David Hough v. Ryan Carroll
2:24-cv-02886
| C.D. Cal. | May 6, 2025Background
- Plaintiffs alleged they were fraudulently induced to invest up to $125,000 each in e-commerce stores managed by Wealth Assistants, which promised high monthly returns and a buy-back guarantee.
- It was further alleged that Wealth Assistants never intended to honor those commitments, sometimes failing to deliver stores or delivering nonfunctional ones.
- Plaintiffs claimed Wealth Assistants used complex payment processing and banking arrangements to conceal the proceeds of its fraudulent scheme, implicating Bank of America, Wells Fargo, and First Citizens as well as Wealth Assistants' finance manager, Christine Hagar.
- Plaintiffs filed suit against the banks and Hagar for aiding and abetting fraud and breach of fiduciary duty, plus a conspiracy claim that was later withdrawn.
- The defendants (the banks and Hagar) moved to dismiss all claims, arguing insufficient allegations of actual knowledge and substantial assistance (for aiding/abetting), particularly under Rule 9(b)’s heightened pleading for fraud.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Aiding and abetting fraud (actual knowledge) | Banks and Hagar knew of the specific fraud/concealment scheme. | Defendants lacked actual, specific knowledge of the alleged fraud or concealment. | Dismissed; no sufficient facts showing actual knowledge. |
| Aiding and abetting fraud (substantial assistance) | Defendants substantially assisted by facilitating transactions. | Allegations were speculative and lacked particularity per Rule 9(b). | Dismissed; insufficiently particularized facts. |
| Aiding and abetting breach of fiduciary duty | Same facts as fraud claims support fiduciary duty aiding/abetting. | Defendants did not know of any fiduciary relationship or alleged breach. | Dismissed; no direct allegation of actual knowledge. |
| Conspiracy to defraud | Initially pled as an alternative; conceded at dismissal phase. | Sought dismissal as meritless and unsupported. | Dismissed per Plaintiffs’ request. |
Key Cases Cited
- Casey v. U.S. Bank Nat’l Ass’n, 26 Cal. Rptr. 3d 401 (Cal. Ct. App. 2005) (sets high pleading standard for actual knowledge/substantial assistance in aiding and abetting claims against banks)
- In re First All. Mortg. Co., 471 F.3d 977 (9th Cir. 2006) (adopts Casey’s requirement of actual knowledge of the specific primary wrong)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (lays out plausibility standard for pleading under Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (establishes plausibility standard for well-pled facts to survive dismissal)
- Gompper v. VISX, Inc., 298 F.3d 893 (9th Cir. 2002) (describes court’s obligations in motion to dismiss)
- Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) (applies heightened Rule 9(b) pleading standard for fraud)