Gregory Raifman v. Wachovia Securities ( 2016 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 12 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
GREGORY R. RAIFMAN; et al., No. 14-15851
Plaintiffs - Appellants, D.C. No. 4:11-cv-02885-SBA
v.
MEMORANDUM*
WACHOVIA SECURITIES, LLC, n/k/a
Wells Fargo Advisors, LLC and WELLS
FARGO ADVISORS, LLC, successor in
interest to Wachovia Securities, LLC,
Defendants - Appellees.
Appeal from the United States District Court
for the Northern District of California
Saundra B. Armstrong, District Judge, Presiding
Submitted May 9, 2016**
San Francisco, California
Before: McKEOWN and FRIEDLAND, Circuit Judges and BOULWARE, ***
District Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Richard F. Boulware, District Judge for the U.S.
District Court for the District of Nevada, sitting by designation.
The issue on appeal is whether Plaintiffs’ suit against Wachovia for alleged
misconduct in connection with a “stock loan program” is barred by the statute of
limitations. The district court held that it was and we affirm.
Plaintiffs do not dispute that at the time their loans matured and they realized
they were not getting their stock back, they were on notice that something was
wrong and that this notice required an investigation on their part. They contend,
however, that they were on notice of only Derivium’s wrongdoing, not
Wachovia’s. They further contend that, despite their reasonable diligence in
investigating, they had no reason to suspect Wachovia until November 2010, when
Wachovia produced various documents in a separate bankruptcy matter. That is
when “smoking gun” evidence was discovered and Plaintiffs claim they finally
became aware that they could pursue claims against Wachovia. Plaintiffs argue
that the “delayed discovery rule” should apply to toll the statute of limitations until
they discovered those documents.
Under California law (which provides the longest statute of limitations that
could apply in this case), the discovery rule “postpones accrual of a cause of action
until the plaintiff discovers, or has reason to discover, the cause of action.” Fox v.
Ethicon Endo-Surgery, Inc., 110 P.3d 914, 920 (Cal. 2005). “A plaintiff has
2
reason to discover a cause of action when he or she ‘has reason at least to suspect a
factual basis for its elements.’” Id. (emphasis added) (quoting Norgart v. Upjohn
Co., 981 P.2d 79, 88 (Cal. 1999)). “Elements” does not refer to the legal elements
of a specific claim, merely the “‘generic’ elements of wrongdoing, causation, and
harm.” Id. In other words, “a potential plaintiff who suspects that an injury has
been wrongfully caused must conduct a reasonable investigation of all potential
causes of that injury. If such an investigation would have disclosed a factual basis
for a cause of action, the statute of limitations begins to run on that cause of action
when the investigation would have brought such information to light.” Id. at 921
(emphasis added). To take advantage of the discovery rule, a plaintiff must
“specifically plead facts to show (1) the time and manner of discovery and (2) the
inability to have made earlier discovery despite reasonable diligence.” Grisham v.
Philip Morris, USA, Inc., 151 P.3d 1151, 1159 (Cal. 2007).
As the district court correctly explained, based on Wachovia’s involvement
in the loan program, Plaintiffs had reason to suspect possible wrongdoing by
Wachovia and to investigate Wachovia within the time limitations. Plaintiffs did
not adequately plead in their complaint what investigations they undertook and
why they were unable to discover earlier the facts that were later disclosed in the
3
separate bankruptcy proceeding. None of Plaintiffs’ allegations regarding
Wachovia show what, if anything, Plaintiffs did to diligently investigate Wachovia
in this case, nor does the complaint provide any reason why Plaintiffs were unable
to discover information sufficient to file a complaint within the statutory period.
Moreover, Plaintiffs’ contention that they could not have filed suit until the
November 2010 “smoking gun” disclosure is unavailing for at least two reasons:
First, the letter primarily referred to as the key disclosure does not actually say
Wachovia sold the borrowers’ securities or that anything untoward was happening
between Wachovia and Derivium. Second, “[a] plaintiff need not be aware of the
specific ‘facts’ necessary to establish the claim [in order for the claim to accrue];
that is a process contemplated by pretrial discovery. Once the plaintiff has a
suspicion of wrongdoing, and therefore an incentive to sue, she must decide
whether to file suit or sit on her rights.” Jolly v. Eli Lilly & Co., 751 P.2d 923,
928 (Cal. 1988) (in bank).
Finally, Plaintiffs’ contention that the limitations period should be tolled
because of Wachovia’s fraudulent concealment of relevant materials fails for
similar reasons. “In order to establish fraudulent concealment, the complaint must
show: (1) when the fraud was discovered; (2) the circumstances under which it was
4
discovered; and (3) that the plaintiff was not at fault for failing to discover it or had
no actual or presumptive knowledge of facts sufficient to put him on inquiry.”
Baker v. Beech Aircraft Corp., 114 Cal. Rptr. 171, 175 (Cal. Ct. App. 1974).
Again, Plaintiffs do not sufficiently allege any efforts to investigate, or that
Wachovia fraudulently withheld information. In their briefing before this court,
Plaintiffs also do nothing to suggest that they could so allege if given an
opportunity to amend—even after the district court faulted their allegations on
these very grounds. The district court was therefore correct in treating further
leave to amend as futile.
AFFIRMED.
5