Maksoud v. Hopkins
3:17-cv-00362
S.D. Cal.Jun 9, 2017Background
- Plaintiff Charbel Maksoud invested $250,000 in BT Software and Research, Inc. (BT) in May 2014 for an agreed equity interest, alleging representations that BT was valued at $10 million and that the funds would be used to develop the Kaliki platform.
- Plaintiff alleges various defendants (including Payton, Guelton, Pillsbury law firm and Salaman, Solutions IQ) participated in misrepresentations, misappropriation of funds, failure to deliver stock certificates, and mismanagement; Plaintiff also asserts he assigned claims of a deceased developer (Baaklini).
- Plaintiff filed a First Amended Complaint with 19 causes of action against 11 defendants; several defendants moved to dismiss for failure to state a claim (Solutions IQ, Pillsbury & Salaman, and Tirrell Payton).
- The FAC mixes allegations against multiple defendants, and many claims are grounded in alleged fraud, triggering Rule 9(b)’s heightened pleading standard for particularity.
- Court dismissed claims against Solutions IQ and the Pillsbury defendants for failure to plead sufficient facts (with leave to amend). As to Payton, the court denied dismissal on fiduciary-duty, negligence, UCL, accounting, and constructive-trust claims, but dismissed several fraud-based and other claims for lack of specificity (with leave to amend). The court also rejected Payton’s indispensable-party argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of allegations against Solutions IQ (unjust enrichment, restitution, constructive trust, declaratory relief) | Maksoud alleges Solutions accepted misappropriated funds from Payton | Solutions argues the FAC lacks factual allegations tying Solutions to wrongdoing | Dismissed all claims against Solutions for failure to meet Rule 8; leave to amend granted |
| Liability of Pillsbury & Salaman (fiduciary duty, professional negligence) | Pillsbury drafted (or failed to draft) documents and knew/should have known of misappropriation, breaching duties to Maksoud | Pillsbury contends no attorney-client relationship with Maksoud; duties ran to BT, not to an adverse counterparty | Dismissed for failure to plead an attorney duty or particularized fraud; leave to amend; must allege citizenship if relying on diversity jurisdiction |
| Indispensable party (Payton): must Bruce Hopkins be joined? | Implicit: Hopkins central to alleged scheme so indispensable | Payton contends Hopkins is indispensable and his absence destroys subject-matter jurisdiction | Court held Hopkins is not indispensable (no allegation he was a party to the stock purchase; joint tortfeasors not indispensable); motion denied |
| Intentional/fraud-based claims against Payton (fraud, false promise, misrepresentation, unjust enrichment, restitution, declaratory relief) | Maksoud alleges multiple misrepresentations inducing investment and misuse of funds | Payton argues many fraud-based claims fail to plead who, what, when, where, and how as required by Rule 9(b) | Court dismissed fraud-based claims that lack particularity (Rule 9(b)), granting leave to amend for those counts |
| Breach of fiduciary duty and negligence against Payton | Maksoud alleges Payton, as CEO, owed shareholder duties and misappropriated funds / made false statements | Payton contends many allegations sound in fraud and fail Rule 9(b) | Court denied dismissal of breach of fiduciary duty and negligence (sufficient non-fraud allegations survive) |
| UCL claim against Payton | Maksoud alleges unfair business practices deprived him of his investment | Payton did not show UCL fails as a matter of law | Court denied dismissal of UCL claim (fact question; plausible economic injury) |
| Accounting and constructive trust claims against Payton | Maksoud alleges fiduciary relationship and unknown balances due from complex transactions | Payton moved to dismiss these equitable claims | Court denied dismissal as Plaintiff sufficiently alleged fiduciary duties and potential unknown balances; constructive trust preserved as remedy pending other claims |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (conclusory allegations are insufficient)
- Bly-Magee v. California, 236 F.3d 1014 (9th Cir. 2001) (leave to amend and Rule 9(b) notice requirement)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) (Rule 9(b) applies to claims grounded in fraud)
- Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., 131 Cal.App.4th 802 (2005) (attorney duties generally do not extend to adverse parties)
- Temple v. Synthes Corp., Ltd., 498 U.S. 5 (1990) (joint tortfeasors need not all be joined)
- MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (discretionary nature of declaratory relief)