United States District Court, N.D. California
December 5, 2005.
In re: CALPINE CORPORATION ERISA LITIGATION. THIS DOCUMENT APPLIES TO ALL ACTIONS.
The opinion of the court was delivered by: SAUNDRA ARMSTRONG, District Judge
This matter comes before the Court on Calpine's Motion to
Dismiss Plaintiff's Amended Consolidated Complaint [Docket No.
106] and the Committee Defendants' Motion to Dismiss the Amended
Consolidated Complaint [Docket No. 110]. Having read and
considered the papers presented by the parties, the Court finds
this matter appropriate for disposition without a hearing. The
Court hereby GRANTS both Calpine's Motion to Dismiss Plaintiff's
Amended Consolidated Complaint and the Committee Defendants'
Motion to Dismiss the Amended Consolidated Complaint WITHOUT
LEAVE TO AMEND.
A. Factual Background
Defendant Calpine Corporation ("Calpine" or the "Company"), a
Delaware corporation, is a leading independent power company
engaged in the development, acquisition, ownership, and operation
of power generation facilities and the sale of electricity
predominantly in the United States, but also in Canada and the
United Kingdom. Corrected Amended Consolidated Compl. ("ACC") at
¶ 8. Calpine is also the world's largest producer of renewable
geothermal energy. Id. Calpine is the designated Plan
Administrator and a named fiduciary of the Calpine Corporation
Retirement Savings Plan (the "Plan"), a 401(k) plan established and sponsored by Calpine. Id. at ¶¶ 1, 3, 9-10.
Defendant Investment Advisory Committee ("Advisory Committee")
is a fiduciary delegate of Calpine with the duty and
responsibility to directly monitor the Plan. Id. at ¶ 12.
Through its individual members, the Advisory Committee exercised
discretionary authority with respect to the management,
administration, and oversight of the Plan and the management and
disposition of the Plan's assets. Id. Defendants Kati Miller
("Miller"), Lisa Bodensteiner ("Bodensteiner"), Rick Barraza
("Barraza"), Tom Glymph ("Glymph"), Trevor Thor ("Thor"), Bob
McCaffrey ("McCaffrey"), and Bryan Bertacchi ("Bertacchi") were
members of the Advisory Committee during the relevant period.
Id. at ¶¶ 13-16, 18-20. Defendant Patrick Price ("Price") was
Calpine's Director of Compensation Benefits and Corporate
Employment and also a member of the Advisory Committee during the
relevant period. Id. at ¶ 17.
Plaintiff James Phelps ("Plaintiff") was an employee of Calpine
and a participant in the Plan during the relevant period. Id.
at ¶¶ 1, 3.
At the end of calendar year 2000, Calpine's portfolio included
forty-four power plants, with an aggregate capacity of 4,273
megawatts. ACC at ¶ 53. Twenty five of those power plants were
gas-fired cogeneration plants with a total capacity of 3,385
megawatts and nineteen geothermal power generation facilities
with a total capacity of 888 megawatts. Id. In 2000, Calpine
raised approximately $8.1 billion through equity and bond
offerings and renewal lease financing. Id. at ¶ 55. Due to
"skyrocketing" energy prices, the Company also enjoyed record
earnings. Id. at ¶ 56.
In the Company's 2000 Annual Report, the Company stated:
In the past year, a series of factors have reduced
the supply of power to California, which has resulted
in wholesale power prices that have been
significantly higher than historical levels. Several
factors contributed to this increase. These included:
significantly increased volatility in prices and
supplies of natural gas;
an unusually dry fall and winter in the Pacific
Northwest, which reduced the amount of available
hydroelectric power from that region (typically,
California imports a portion of its power from this
the large number of power generating facilities in
California nearing the end of their useful lives,
resulting in increased downtime (either for repairs
or because they have exhausted their air pollution
credits and replacement credits have become too
costly to acquire on the secondary market); and continued obstacles to new power plant construction
in California, which deprived the market of new power
sources that could have, in part, ameliorated the
adverse effects of the foregoing factors.
Id. at ¶ 67.
On January 5, 2001, Calpine announced that it was increasing
its earnings expectations for 2000 and 2001 to approximately
$1.05 per share for fiscal year end 2000 ("FY00") and to $1.25
per share for fiscal year end 2001 ("FY01"). Id. at ¶ 63. This
earnings announcement exceeded analyst expectations of $0.96 per
share for FY00 and $1.20 per share for FY01. Id. Calpine's
stock climbed to $35.06. Id. at ¶ 54.
On or about February 2, 2001, the Company announced in a press
release that by 2005, it planned to be at 70,000 megawatts of
electric generating capacity. Id. at ¶¶ 58, 64. On February 6,
2001, the Company announced that, before the taking of an
extraordinary charge, net income for FY00 was $324.7 million.
Id. at ¶ 64. This represented a 238% increase over the
Company's 1999 net income. Id.
On February 28, 2001, the Company announced that it had signed
two long-term power sales contracts with the California
Department of Water Resources ("CDWR"), providing up to $8.3
billion in potential revenues. Id. at ¶ 65. On or about March
15, 2001, the Company filed its FY00 Form 10-K with the
Securities Exchange Commission ("SEC").
On December 9, 2001, an article was published in the New York
Times regarding Calpine's relationship with Enron. Id. at ¶¶
59, 93. The article noted in part:
Gains from trading energy commodities and energy
derivatives made up the difference. For the first
nine months of 2001, 10 percent of Calpine's $1.1
billion in gross profit came from derivatives trading
activity, which because of the way the company
accounts for the transaction flows directly into the
income statement. Another 18 percent came from
trading energy itself.
. . .
Enron was the biggest player in that field, and the
resemblance is not coincidental. Mr. Posoli, who
created Calpine's trading arm, came to the company
from Enron. He spent most of his four years at Enron
in the group that traded energy derivatives before
joining Calpine in 1999.
. . .
In the third quarter of 2001, $768 million, or 26
percent, of Calpine's revenue came from Enron. Also
in the quarter, Enron bought 6.5 million megawatt
hours of electricity from Calpine. Dividing revenue
generated by Enron by the megawatt hours it bought
from Calpine produces an average cost per megawatt
hour of $119.13 to Enron.
This Cost is significantly higher than what other
Calpine customers paid in the same period. Calpine's
revenue for all megawatt hours sold during the third
quarter averaged just over $84. Sales to non-Enron
customers averaged a rate of $75.48 per megawatt
. . .
But a search through energy commission's filings back
to February 2000 shows only one other power sale
agreement that Calpine struck with Enron and that
was one covering Jan. 13 and 14, 2001. This
transaction could not account for the third-quarter
Id. at ¶ 93.*fn1
By December 14, 2001, Moody's Investors Service announced that
it would cut the credit rating on Calpine's $11.6 billion of debt
to "junk." Id. at ¶ 59. Subsequently, Calpine's shares
plummeted from a starting price of $21.37 at the opening of
trading on December 10, 2001 to a closing price of $13.20 on
December 14, 2001. Id. at ¶ 60.
On April 22, 2002, Calpine settled with the Attorney General of
California, thereby ending the State's investigation into
allegedly illegal electricity pricing practices in California.
Id. at ¶ 84. Calpine paid $6 million in fines. Id.
On January 28, 2004, Calpine settled with the Commodity Futures
Trading Commission ("CFTC"), thereby ending the CFTC's
investigation regarding allegedly improper energy trade
reporting. Id. at ¶ 96. Calpine paid $1.5 million in fines.
In May 23, 2004, Peter Cartwright, the Company's founder,
Chairman of the Board, and Chief Executive Officer, publicly
stated that Calpine's relationship with Enron was minimal and
that other market and regulatory factors were responsible for the
California market crises. Id. at ¶ 97, n. 7.
B. Procedural Background
On April 17, 2003, Plaintiff filed a class action complaint
pursuant to § 502 of the Employee Retirement Income Security Act
("ERISA"), 29 U.S.C. § 1132, on behalf of the Plan and its
participants and beneficiaries, and against Calpine, the Advisory
Committee, Peter Cartwright, Ann B. Curtis, Jeffrey Garten, Susan
Schwab, George Stathakis, John O. Wilson, and V. Orville Wright.
On August 20, 2003, the Court issued an order consolidating several related cases.
On January 20, 2004, Plaintiff filed a Consolidated Complaint
alleging generally that Calpine, certain members of its Board of
Directors, and members of the Plan Advisory Committee and other
fiduciary delegates violated their duties of prudence, care,
loyalty, and Plan faithfulness under Section 404(a) of ERISA
through the management and administration of the Plan's imprudent
investment in Calpine stock during the Class Period. The action
was brought pursuant to ERISA §§ 409, 502(a), 29 U.S.C. §§ 1109,
On or about August 13, 2004, Calpine and the individual
defendants filed separate, but related, motions to dismiss. A
hearing was held on the motions to dismiss on February 11, 2005.
On March 31, 2005, the Court issued an Order dismissing with
prejudice all of the claims in Plaintiff's Consolidated
Complaint, with the exception of Count Three, Plaintiff's
misrepresentation claim. Plaintiff was granted leave to amend
Count Three if he could allege, in good faith, that defendants,
acting in a fiduciary capacity, made material misrepresentations
to the Plan participants. The Court instructed Plaintiff that, to
support his misrepresentation claim, he could not merely rely on
vague references to Calpine's public filings.
On May 9, 2005, Plaintiff filed an Amended Consolidated
Complaint. Then, on May 27, 2005, after protracted discourse with
counsel for defendants regarding the Court's March 31, 2005
Order, Plaintiff filed a revised Amended Consolidated Complaint.
See Opp. to Com. Def's Mot. at 3:21-26.
On June 3, 2005, Plaintiff filed a Motion for Leave to File a
Motion for Reconsideration of the Court's Order Granting
Defendants' Motions to Dismiss ("Motion for Reconsideration").
On June 15, 2005, Plaintiff filed the instant Corrected Amended
Consolidated Complaint (referred to herein as the "Amended
Complaint"). The Amended Complaint is brought by Plaintiff, on
behalf of the participants in and beneficiaries of the Plan, and
against Calpine, the Investment Advisory Committee ("the
Committee"), and the following individual Committee members:
Miller, Bodensteiner, Barraza, Glymph, Thor, McCaffrey,
Bertacchi, and Price (the Investment Advisory Committee and the
individual Committee members are collectively referred to herein
as the "Committee Defendants" and both Calpine and the Committee
Defendants are occasionally referred to herein simply as
"Defendants"). The Amended Complaint alleges that Calpine and the
Committee Defendants disseminated inaccurate and misleading
material information to Plan participants and withheld material information vital to making
Plan investment decisions. Plaintiff also alleges that, at
numerous points throughout the Class Period,*fn2 the Company
knew, or should have known, that the true underlying impetus of
Calpine's continued expansion was based on (1) an increase in
wholesale energy prices in the state of California stemming from
allegedly unlawful and unsustainable market manipulation, and (2)
the Company's allegedly unlawful "round-trip" energy trading
practices. The sole cause of action alleged in the Amended
Complaint is "Breach of Fiduciary Duty" and is premised on the
alleged dissemination of "Misleading, Incomplete, and Inaccurate
Information to the Plan and Plan Participants and Beneficiaries."
On June 17, 2005, the Court denied Plaintiff's Motion for
On June 28, 2005, Calpine and the Committee Defendants filed
the instant Motions to Dismiss.
A. Motion to Dismiss
Under Federal Rule of Civil Procedure 12(b)(6), a motion to
dismiss should be granted if it appears beyond a doubt that the
plaintiff "can prove no set of facts in support of his claim
which would entitle him to relief." Conley v. Gibson,
355 U.S. 41, 45-46 (1957). For purposes of such a motion, the complaint is
construed in a light most favorable to the plaintiff and all
properly pleaded factual allegations are taken as true. Jenkins
v. McKeithen, 395 U.S. 411, 421 (1969); Everest and Jennings,
Inc. v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.
1994). All reasonable inferences are to be drawn in favor of the
plaintiff. Jacobson v. Hughes Aircraft, 105 F.3d 1288, 1296
(9th Cir. 1997).
The court does not accept as true unreasonable inferences or
conclusory legal allegations cast in the form of factual
allegations. Western Mining Council v. Watt, 643 F.2d 618, 624
(9th Cir. 1981); see Miranda v. Clark County, Nev.,
279 F.3d 1102, 1106 (9th Cir. 2002) ("[C]onclusory allegations of law and
unwarranted inferences will not defeat a motion to dismiss for
failure to state a claim."); Sprewell v. Golden State Warriors,
266 F.3d 979, 987 ("Nor is the court required to accept as true
allegations that are merely conclusory, unwarranted deductions of
fact, or unreasonable inferences."), as amended by,
275 F.3d 1187 (9th Cir. 2001); McGlinchy v. Shell Chem. Co.,
845 F.2d 802, 810 (9th Cir. 1988) ("[C]onclusory allegations without more
are insufficient to defeat a motion to dismiss for failure to
state a claim."). When a complaint is dismissed for failure to state a claim,
"leave to amend should be granted unless the court determines
that the allegation of other facts consistent with the challenged
pleading could not possibly cure the deficiency." Schreiber
Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401
(9th Cir. 1986). The court should consider factors such as "the
presence or absence of undue delay, bad faith, dilatory motive,
repeated failure to cure deficiencies by previous amendments,
undue prejudice to the opposing party and futility of the
proposed amendment." Moore v. Kayport Package Express,
885 F.2d 531, 538 (9th Cir. 1989). Of these factors, prejudice to the
opposing party is the most important. See Jackson v. Bank of
Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990) (citing Zenith
Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-31
(1971)). Leave to amend is properly denied "where the amendment
would be futile." DeSoto v. Yellow Freight Sys., 957 F.2d 655,
658 (9th Cir. 1992).
ERISA § 404(a)(1)(A) and (B) sets forth a fiduciary's duties
under ERISA. It provides, in relevant part, that "a fiduciary
shall discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries . . . for the
exclusive purpose of  providing benefits to participants and
their beneficiaries  and  defraying reasonable expenses of
administering the plan; [and] with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims[.]" 29 U.S.C. § 1104(a)(1)(A) and (B).
Further, ERISA § 405(a) provides that:
In addition to any liability which he may have under
any other provisions of this part, a fiduciary with
respect to a plan shall be liable for a breach of
fiduciary responsibility of another fiduciary with
respect to the same plan in the following
(1) if he participates knowingly in, or knowingly
undertakes to conceal, an act or omission of such
other fiduciary, knowing such act or omission is a
(2) if, by his failure to comply with section
1104(a)(1) of this title in the administration of his
specific responsibilities which give rise to his
status as a fiduciary, he has enabled such other
fiduciary to commit a breach; or
(3) if he has knowledge of a breach by such other
fiduciary, unless he makes reasonable efforts under
the circumstances to remedy the breach.
29 U.S.C. § 1105(a). ANALYSIS
A. Sufficiency of the Claims Under Rule 9(b)
As a preliminary matter, both Calpine and the Committee
Defendants contend that, since the sole cause of action in
Plaintiff's Amended Complaint is premised on fraud, the Amended
Complaint must be reviewed under the more stringent pleading
requirements of Federal Rule of Civil Procedure 9(b). In
response, Plaintiff argues that Rule 9(b) is inapplicable to an
ERISA complaint alleging breach of fiduciary duty.*fn3
Rule 9(b) provides as follows:
In all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be
stated with particularity. Malice, intent, knowledge,
and other condition of mind of a person may be
Fed.R.Civ.P. 9(b). "[The Ninth Circuit] has interpreted Rule
9(b) to require that `allegations of fraud are specific enough to
give defendants notice of the particular misconduct which is
alleged to constitute the fraud charged so that they can defend
against the charge and not just deny that they have done anything
wrong.'" Neubronner v. Milken, 6 F.3d 666
, 671 (9th Cir. 1993)
(quoting Semegen v. Weidner, 780 F.2d 727
, 731 (9th Cir.
1985)). "The pleader must state the time, place, and specific
content of the false representations as well as the identities of
the parties to the misrepresentation." Schreiber Distributing
Co. v. Serv-Well Furniture Co., 806 F.2d 1393
, 1401 (9th Cir.
1986) (citing Semegen, 780 F.2d at 731).
As Calpine and the Committee Defendants point out, Ninth
Circuit precedent requires district courts to apply the
heightened pleading requirements of Rule 9(b) to all averments
of fraud regardless of whether fraud is an essential element of
the underlying cause of action. See Vess v. Ciba-Geigy Corp.
USA, 317 F.3d 1097, 1103-1105, 1108 (9th Cir. 2003) ("Where, as
here, the averments in the complaint necessarily describe fraudulent conduct, Rule 9(b) applies to those averments"). In
fact, as stated in Vess, since "[f]raud allegations may damage
a defendant's reputation regardless of the cause of action in
which they appear, . . . [they] are therefore properly subject to
Rule 9(b) in every case." Id. at 1104 (emphasis added). When
fraud is not an essential element of a claim, and the claim
includes non-fraud allegations, only the non-fraud allegations
are exempt from the pleading requirements of Rule 9(b). Id.
When particular averments of fraud are insufficiently pled under
Rule 9(b), a district court must strip those averments from the
claim and examine the remaining allegations to determine whether
they state a claim. Id. at 1105.
Here, while Plaintiff is correct that the sole cause of action
alleged in the Amended Complaint is "breach of fiduciary duty,"
it is equally true that the Amended Complaint is specifically
premised on averments of fraud. In fact, the gravamen of
Plaintiff's Amended Complaint is that Calpine and the Committee
Defendants "breached [their] fiduciary duties to the Plan by
disseminating misleading and incomplete information to Plan
participants, and failing to inform participants . . . of
material information regarding participants' investments in
Company stock." ACC at ¶ 51. As such, under Vess, this Court
must review Plaintiff's Amended Complaint under the Rule 9(b)
Applying the Rule 9(b) pleading standard, it is quite apparent
that the Amended Complaint falls considerably short of its
requirements. It is a well-settled principle that "[a]verments of
fraud must be accompanied by the `who, what, when, where, and
how' of the misconduct charged." Vess, 317 F.3d at 1106
(quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).
Further, the plaintiff "must set forth more than the neutral
facts necessary to identify the transaction. The plaintiff must
set forth what is false or misleading about the statement, and
why it is false." Id. (quoting Decker v. GlenFed, Inc. (In re
GlenFed, Inc. Sec. Litig.), 42 F.3d 1541, 1548 (9th Cir. 1994)).
All of Plaintiff's allegations regarding the dissemination of
misleading and incomplete information, the purported
"ill-conceive drive to leverage [Calpine's] stock," and Calpine's
allegedly illegal or improper "`wash' energy trades" are entirely
too vague to meet the particularity requirements of Rule 9(b).
For example, although Plaintiff's claim is based in part on misleading information
contained in certain Calpine press releases, the Amended
Complaint fails to identify the statements in the press releases
being challenged or why they were false when made. See ACC at
¶¶ 58, 63-65, 98. In fact, the only press release statements
identified in the Amended Complaint are that:
On February 2, 2001, the Company announced a "2005
operating goal of 70,000 megawatts of electric
On February 6, 2001, the Company announced that net
income "for the year ended December 31, 200 was
$324.7 million, representing a 238% increase over its
1999 net income of $96.2 million"; and
On February 28, 2001, the Company announced that it
had signed "two long-term power sales contracts with
the California Department of Water Resources
("CDWR"), totaling up to $8.3 billion in potential
See ACC at ¶¶ 64-65 (emphasis in original). With respect to
these press release statements, the Amended Complaint is devoid
of any facts showing that these statements are false or
misleading. Moreover, by utterly failing to address the press
release statements in his Opposition briefs, Plaintiff tacitly
concedes that he cannot show that these particular statements
are false or misleading.
Similarly, with respect to the purportedly false statements
contained in Calpine's 2000 Annual Report and FY00 Form
10-K,*fn5 there are no facts pled in the Amended Complaint
that demonstrate that the statements were false or misleading
when made. Instead, Plaintiff relies on the theory that the
statements are misleading because they do not clearly state that
Calpine was aware of the fact that other power generators had
engaged in "market manipulation." See ACC at ¶¶ 80, 82-83.
Plaintiff's allegations regarding the alleged market manipulation, and Calpine's alleged knowledge of it, however, are
wholly conclusory. Significantly, Plaintiff never identifies who
was engaged in the market manipulation, what type of manipulation
was allegedly occurring, or when it occurred. Instead, Plaintiff
relies on numerous non-party sources, published several years
after Calpine's purportedly false 2000 Annual Report and FY00
Form 10-K were issued, that generally discuss certain economic
studies and theories regarding the energy market. See id. at ¶¶
69-78. None of the sources specifically addresses Calpine. Id.
Plaintiff's allegations concerning Calpine's allegedly improper
"round-trip" transactions with Enron suffer from similar defects.
Although the Amended Complaint explicitly states that "Calpine . . .
improperly reported certain energy trading transactions,
which had the net effect of further artificially boosting
Calpine's apparent revenues during the Class Period," see ACC
at ¶ 89, Plaintiff does not identify any facts in support of this
allegation or any specific financial statements that are being
challenged. Further, Plaintiff does not identify any sections of
GAAP that were purportedly violated, why Calpine's accounting was
improper, or how much revenue is at issue. Instead, Plaintiff
relies on certain general statements made in a December 9, 2001
New York Times article. Since the New York Times article does
not actually definitely state that Calpine's accounting was
false, however, even construing the Amended Complaint in the
light most favorable to Plaintiff, it is entirely unclear how the
allegations in the New York Times article show that Calpine
made any false or misleading statements.*fn6
Finally, while it is true that Rule 9(b) may be "relaxed" in
some circumstances where the "evidence of fraud is within the
defendant's exclusive possession," see Wool v. Tandem Computers,
Inc., 818 F.2d 1433, 1430 (9th Cir. 1987), Plaintiff has not
demonstrated that he is entitled to this exception. Indeed, since
Plaintiff has alleged that, as a plan participant, he was the
recipient of the allegedly misleading statements, then
Plaintiff should, at the very least, be able to identify with
specificity: (1) the particular statements that Calpine and the
Committee Defendants made that were misleading; (2) the medium
used to communicate the statements; (3) when the statements were
made and by whom; and (4) how they were misleading. Indeed, this
action has been pending for nearly three years and, during that time, Plaintiff
has had access to a wide variety of publicly available
information, including Calpine's financial statements, SEC
filings, and press releases. Yet, despite the fact that Plaintiff
was specifically granted leave to amend his complaint in order to
state this claim, Plaintiff's Amended Complaint is totally
deficient. Because Plaintiff's entire action is premised on these
insufficient allegations, the Court finds that dismissal of the
Amended Complaint in its entirety is warranted.
B. Sufficiency of the Claims under Rule 8(a) and Rule
Further, as Calpine and the Committee Defendants also assert in
their Motions to Dismiss, even if the Court were to review the
Amended Complaint under the more lenient Rule 8(a) pleading
standard, the Amended Complaint still fails to state a claim.
Upon dismissal of the misrepresentation claim alleged in the
initial Consolidated Complaint, Plaintiff was granted leave to
amend only if he could allege, in good faith, that Defendants
actually made material misrepresentations about the Calpine stock
fund in their communications with the Plan participants while
acting as Plan fiduciaries. In their Motions to Dismiss, Calpine
and the Committee Defendants correctly argue that Plaintiff has
not identified a single such communication made by either Calpine
or the Committee Defendants.
First, with respect to the press releases identified in the
Amended Complaint, Calpine and the Committee Defendants argue
that the Amended Complaint does not set forth any facts
sufficient to show that the press releases were distributed to
the Plan participants by any of the Plan fiduciaries while acting
in their fiduciary capacity. Indeed, with respect to the
Committee Defendants, there is absolutely nothing alleged in the
Amended Complaint that would indicate, in any way, that the
Committee Defendants had anything to do with the issuance of
Company press releases. Further, as the district court stated in
Stein v. Smith, 270 F. Supp. 2d 157, 173 (D. Mass. 2003),
general statements made in press releases are not acts of "plan
administration." Stein, 270 F. Supp. at 173 (citing Varity v.
Howe, 516 U.S. 489 (1996)). Indeed, in Varity, the United
Supreme Court found that ERISA liability was implicated only
after finding that the defendant had "intentionally connected
its statements about [the company's] financial health to
statements it made about the future of benefits, so that its
intended communication about the security of benefits was
rendered materially misleading." Varity, 516 U.S. at 505 ("We
do not hold . . . that Varity acted as a fiduciary simply because
it made statements about its expected financial condition or
because `an ordinary business decision turn[ed] out to have an adverse impact on the plan.'").
Plaintiff has also failed to show that the allegedly misleading
SEC filings were communicated to the Plan participants by Calpine
or the Committee Defendants while acting as Plan fiduciaries.
Moreover, although Plaintiff states in his Oppositions that the
Form 10-K which is the only document alleged to contain the
purportedly misleading statements was directly provided to
the Plan participants, this fact is not actually alleged in the
Amended Complaint. In fact, the Amended Complaint only states
that the document was "directly or indirectly" disseminated to
all Calpine employees. ACC at ¶ 67 (emphasis added). This is
insufficient to state a claim under Varity. Compare with
Varity, 516 U.S. at 493 (misleading statements about company's
viability directly communicated to plan participants at special
meeting called by plan fiduciaries to persuade plan participants
to make certain changes to their employer and benefit plan).
Further, contrary to Plaintiff's current mistaken belief, this
Court did not hold, in the March 31, 2005 Order, that Plaintiff
merely had to allege that Calpine provided a Form S-8 to Plan
participants in order to sufficiently state his breach of
fiduciary duty claim. Plaintiff is still required to show that
the Form S-8 contained misleading statements and was disseminated
to the Plan participants by Defendants while they were acting in
their fiduciary capacity.*fn7 As the court stated in In re
WorldCom ERISA Litig., "[a] corporation and its board may wear
two `hats' that of employer and of ERISA fiduciary. ERISA
liability arises only from actions taken or duties breached in
the performance of ERISA obligations." In re WorldCom ERISA
Litig., 263 F.Supp.2d 745, 760 (S.D.N.Y. 2003) (emphasis added).
As such, unless Plaintiff can plead and prove that the SEC
filings were disseminated to the Plan participants in a way that
was meaningfully related to the Plan itself, the mere fact that
Calpine filed such documents is not enough to establish ERISA
liability. Id. (emphasizing that "SEC filings are documents
that directors must execute to comply with a corporation's
obligations under federal securities laws."). Indeed, other
courts considering similar allegations have also held that
corporate SEC filings and press releases are, as a matter of law,
directed at the market as a whole and not at ERISA Plan
participants. See, e.g., Crowley ex rel. Corning, Inc. Inv. Plan
v. Corning, Inc., 2004 WL 763873 (W.D.N.Y. 2004).
Nor can Plaintiff evade dismissal by relying on his theory that
Calpine or the Committee Defendants breached their fiduciary
duties by failing to provide certain information to the Plan
participants. Plaintiff's "affirmative duty to provide
information" claim was already dismissed with prejudice by this
Court in the March 31, 2005 Order. See March 31, 2005 Order at
12. Plaintiff may not reassert a theory that has already been
considered and soundly rejected as insufficient by this Court.
See, e.g., Baymiller v. Guarantee Mut. Life Co., 2000 WL
33774562 *2 (C.D. Cal. 2000) (law of the case doctrine prevents
plaintiff from pursuing claims against defendants in second
amended complaint that were asserted in the first amended
complaint and dismissed).
Finally, Plaintiff is also precluded from attempting to save
his Amended Complaint from dismissal by asserting new allegations
regarding the Committee Defendants and the fact that they were
"high-ranking corporate officers." As a matter of law, Plaintiff
cannot rely on factual allegations that are not actually
contained in the instant Amended Complaint. See Schneider v.
California Dep't of Corrections, 151 F.3d 1194, 1197 n. 1 (9th
Cir. 1998). While the Court may consider whether the allegations
would prove that further leave to amend would not be futile,
here, given the length of time that this action has been pending,
the fact that Plaintiff was provided with specific admonitions
when granted leave to amend the prior Consolidated Complaint, and
the overwhelming deficiencies of the current Amended Complaint
that have already been set forth herein, it is quite clear to the
Court that leave to amend is futile. Id. at 1197. Notably,
even if certain Committee Defendants are or were high-ranking
corporate officers, Plaintiff has not stated that he has any
additional facts that would show that any of the officers, while
acting in their fiduciary capacity, made material misstatements
to the Plan participants. Indeed, with respect to the fraudulent
accounting transactions purportedly committed by the Company,
Plaintiff has not stated that he has any additional facts that
would link such defendants to the alleged acts.
Last, since Plaintiff has failed to establish that either
Calpine or the Committee Defendants have breached their fiduciary
duties, Plaintiff's claim of "co-fiduciary liability" necessarily
fails. As such, the entire Amended Complaint is subject to
dismissal. Accordingly, since Plaintiff has failed to state a
claim under any cause of action alleged in the Amended Complaint,
the Court finds that the parties' dispute regarding the propriety of Plaintiff's requested relief is moot.
C. Dismissal with Prejudice
As a final matter, the Court also concludes that dismissal with
prejudice is warranted. First, this case has been pending for
nearly three years and is premised on conduct that occurred
almost five years ago. Second, the Court held an exhaustive
three-hour long hearing on the prior motions to dismiss and
therefore Plaintiff was given ample notice with regard to the
deficiencies of his pleadings. Despite this fact, Plaintiff has
not identified a single valid reason why he has been unable to
file an Amended Complaint that complies with the Court's March
31, 2005 Order. Indeed, even though Plaintiff was directed to
file his Amended Complaint within thirty days of the March 31,
2005 Order, he requested and was granted an additional sixty
days to file his Amended Complaint. Due to the significant amount
of time that has passed since this action was initially filed,
and the numerous opportunities Plaintiff has been granted to cure
the defects in his pleadings, the state of Plaintiff's current
Amended Complaint is simply inexcusable. Further, Plaintiff has
not identified any facts that he could add to his Amended
Complaint that would lead this Court to believe that further
leave to amend would be fruitful.
IT IS HEREBY ORDERED THAT Calpine's Motion to Dismiss
Plaintiff's Amended Consolidated Complaint [Docket No. 106] is
IT IS FURTHER ORDERED THAT the Committee Defendants' Motion to
Dismiss the Consolidated Complaint [Docket No. 110] is GRANTED.
IT IS FURTHER ORDERED THAT Defendants' Request for Judicial
Notice [Docket No. 108] is GRANTED.
IT IS FURTHER ORDERED THAT Plaintiff's Corrected Amended
Consolidated Complaint [Docket No. 101] is DISMISSED WITH
PREJUDICE. The Clerk is directed to close the file and to
terminate any pending matters.
IT IS SO ORDERED.
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