AIG Retirement Services, Inc. v. Altus Finance S.A.

FILED
NOT FOR PUBLICATION FEB 09 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO U RT OF AP PE A LS
FOR THE NINTH CIRCUIT
AIG RETIREMENT SERVICES, INC., Nos. 07-56019
f/µ/a SUNAMERICA, Inc.
D.C. No. 2:05-cv-01035-JFW
Plaintiff - Appellant,
v.
MEMORANDUM *
ALTUS FINANCE S.A., a corporation
organized under French law,
Defendant,
and
AURORA S.A., a corporation organized
under French law; ARTEMIS S.A., a
corporation organized under French law;
ARTEMIS FINANCE S.N.C., a entity
doing business under French law; CDR
ENTERPRISES, a corporation organized
under French law; CONSORTIUM DE
REALISATION S.A., a corporation
organized under French law; MAAF
ASSURANCES, a mutual insurer
organized under French law; MAAF VIE
S.A., a corporation organized under French
law; CREDIT LYONNAIS S.A., a
corporation organized under French law,
Defendants-Appellees.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
AIG RETIREMENT SERVICES, INC., No. 07-56679
f/µ/a SUNAMERICA, Inc.,
D.C. No. 2:05-cv-01035-JFW
Plaintiff-Appellant.
v.
ALTUS FINANCE S.A., a corporation
organized under French law; AURORA
S.A., a corporation organized under French
law; ARTEMIS S.A., a corporation
organized under French law; ARTEMIS
FINANCE S.N.C., a entity doing business
under French law; CDR ENTERPRISES, a
corporation organized under French law;
CONSORTIUM DE REALISATION S.A.,
a corporation organized under French law;
MAAF ASSURANCES, a mutual insurer
organized under French law; MAAF VIE
S.A., a corporation organized under French
law; CREDIT LYONNAIS S.A., a
corporation organized under French law,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted September 3, 2009
Pasadena, California
2
Before: FISHER and GOULD, Circuit Judges, and ENGLAND, District Judge.**
Plaintiff AIG Retirement Services, Inc. ('AIG'), timely appeals from the
district court's grant of Defendants' motions to dismiss and motions for summary
judgment. We have jurisdiction under 28 U.S.C. y 1291 and affirm in part and
reverse in part.
'We review de novo the district court's dismissal of a complaint for failure
to state a claim under Federal Rule of Civil Procedure 12(b)(6).' Gompper v.
VISÈ, Inc., 298 F.3d 893, 895 (9th Cir. 2002) (internal citations omitted).
Nevertheless, 'we may affirm the district court's dismissal on any ground
supported by the record.' Gemtel Corp. v. Cmty. Redevelopment Agency, 23 F.3d
1542, 1546 (9th Cir. 1994) (internal citations omitted). We also review de novo
the district court's grant of summary judgment. Devereaux v. Abbey, 263 F.3d
1070, 1074 (9th Cir. 2001) (en banc).
First, the district court prematurely dismissed AIG's breach of the implied
covenant of good faith and fair dealing claim. AIG adequately alleged that even
though the MAAF Defendants transferred their New California shares to a
'permitted transferee' under the Stocµholders Agreement, because Defendants
**
The Honorable Morrison C. England, Jr., United States District Judge
for the Eastern District of California, sitting by designation.
3
µnew Artemis could only fraudulently and unlawfully obtain regulatory approval
to hold those shares, the transfer nevertheless circumvented AIG's contractual right
of first refusal. Since the implied covenant has been recognized as requiring that
contractual duties be performed consistently with applicable laws and regulations,
Koval v. Peoples, 431 A.2d 1284, 1286 (Del. Super. Ct. 1981), and in good faith,
Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 442 (Del. 2005), AIG
adequately stated a claim for breach of the implied covenant. Defendants'
argument that AIG's damages are unduly speculative is similarly premature. Cf.
Truitt v. Fahey, 52 A. 339 (Del. Super. Ct. 1902) (finding damages speculative
after trial). Thus, the district court's dismissal of AIG's breach of the implied
covenant claim is reversed.
Liµewise, the district court prematurely granted Defendants' motions for
summary judgment as to AIG's fraud claim. AIG relied on three distinct theories
in pursuit of its instant claim: 1) 'defrauded bidder,' 2) 'defrauded purchaser,' and
3) 'defrauded holder of a right of first refusal.' Although the district court
properly rejected AIG's 'defrauded purchaser' claim, the law and the undisputed
facts favor denial of summary judgment as to AIG's remaining theories.
As a threshold matter, AIG contends that the district court erred when it
excluded the testimony of AIG's expert witness, Karl L. Rubinstein, former
4
counsel to the California Insurance Commissioner. We review the district court's
decision for an abuse of discretion, Gen. Elec. Co. v. Joiner, 522 U.S. 136, 142-43
(1997), and find no such abuse here. The district court acted well within its
authority when it determined that AIG's proffered evidence was inherently
unreliable. See Fed. R. Evid. 702(2) (requiring the use of 'reliable principles and
methods'); Kumho Tire Co. v. Carmichael, 526 U.S. 137, 156 (1999) (looµing to
whether an expert's method has 'general acceptance' in a 'relevant expert
community'). Thus, the district court's exclusion of the testimony of AIG's expert
witness is affirmed.
On the merits, the district court improperly determined that the damages
sought under Plaintiff's 'defrauded bidder' claim were governed by California
Civil Code y 3343. Section 3343 articulates the available damages for '[o]ne
defrauded in the purchase, sale or exchange of property.' However, AIG was
allegedly defrauded, not into a purchase or sale governed by y 3343, but instead
into entering a joint bid with Defendants, a venture AIG alleges it never would
have undertaµen but for Defendants' false statements as to, inter alia, Defendants'
own identities and owners. See City Solutions Inc., v. Clear Channel
Communications, Inc., 365 F.3d 835, 839 (9th Cir. 2004).
5
Moreover, any attempt by Defendants to characterize their fraud as one
intended to induce AIG to purchase New California is not well taµen because
AIG's purchase of its New California shares was merely incidental to the actual
goal of Defendant's underlying fraud, which was to induce AIG to join
Defendant's bid. Stated another way, at its most basic, the substantive fraud, as
alleged in this case, occurred when Defendants induced Plaintiff to join their bid,
and all subsequent actions were consequences of that decision, logical steps taµen
in the furtherance of the original fraud in the bidding. Accordingly, AIG's
damages under its instant fraud theory are governed by California's general fraud
provision, Civil Code y 3333, which permits the recovery of lost profits.
Despite the possible existence of many alleged contingencies, the occurrence
of which Defendants argue AIG would be called upon to prove at trial, the district
court also erred when it prematurely determined that AIG's sought-after damages
were impermissibly speculative. See City Solutions, 365 F.3d at 841. The district
court similarly erred when it treated AIG's admissions as to justifiable reliance, or
lacµ thereof, as conclusive. See, e.g., Huey v. Honeywell, Inc., 82 F.3d 327, 333
(9th Cir. 1996) (quoting Kunglig Jarnvagsstyrelsen v. Dexter & Carpenter, Inc., 32
F.2d 195, 198 (2d Cir. 1929)). Thus, triable issues of fact remain as to AIG's
ability to prove its damages to a reasonable certainty and as to whether AIG
6
justifiably relied on Defendants' fraud. The district court erred in holding to the
contrary, and its grant of summary judgment as to AIG's 'defrauded bidder' fraud
claim is reversed. For the same reasons, the district court's grant of summary
judgment as to AIG's 'defrauded holder of a right of first refusal' theory is
reversed and remanded as well.
Nevertheless, the district court properly rejected AIG's 'defrauded
purchaser' theory because AIG lacµs standing to bring what is in actuality a
derivative claim. See Jones v. H.F. Ahmanson & Co., 1 Cal. 3d 93, 106 (1969)
('[T]he action is derivative . . . if the gravamen of the complaint is injury to the
corporation, or to the whole body of its stocµ or property without any severance or
distribution among individual holders . . . .') (internal citations and quotations
omitted). Accordingly, the district court's grant of Defendants' motions for
summary judgment as to Plaintiff's fraud claim is reversed as to the 'defrauded
bidder' and 'defrauded holder of a right of first refusal' claims and is affirmed as
to AIG's 'defrauded purchaser' claim.
The district court also properly rejected AIG's unjust enrichment remedy
because, in light of the above reversals of AIG's breach of contract and fraud
claims, recovery under an unjust enrichment theory is prohibited as duplicative.
See Ramona Manor Convalescent Hosp. v. Care Enterprises, 225 Cal. Rptr. 120,
7
130-31 (Cal. Ct. App. 1986); see also Paracor Fin., Inc. v. Gen. Elec. Capital Corp.,
96 F.3d 1151, 1167 (9th Cir. 1996) (citing Wal-Noon Corp. v. Hill, 119 Cal. Rptr.
646, 651 (Ca. Ct. App. 1975))
With regard to the last substantive claims, the district court prematurely
dismissed AIG's interference with contract and with prospective economic
advantage claims by resolving several contested factual issues on the pleadings.1
Specifically, the district court improperly concluded that: 1) AIG had admitted in
earlier pleadings to having actual µnowledge of its interference claims prior to
entering the tolling agreements, 2) AIG was on inquiry notice of its interference
claims prior to entering those agreements, and 3) AIG's sought-after damages were
impermissibly speculative. Accordingly, the district court's dismissal of Plaintiff's
interference claims is reversed and remanded.
Finally, in light of the reversal of AIG's interference claims, the Artemis
Defendants are no longer prevailing parties under the fee provision of the
Stocµholders Agreement. Moreover, even if the Artemis Defendants were
prevailing parties, the contract language providing for fees to be awarded '[i]n any
suit to enforce the provisions' of the Agreement is simply too narrow to
1
Because the district court's dismissal of Plaintiff's breach of implied
covenant claim is reversed, there is no need to address Defendants' argument that
the inference with contract claim fails with the underlying contract claim.
8
encompass fees incurred as a result of the claims brought by Plaintiff here. Thus,
the district court's award of attorneys' fees is also reversed. Each party shall bear
its own costs on appeal.
AFFIRMED IN PART AND REVERSED IN PART AND
REMANDED.
9
FILED
AIG Retirement Services, Inc. v. Altus Finance S.A., No. 07-56019õ FEB 09 2010
MOLLY C. DWYER, CLERK
RAYMOND C. FISHER, Circuit Judge, concurring in part, dissenting inU.Spart:
. CO U RT OF AP PE A LS
Although I join most of the disposition in this case, I respectfully disagree
with my colleagues' conclusions concerning AIG's 'defrauded holder of a right of
first refusal' and unjust enrichment claims. I believe AIG cannot recover under its
defrauded holder theory and can maintain a separate claim for unjust enrichment.
I.
The majority treats the 'defrauded holder of a right of first refusal' claim as
functionally identical to the 'defrauded bidder' claim, reinstating the former '[f]or
the same reasons' that it reinstated the latter. This cursory discussion overlooµs
the factual basis of the defrauded holder claim, which has nothing to do with a
bidding process. California Civil Code section 3343 applies to the defrauded
holder claim. Consequently I would hold that summary judgment was warranted
because AIG could not recover damages.
California Civil Code section 3343 severely limits the availability of lost
profits damages to '[o]ne defrauded in the purchase, sale or exchange of property.'
Cal. Civ. Code y 3343(a)(4). City Solutions Inc. v. Clear Channel
Communications, Inc. (City Solutions II), cited by the majority, excludes bidding
processes from 'purchase, sale or exchange.' 365 F.3d 835, 839 (9th Cir. 2004).
The transaction at the core of the defrauded holder claim, however, is the sale of
two-thirds of the New California Holdings Corporation. AIG claims that it would
have been able to purchase this equity but for defendants' fraud. The majority
does not explain how this claim is the 'same' as a claim arising out of a joint bid.
The California Court of Appeal's decision in Kenly v. Uµegawa
demonstrates why section 3343 applies to the defrauded holder claim. 19 Cal.
Rptr. 2d 771, 773 (Ct. App. 1993). The court explained, 'An examination of the
language of section 3343 supports the conclusion that [a defrauded party] is not
entitled to lost profits on a property he never acquired' because even though the
property was never acquired, it is still the subject of a proposed purchase, sale or
exchange. Id. at 775. The majority has made no attempt to distinguish Kenly from
AIG's claim to have been defrauded out of a right to acquire the two-thirds of New
California held by the MAAF defendants, nor could it successfully do so.
II.
The majority holds that AIG's equitable claim of unjust enrichment is
prohibited as duplicative. Again, I respectfully disagree. An unjust enrichment
theory is not necessarily duplicative of AIG's surviving legal claims, and AIG is
permitted to plead alternative theories of relief. Therefore, I would reverse the
district court's summary judgment on the unjust enrichment claim.
'The right to maintain an action for restitution . . . is largely the product of
2
imperfections in the tort remedies.' Ramona Manor Convalescent Hospital v.
Care Enterprises, 226 Cal. Rptr. 120, 130 (Ct. App. 1986) (quoting Restatement
(First) of Restitution y 3 cmt. a (1937) (emphasis removed)). As just one example,
because California has statutorily limited damages in fraud actions concerning the
purchase of property, should AIG prove its defrauded holder allegations, it may
turn to equity to prevent 'unjust retention of the benefit' of the fraud. See, e.g.,
Lectrodryer v. SeoulBanµ, 91 Cal. Rptr. 2d 881, 883 (Ct. App. 2000). Unjust
enrichment provides an additional method of recovery for a plaintiff who proves a
bad act but has no remedy at law. As we vacate and remand substantial portions of
this case for further proceedings, the majority's assumption that AIG will have an
adequate remedy at law is premature.
The majority cites to two cases, both of which are inapposite. In Ramona
Manor, the California Court of Appeal held that a claim of equitable restitution
does not authorize double recovery. 225 Cal. Rptr. at 129-30. However, the bar on
double-recovery does not come into play until a party has successfully proven a
legal theory at trial. See id. at 1138. We cannot assume that AIG will succeed on
any of its legal claims; AIG has a long road between our ruling and a favorable
verdict. In Paracor Finance, Inc. v. General Electric Capital Corp., we held that
an unjust enrichment claim 'does not lie when an enforceable, binding agreement
3
exists defining the rights of the parties.' 96 F.3d 1151, 1167 (9th Cir. 1996)
(citing, inter alia, Wal-Noon Corp. v. Hill, 119 Cal. Rptr. 646, 650-51 (Ct. App.
1975)). Although the shareholder agreement governed the relationship between
AIG and the MAAF defendants, there was no 'binding agreement' with the Altus
and Artemis defendants. Therefore AIG may still assert an equitable claim
concerning its indirect dealings with Altus and Artemis.
4