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Money Matters Management v. Niche Marketing

October 19, 2007

MONEY MATTERS MANAGEMENT, A CALIFORNIA CORPORATION, ET AL., PLAINTIFFS,
v.
NICHE MARKETING, INC., A CALIFORNIA CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER DENYING MOTION TO DISMISS COUNTERCLAIM PURSUANT TO FED. R. CIV. P. 12(b)(1) AND GRANTING MOTION TO DISMISS COUNTERCLAIM PURSUANT TO FED. R. CIV. P. 12(b)(6)

[Doc. No. 51]

Presently before the court is Money Matters Management, Inc., and Myles Hubers' motion to dismiss Erik Sussman's counterclaim under Rule 12(b)(1), for lack of subject matter jurisdiction, and Rule 12(b)(6), for lack of capacity and real party in interest. For the following reasons, the court denies the motion under Rule 12(b)(1), and grants the motion to dismiss the counterclaim under Rule 12(b)(6).

BACKGROUND

Factual Background

Plaintiffs in the instant case have filed claims under ERISA and associated pendent/supplemental state claims (hereinafter "the ERISA case"). Plaintiffs include Myles Hubers, an individual residing in California, and Money Matters Management, Inc., a California corporation ("Money Matters"). (Doc. No. 35, First Amended Complaint ¶¶ 10 & 11.) Defendants include Erik Sussman, an individual residing in Florida. (Id. ¶ 16.) Plaintiffs allege "fraud and concealment, false inducement, and breach of common law fiduciary duties" by defendants "in connection with the pre-plan promotion and marketing of the plan and insurance coverage." (Id. ¶ 1.) Plaintiff Money Matters adopted the plan effective December 18, 2004. (Id.) Plaintiffs purchased the plan from defendants believing it would allow them to take substantial income tax deductions for amounts contributed to the plan. (Id. ¶ 22.) Defendants allegedly received commissions on the sale of the insurance policies which violated their fiduciary duties. (Id. ¶¶ 49-55.) Moreover, plaintiffs allege defendants negligently or fraudulently failed to disclose the true tax consequences and liabilities of the plan. (Id. ¶¶ 90-116.)

Defendant Sussman filed a counterclaim August 3, 2007 (Doc. No. 43), followed by an amended counterclaim on August 24, 2007 (Doc No. 47) (hereinafter "counterclaim"). The counterclaim alleges breach of contract by Hubers and Money Matters (hereinafter "counterdefendants"), and fraud by Money Matters, relating to a marketing agreement which Sussman and Hubers signed in March of 2005. (Counterclaim, Ex. A.) Under the terms of the agreement, Mortgage Loan Specialists, Inc. was to refer clients to Choice Financial Professionals, Inc., in exchange for a monthly payment. (Counterclaim ¶¶ 2 & 5.) Sussman signed the contract under the line for Choice Financial Professionals, as president of that company. (Id., Ex. A.) Under the line for Mortgage Lending Services, Inc., Hubers signed as president. (Id.) Sussman alleges no referrals have been made under the contract, despite his having paid $350,000 as advance payment for 14 months of marketing fees. (Counterclaim ¶¶ 6 & 8.) Moreover, Sussman claims Money Matters had no intention of providing referrals at the time the agreement was made. (Id. ¶ 11.)

Procedural Background

Sussman filed his amended counterclaim on August 24, 2007. Counterdefendants filed the instant motion on September 10, 2007. (Doc. No. 51.) On October 1, 2007, counterclaimant filed his opposition to the motion, (Doc. No. 53) and on October 5, 2007, counterdefendants filed their reply (Doc. No. 54). The court finds the matter is now fully briefed and amenable for disposition without oral argument pursuant to Local Rule 71.1(b).

DISCUSSION

Subject Matter Jurisdiction

1. Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) tests the subject matter jurisdiction of the court, as the federal courts are courts of limited subject matter jurisdiction. See, e.g., Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039-40 (9th Cir. 2003). Consequently, it is presumed that jurisdiction lies outside this court and the plaintiff bears the burden of establishing the propriety of the court's jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

A motion to dismiss under Rule 12(b)(1) can be either "factual" or "facial." Thornhill Pub. Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979); 2 Moore's Federal Practice § 12.30 (2004). If the defendant brings a facial attack, arguing that the allegations in the complaint are insufficient to demonstrate the existence of jurisdiction, the Court's inquiry is much the same as when ruling on a motion brought under Rule 12(b)(6). Moore's Federal Practice § 12.30. Specifically, the Court must assume that the factual allegations in the complaint are true and construe them in the light most favorable to the plaintiff. Miranda v. Reno, 238 F.3d 1156, 1157 n.1 (9th Cir. 2000), cert. denied, 534 U.S. 1018 (2001); Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989). A Rule 12(b)(1) motion will be granted if the ...


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