the 401(k) QDRO contained the following defects: 2 (1) the 401(k) QDRO did not specify a fixed dollar amount that would be provided to 3 Young through the QDRO; (2) the 401(k) QDRO erroneously references “marital 4 property rights”; and (3) the child support that Defendant owed Plaintiff was being paid 5 through Defendant’s wage garnishments. Id. ¶ 42. He then claims that his concrete, 6 actual injury is “the improper transfer of $66,400 from his Ligand 401(k) account and 7 improper transfer of 18,010 stock options granted to Plaintiff under the Ligand 8 Pharmaceuticals Incorporated 2002 Stock Incentive Plan.”3 ECF No. 52 at 17-18. 9 In order to find that Plaintiff has suffered a concrete harm based on the transfer of 10 401(k) funds and stock options, this Court would be called upon to judge the prior state 11 court orders – i.e., the validity of the 401(k) QDRO and Stock DRO. As discussed 12 above, such review is not permitted under Rooker-Feldman. 13 As to the third cause of action based upon failure to establish procedures to 14 determine the qualified status of a qualified relations order, Plaintiff has similarly failed 15 to point to any concrete harm that resulted from the absence of such procedures and the 16 failure to communicate them and apply them. 17 Since Plaintiff has failed to identify a separate concrete or actual harm that is not 18 barred by Rooker-Feldman, he has failed to meet the requirements for standing and 19 Defendants’ motion to dismiss for lack of standing will be granted. As such, the Court therefore GRANTS Defendants’ motion to dismiss based on 20 21 standing as to all five claims brought under ERISA (first, second, third, fourth, and sixth 22 causes of action). 23 24 25 26 27 28 Young asserts that Plaintiff’s allegations regarding his concrete, actual injury is limited to the “improper transfer to and retention by Defendant of $66,400 from his Ligand 401(k) account in violation of ERISA’s anti-alienation provision, and the improper transfer to and retention by Defendant of 18,010 stock options granted to Plaintiff under the Ligand Pharmaceuticals Incorporated 2002 Stock Incentive Plan, among other injuries (including those under ERISA and common law).” ECF No. 53 at 9 3 21 18-CV-2856-GPC-MSB Ligand’s Fiduciary Duty Under ERISA 1 C. 2 Of the three fiduciary duty claims under ERISA, only the third cause of action has 3 survived Rooker-Feldman analysis. Assuming Plaintiff could show standing on the third 4 cause of action, this cause of action fails to state a claim upon which relief can be 5 granted. 6 In the third cause of action, Plaintiff asserts that Ligand breached its fiduciary duty 7 under ERISA by failing to (1) establish reasonable, written procedures to determine the 8 qualified status of a domestic relations order; (2) communicate those procedures to 9 alternate payees; and (3) administer the distribution of benefits under qualified orders. 10 Ligand contends that it has met its statutory duty under ERISA with respect to its 11 approval process of the 401(k) QDRO. ECF No. 49 at 29. The Court agrees. 12 The duty for plan administrators in the QDRO approval process is one that is 13 “relatively discrete, given the specific and objective criteria for a domestic relations order 14 that qualifies as a QDRO.” Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 15 U.S. 285, 301-02 (2009). The Kennedy court likened the requirements to a “statutory 16 checklist” that would “spare an administrator from litigation-fomenting ambiguities.” Id. 17 at 302 (internal citations omitted). A plan administrator should not be required to 18 determine questions of law or factually complex and subjective determinations. Id. In 19 fact, “[w]hen a QDRO is found to meet the statutory criteria, the law requires the [plan 20 adminstrator’s] compliance with the QDRO without inquiry as to whether a valid QDRO 21 actually complies with state laws.” Gray v. I.B.E.W. Local 332 Pension Tr., No. C09- 22 03782 HRL, 2010 WL 3893590, at *3 (N.D. Cal. Sept. 30, 2010), aff’d, 495 F. App'x 831 23 (9th Cir. 2012) (emphasis in original). 24 Here, Ligand properly followed a checklist which satisfied the specificity 25 requirements under 29 U.S.C. § 1056(d)(3)(C) and (D), to determine the validity of the 26 401(k) QDRO. ECF No. 49 at 30-31. Meanwhile, Plaintiff urges the Court to require 27 more of Ligand based upon DOL Advisory Opinion 1999-13A and to hold that 28 22 18-CV-2856-GPC-MSB 1 Defendants had a further fiduciary duty to investigate the validity of the 401(k) QDRO. 2 The Court disagrees. 3 DOL Advisory Opinion 1999-13A provides guidance on the duties of a plan 4 administrator in the processing of a QRDO. It was provided at the request of United 5 Airlines as plan administrator and prompted by the submission and approval of dozens of 6 questionable domestic relations orders. These orders were “questionable” or “sham” in 7 nature since they suffered from several suspicious defects, including that several came 8 from the same lawyer and listed the alternate payees and partipicants as having the same 9 address. The DOL Advisory Opinion observed that a plan administrator who has 10 received a document purporting to be a DRO must carry out his responsibilities under § 11 206(d)(3) in a manner consistent with his general fiduciary duties. However, the DOL 12 stated clearly that the plan administrator is not required “to review the correctness of a 13 determination by a competent State authority pursuant to State domestic realtions law.” 14 DOL Advisory Opinion 1999-13A. Instead, where credible evidence that questions the 15 validity of a QDRO surfaces, “the administrator must decide how best to resolve the 16 question of validity without inappropriately involving the plan in the State domestic 17 relations proceeding.” That is because, “the administrator may not independently 18 determine that the order is not valid under State law and therefore is not a ‘domestic 19 relations order.’” Id. 20 According to this advisory opinion, the appropriate course of action depends upon 21 the actual facts and circumstances of the case. Id. Here, there was no suggestion of a 22 sham QDRO that revealed any fraud by an attorney or participant or beneficiary. In fact, 23 Plaintiff’s challenge of the validity of the QDRO relies on the theory that the trial court 24 erred in granting it, an error that was appealed to the appellate court. Given these claims, 25 it is undisputed that the plan administrator waited until the court of appeals had rejected 26 Plaintiff’s challenges before it processed the QDRO. As a result, viewing the facts most 27 favorable to Plaintiff, he has failed to identify a fiduciary duty that Ligand did not 28 perform. 23 18-CV-2856-GPC-MSB 1 Accordingly, the third cause of action is DISMISSED with prejudice. 2 D. 3 The supplemental jurisdiction statute provides: 4 In any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Pendent Jurisdiction 28 U.S.C. § 1367(a). The Ninth Circuit has concluded that “[t]he statute’s plain language makes clear that supplemental jurisdiction may only be invoked when the district court has a hook of original jurisdiction on which to hang it.” Herman Family Revocable Trust v. Teddy Bear, 254 F.3d 802, 805 (9th Cir. 2001) (“[I]f the federal claim [is] dismissed for lack of subject matter jurisdiction, a district court has no discretion to retain the supplemental claims for adjudication.”). “[S]upplemental jurisdiction cannot exist without original jurisdiction . . . where there is no underlying original federal subject matter jurisdiction, the court has no authority to adjudicate supplemental claims under § 1367.” Id. (citing Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481, 1485–86 (Fed. Cir. 1998); Saksenasingh v. Sec’y of Educ., 126 F.3d 347, 351 (D.C. Cir. 1997). In Herman, the Ninth Circuit vacated a district court’s order where the district court had concluded that it lacked admiralty jurisdiction over the federal claims, but nevertheless proceeded to exercise supplemental jurisdiction over the state-law claims and entered judgment for defendants. Id. at 804. The Ninth Circuit distinguished between the exercise of supplemental jurisdiction when the federal claim has been dismissed under Rule 12(b)(1) as opposed to 12(b)(6), finding that “[a] dismissal on the merits is different from a dismissal on jurisdictional grounds. If the district court dismisses all federal claims on the merits, it has discretion under § 1367(c) to adjudicate the remaining claims; if the court dismisses for lack of subject matter jurisdiction, it has no discretion and must dismiss all claims.” Id. at 806. 27 28 24 18-CV-2856-GPC-MSB 1 Since this Court has dismissed Plaintiff’s sole federal claim under Rule 12(b)(1) on 2 the basis of lack of subject matter jurisdiction, the Court therefore concludes that it lacks 3 the authority to exercise supplemental jurisdiction over Plaintiff's state law claims. See 4 id.; see also, e.g., Langer v. Kacha, No. 14-CV-2610-BAS(KSC), 2016 WL 524440, at 5 *5 (S.D. Cal. Feb. 10, 2016) (dismissing state-law claims under Herman once the federal 6 claim was dismissed for lack of subject matter jurisdiction); ComUnity Collectors LLC v. 7 Mortgage Elec. Registration Servs., Inc., No. C-11-4777 EMC, 2012 WL 3249509, at *1 8 (N.D. Cal. Aug. 7, 2012) (same); Lopez v. Lassen Dairy, Inc., No. CV-F-08-121 LJO 9 GSA, 2010 WL 4705521, at *2 (E.D. Cal. Nov. 12, 2010) (same). The Court thereby 10 DISMISSES Plaintiff’s state law claims – the fifth, seventh, eighth, and ninth causes of 11 action – without prejudice so that they can be presented, as appropriate, to a state court 12 with jurisdiction. 13 E. 14 Defendants argue that Plaintiff’s claims are barred by collateral estoppel. Since the Collateral Estoppel 15 claims have been dismissed on other grounds, it is unnecessary to analyze these claims 16 under collateral estoppel principles. 17 F. 18 Defendant Young also raises a challenge based upon personal jurisdiction Personal Jurisdiction as to Young 19 deficiencies. However, since the Court has dismissed all of the ERISA based claims 20 against her, the Court finds this challenge is moot. 21 G. 22 Young has requested the Court order sanctions under Rule 11 and under 28 U.S.C. Sanctions 23 § 1927 against Plaintiff and his attorneys, Mark Schechter and Paul Woodward of 24 Butterfield Schechter LLP. ECF No. 58. An opposition was filed on October 4, 2019. 25 ECF No. 60. A reply was filed on October 11, 2019. ECF No. 61. 26 Young alleges that the FAC is legally deficient and that Plaintiffs’ attorneys did 27 not perform a reasonable and competent inquiry before filing the FAC. ECF No. 58-1 at 28 12. Young additionally alleges that Plaintiff and his attorneys’ decision to file this action 25 18-CV-2856-GPC-MSB 1 was to “unnecessarily increase the cost of litigation for Ms. Young so that she is forced to 2 the settlement table.” ECF No. 58-1 at 17. 3 4 1. Rule 11 Rule 11 of the Federal Rules of Civil Procedure (“Rule 11”) imposes a duty on 5 attorneys to certify that (1) they have read the pleadings or the motions they file, and (2) 6 the pleading or motion is well-grounded in fact, has a colorable basis in law, and is not 7 filed for an improper purpose. Sec. Farms. v. Int’l Bhd. Of Teamsters, 124 F.3d 999, 1016 8 (9th Cir. 1997) (citing Rule 11(b)). Generally, sanctions are appropriately imposed on an 9 attorney for a filing “if either a) the paper is filed for an improper purpose, or b) the paper 10 is ‘frivolous.’ ” Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 11 1990) (quoting Zaldivar v. City of Los Angeles, 780 F.2d 823, 832 (9th Cir. 1986)). 12 However, as the Ninth Circuit has recognized, a special set of considerations 13 pertain to Rule 11 motions directed at complaints. Unlike other filings, complaints may 14 be challenged only for “frivolousness,” which the Ninth Circuit uses as a “shorthand ... to 15 denote a filing that is both baseless and made without a reasonable and competent 16 inquiry.” Id. Unlike the “improper purpose” inquiry, “frivolousness” is not concerned 17 with the motivations of the signing attorney, and “subjective evidence of the signer’s 18 purpose is to be disregarded” so long as the contested papers are not 19 baseless. Id. According to the Ninth Circuit, complaints, which serve as the legal 20 “vehicle through which [the plaintiff] enforces his substantive legal rights,” should be 21 preserved to the extent possible, since the successful vindication of “those rights benefits 22 not only individual plaintiffs but may benefit the public.” Id. 23 Frivolousness is determined objectively. “[T]he subjective intent of the ... movant 24 to file a meritorious document is of no moment. The standard is reasonableness. The 25 ‘reasonable [person]’ against which conduct is tested is a competent attorney admitted to 26 practice before the district court.” G.C. and K.B. Invest., Inc. v. Wilson, 326 F.3d 1096, 27 1109 (9th Cir. 2003). At base, “[t]he issue in determining whether to 28 impose sanctions under Rule 11 is whether a reasonable attorney, having conducted an 26 18-CV-2856-GPC-MSB 1 objectively reasonable inquiry into the facts and law, would have concluded that the 2 offending paper was well-founded.” Truesdell v. So. Cal. Permanente Med. Grp., 209 3 F.R.D. 169, 174 (C.D. Cal. 2002). 4 Cases warranting imposition of sanctions for frivolous actions are “rare and 5 exceptional.” Operating Eng'rs Pension Trust v. A–C Co., 859 F.2d 1336, 1344 (9th Cir. 6 1988); In re Keegan Mgmt. Co. Sec. Litig., 78 F.3d 431, 437 (9th Cir. 7 1996) (characterizing sanctions as “an extraordinary remedy, one to be exercised with 8 extreme caution”). “District courts enjoy much discretion in determining whether and 9 how much sanctions are appropriate.” Oliver v. In-N-Out Burgers, 945 F. Supp. 2d 1126, 10 1130 (S.D. Cal. 2013) (citing Haynes v. City & Cnty. of San Francisco, 688 F.3d 984, 11 987 (9th Cir. 2012)). A district court’s determination of whether to enter sanctions is 12 reviewed for abuse of discretion. Id. 13 Here, Young bears the burden of demonstrating that the FAC includes sanctionable 14 material. The FAC presented genuine questions of law and Plaintiff alleged significant 15 stakes since the sum of Plaintiffs’ funds transferred to Young totaled to over $3 million. 16 FAC ¶ 57. Having discerned no sanctionable material during the course of its review of 17 the FAC, the Court DENIES Young’s Rule 11 motion. 18 19 2. 28 U.S.C. § 1927 Pursuant to 28 U.S.C. § 1927, “[a]ny attorney ... who so multiplies the proceedings 20 in any case unreasonably and vexatiously may be required by the court to satisfy 21 personally the excess costs, expenses, and attorneys' fees reasonably incurred because of 22 such conduct.” “[S]ection 1927 sanctions must be supported by a finding of subjective 23 bad faith,” which “is present when an attorney knowingly or recklessly raises 24 a frivolous argument, or argues a meritorious claim for the purpose of harassing an 25 opponent.” In re Keegan Mgmt. Co., Sec. Lit., 78 F.3d 431, 436 (9th Cir.1996) (internal 26 quotations omitted) (emphasis added). 27 28 The Ninth Circuit has found that while recklessness may be the standard under § 1927, “it is an insufficient basis for sanctions under a court's inherent power.” In re 27 18-CV-2856-GPC-MSB 1 Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996). Instead, counsel’s 2 conduct must “constitute[ ] or [be] tantamount to bad faith.” Roadway Express, Inc. v. 3 Piper, 447 U.S. 752, 767, 100 S.Ct. 2455, 2465, 65 L.Ed.2d 488 (1980). In sanctioning 4 counsel, “[c]ourts may not invoke [inherent] powers without a ‘specific finding of bad 5 faith.’ ” Yagman v. Republic Ins., 987 F.2d 622, 628 (9th Cir.1993) (quoting United 6 States v. Stoneberger, 805 F.2d 1391, 1393 (9th Cir.1986)); accord Zambrano v. City of 7 Tustin, 885 F.2d 1473, 1478 (9th Cir.1989) (“To insure that restraint is properly 8 exercised, we have routinely insisted upon a finding of bad faith before sanctions may be 9 imposed under the court's inherent power.”). “Bad faith is present when an attorney 10 knowingly or recklessly raises a frivolous argument or argues a meritorious claim for the 11 purpose of harassing an opponent.” Trulis v. Barton, 107 F.3d 685, 694 (9th Cir. 1995). 12 Here, Young asserts that Plaintiff’s failure to add facts in his amended complaint to 13 address the issues raised in Young’s original mooted motion to dismiss is proof of 14 Plaintiff’s attempt to multiply the proceedings. Young’s filing of the amended complaint 15 is insufficient to constitute bad faith given that the original motion to dismiss had not 16 been ruled on. In Stone Creek, the Ninth Circuit affirmed the lower court’s sanctions 17 order since the plaintiff failed to drop withdraw its actual damages claim when the 18 plaintiff knew that its actual damages claim was meritless, and plaintiff intended to 19 pursue only the defendant’s profits. Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 20 F.3d 426, 443 (9th Cir. 2017), cert. denied, 138 S. Ct. 1984, 201 L. Ed. 2d 248 (2018). In 21 the district court proceedings, the plaintiff opposed the defendant’s motion to vacate the 22 jury trial and caused additional expense and delay. Stone Creek Inc. v. Omnia Italian 23 Design Inc., No. CV-13-00688-PHX-DLR, 2016 WL 492629, at *2 (D. Ariz. Feb. 9, 24 2016), aff’d, 862 F.3d 1131 (9th Cir. 2017), and aff’d, 875 F.3d 426 (9th Cir. 2017). As a 25 result of the plaintiff’s opposition, the defendant was “forced to expend time and 26 resources defending against the claim by, for example, taking depositions and having its 27 expert prepare a report.” Stone Creek, 875 F.3d at 443. 28 28 18-CV-2856-GPC-MSB 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Here, Plaintiff has not engaged in comparable behavior to support a finding of bad faith. The Court therefore DENIES Young’s 28 U.S.C. § 1927 motion.4 V. MOTIONS TO SEAL Young filed a motion to file documents under seal accompanying her motion to dismiss the FAC (“First Motion”), ECF No. 47, and filed a second motion to file documents under seal accompanying her motion for sanctions. ECF No. 56 (“Second Motion”). Ligand also filed a motion to file documents under seal. ECF No. 48. No oppositions have been filed. In her First Motion, Young seeks to file under seal Exhibits 1-11 and 15-20. ECF No. 47. To support her argument, Young cites the prior sealing order by the Texas state court which oversaw the case for which these documents were filed. ECF No. 47. The remaining exhibits that Young seeks to file (i.e., Exhibits 12-14) are documents filed in the San Diego superior court. The Court has previously granted Young’s motion to seal documents filed in Texas state court and San Diego superior court – the majority of which are identical to the Exhibits in the First Motion. ECF. No. 42. Given the prior sealing order by the Texas state court and for reasons similar to those stated in the Court’s prior order granting motions to seal, the Court GRANTS Young’s motion to file Exhibits 1-11 and 15-20 under seal. In the Second Motion, Young seeks to file under seal Exhibits 1-18 and 24-27. ECF No. 56. Exhibits 1-18 are identical to sealed exhibits from the First Motion. Exhibits 24-27 are also documents filed related to the Texas state court proceedings. For the same reasons as articulated above, Young’s motion to file Exhibits 1-18 and 24-27 under seal is GRANTED. The remaining exhibits in her Second Motion (i.e., Exhibits 19-23) are comprised of proof of service of Young’s sanctions motion, and four sets of 26 27 28 4 Young filed a request for judicial notice accompanying her motion for sanctions seeking judicial notice of twenty-six documents. Since Young’s motion for sanctions has been denied in full, the request for judicial notice is rendered moot. 29 18-CV-2856-GPC-MSB 1 email correspondence between Plaintiff, Young’s Texas counsel, and the Court 2 coordinator. 3 Ligand seeks to seal limited redacted portions of the memorandum support of their 4 motion to dismiss. ECF No. 48. As support for this, Ligand asserts that these excerpts 5 refer to the Texas state court orders that Young has filed under seal in connection with 6 her motion to dismiss. The Court has previously granted Ligand’s motion to seal limited 7 redacted portions in support of their motion to dismiss. ECF No. 42. For reasons similar 8 to those stated in the Court’s prior order granting Ligand’s motion to seal, the Court 9 GRANTS Ligand’s motion to seal limited redacted portions of the memorandum in 10 support of their motion to dismiss at the following page and line numbers: 1:7, 2:23-25, 11 3:2-18 and n.4, 4:1-5, 10:3-4, and 12:13-14. Accordingly, Defendants’ motions to seal are GRANTED. 12 13 14 15 16 17 18 19 20 21 VI. Conclusion Based on the above, the Court GRANTS the Defendants motions to dismiss the first, second, third, fourth and sixth causes of action with prejudice and without leave to amend. The remaining state law claims – the fifth, seventh, eighth, and ninth causes of action – are dismissed without prejudice so that they can be raised, as appropriate, in state court. IT IS SO ORDERED. Dated: December 5, 2019 22 23 24 25 26 27 28 30 18-CV-2856-GPC-MSB

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