The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
ORDER: (1) GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT; [Doc. No. 122] (2) DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT; [Doc. No. 139] (3) GRANTING IN PART AND DENYING IN PART DEFENDANTS' FIRST MOTION TO STRIKE; [Doc. No. 143] (4) GRANTING IN PART AND DENYING IN PART DEFENDANTS' SECOND MOTION TO STRIKE [Doc. No. 150].
Presently before the Court are: (1) a motion for summary judgment on all of plaintiffs' claims, filed by defendants Paul Bannock ("Bannock") and Hartford Life and Annuity Insurance Company ("Hartford") (collectively "defendants"); (2) a motion for summary judgment on plaintiffs' claim for rescission, filed by plaintiffs; (3) a motion to strike the evidence in support of plaintiffs' motion for summary judgment, filed by defendants; and (4) a motion to strike the evidence in support of plaintiffs' opposition to defendants' motion for summary judgment, filed by defendants. For the following reasons, the Court (1) grants defendants' motion for summary judgment; (2) denies plaintiffs' motion for summary judgment; (3) grants in part and denies in part defendants' first motion to strike; and (4) grants in part and denies in part defendants' second motion to strike.
The following facts are undisputed. Omni Home Financing, Inc. ("Omni") is a California corporation and employer sponsor of the Omni Home Financing, Inc. 412(i) Defined Benefit Plan ("the Plan"). Omni is a residential mortgage brokerage firm. Plaintiffs Anthony Gaglione, Keith Murphy, and David Bancroft are principal employees of Omni and individual participants in the Plan.
Omni's accountant, Richard Goldberg, advised Omni to look into creating a retirement plan after Omni's financial success in 2003. The Omni principals attended a half-hour meeting with two representatives from a company called Financial Coach in early 2004 and discussed retirement plans. The Omni principals then contacted Anthony Gaglione's brother, Andrew Gaglione, to discuss further their retirement plan options. Andrew Gaglione is a financial advisor employed by Citigroup who worked with the Omni principals in their personal investments. Andrew Gaglione referred Omni to Paul Bannock, to further discuss implementing a retirement plan for Omni.*fn1
Bannock is a Hartford "account executive" who markets Hartford insurance products, including insurance products for 412(i) plans. Bannock had previously assisted other financial advisors with the sale of insurance to 412(i) plans. At Bannock's first meeting with the Omni principals, he asked them questions about the company. He put this information into a "Plan Design Guide," which he gave to Benefit Systems, Inc. ("BSI"), a plan administrator. BSI used the information to create a proposal for Omni's 412(i) plan using Hartford insurance products.
Bannock and Andrew Gaglione presented the proposal at two meetings with the Omni principals. The proposal included statements that Omni's contributions to the Plan would be tax deductible.
At these meetings, Bannock gave Anthony Gaglione documents to sign as the trustee of the Plan. These documents included statements that Bannock and Hartford were not providing tax and legal advice and that Omni should seek such advice from its tax and legal advisors. The documents also included information about the treatment of 412(i) plans by the Internal Revenue Service ("IRS").
The Omni principals then decided how much to contribute to the Plan, and BSI created the final plan documents. Omni adopted the Plan in December of 2003, to be effective January 1, 2003. Hartford issued insurance policies to the Plan. Bannock and Andrew Gaglione both received commissions from Hartford for the sale of insurance products to the Plan.
Omni took deductions on its 2003 and 2004 income tax returns in the amount of $420,000 contributed to the Plan in 2004 and 2005. The IRS audited the Plan's return and determined the Plan did not comply with several of the requirements for qualified plans. The IRS therefore disallowed Omni's deductions for amounts contributed to the Plan.
On April 21, 2006, plaintiffs filed their complaint, stating multiple causes of action under the Employee Retirement Income Security Act ("ERISA") and state law. (Doc. No. 1.) The complaint named Bannock, Hartford, and BSI as defendants. On July 6, 2006, plaintiffs filed a First Amended Complaint ("FAC"), adding Citigroup Global Markets, Inc. ("Citigroup") and Andrew Gaglione as defendants. (Doc. No. 13.) On September 25, 2006, the Court granted in part and denied in part defendants' motion to dismiss the complaint, and granted leave to amend certain claims. (Doc. No. 46.) Plaintiffs did not file a second amended complaint. On November 7, 2006, and November 8, 2006, the Court granted in part and denied in part motions to compel arbitration on behalf of BSI and Citigroup. (Doc. Nos. 54 & 55.)
Plaintiffs' surviving FAC states four causes of action: (1) rescission and unwinding of all transactions and restoration of all amounts paid by plaintiffs to defendants, in violation of ERISA; (2) breach of fiduciary duty, fraud, and misrepresentation, in violation of ERISA; (3) pre-Plan negligent misrepresentation; and (4) pre-Plan fraud, deceit, concealment, misrepresentation, and fraudulent acts by agents, in violation of the California Civil Code.
On June 16, 2007, the Court granted the parties' joint motion to dismiss defendant Andrew Gaglione. (Doc. No. 71.) On November 5, 2007, the Court approved plaintiffs' settlements with BSI and Citigroup. (Doc. No. 110.) On November 14, 2007, the Court granted the parties' joint motion for dismissal of these two defendants. (Doc. No. 115.) Bannock and Hartford are the only remaining defendants.
On December 27, 2007, Magistrate Judge Jan M. Adler denied plaintiffs' motion to amend or withdraw certain admissions. (Doc. No. 123.) Plaintiffs' late responses to Defendants' requests for admissions were stricken and the matters deemed admitted. (Id.)
On December 13, 2007, defendants filed a motion for summary judgment. (Doc. No. 122.) On January 17, 2008, the Court granted the parties' joint motion to postpone the hearing date on defendants' motion for summary judgment until April 14, 2008. (Doc. No. 130.) On March 12, 2008, plaintiffs filed a cross-motion for summary judgment. (Doc. No. 139.) On March 24, 2008, plaintiffs opposed defendants' motion for summary judgment. (Doc. No. 142.) On March 31, 2008, defendants filed a motion to strike plaintiffs' summary judgment evidence (the "first motion to strike"). (Doc. No. 143.) Defendants filed an opposition to plaintiffs' motion for summary judgment on March 31, 2008 (Doc. No. 145), and on April 7, 2008, plaintiffs filed a reply. (Doc. No. 149.) Defendants also filed a reply in support of their motion for summary judgment on April 7, 2008 (Doc. No. 148), and a motion to strike the evidence in support of plaintiffs' opposition to defendants' motion for summary judgment (the "second motion to strike") (Doc. No. 150). Plaintiffs opposed defendants' motion to strike on April 7, 2008. (Doc. No. 151.) On April 11, 2008, defendants filed replies in support of each motion to strike. (Doc. Nos. 152 & 153.) The Court heard oral argument on the cross-motions for summary judgment at 10:30 a.m. on April 14, 2008. Marc Schechter and Susan Meter appeared on behalf of the plaintiffs. David Jones and Jessica Spangler Taylor appeared on behalf of the defendants.
Summary judgment is proper where the pleadings and materials demonstrate "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material issue of fact is a question the trier of fact must answer to determine the rights of the parties under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. Summary judgment may be granted in favor of a defendant on an ultimate issue of fact where the defendant carries its burden of "pointing out to the district ...