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Page v. Impac Mortgage Holdings

March 31, 2009

SHARON PAGE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
IMPAC MORTGAGE HOLDINGS, INC., JOSEPH R. TOMKINSON, WILLIAM S. ASHMORE, JAMES WALSH, FRANK P. FILIPPS, STEPHAN R. PEERS, WILLIAM E. ROSE, LEIGH J. ABRAMS, GRETCHEN D. VERDUGO, SHERALEE URBANO, THE IMPAC MORTGAGE HOLDINGS, INC., EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE, AND DOES 1-20, DEFENDANTS.



The opinion of the court was delivered by: Andrew J. Guilford United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS UNDER FEDERAL RULE OF CIVIL PROCEDURE 12(b)(1) AND 12(b)(6)

Before the Court are the Motions of Defendant Impac Mortgage Holdings, Inc. ("Defendant Impac") and Defendants Joseph R. Tomkinson, William S. Ashmore, James Walsh, Frank P. Filipps, Stephan R. Peers, William E. Rose, Leigh J. Abrams, Gretchen D. Verdugo, Sheralee Urbano, ("Individual Defendants") to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim ("Motions"). After considering all arguments presented by the parties, the Court GRANTS in part and DENIES in part the Motions.

BACKGROUND

According to the pleadings in this case, Defendant Impac is a mortgage real estate investment trust. From May 2006 to the present, Defendant Impac operated a 401(k) Savings Plan ("Plan"). Defendant Impac allowed Plan participants to invest in Defendant Impac's common stock as one of the investment alternatives in the Participant Contribution Component of the Plan.

Plaintiff Sharon Page ("Plaintiff") is a former employee of Defendant Impac and was a participant in the Plan. She claims that the investments in Defendant Impac's common stock led to substantial losses to the Plan and have resulted in the depletion of millions of dollars from the Plan's participants. (First Amended Complaint ¶¶ 4-5.) Plaintiff alleges that Defendants knew that Defendant Impac's common stock was not a good investment, but maintained it as an investment option and failed to inform Plan participants of the relevant facts. Plaintiff brings this action on behalf of the Plan and as a class action.

Plaintiffs' First Amended Complaint ("FAC") seeks relief for: (1) Imprudent Investment of Plan Assets; (2) Deception of the Plan's Participants; (3) Breach of the Duty to Properly Appoint, Mentor, and Inform Other Fiduciaries; (4) Breaches of the Duty of Loyalty; and (5) Co-Fiduciary Liability.

LEGAL STANDARD

Acomplaint must be dismissed when a plaintiff's allegations fail to state a claim upon which relief can be granted. Fed R. Civ. P. 12(b)(6). Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed R. Civ. P. 8(a)(2). "Ordinary pleading rules are not meant to impose a great burden upon a plaintiff." Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005). "Specific facts are not necessary; the statement need only 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) (per curiam) (quoting Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007)). Thus, a complaint may not be dismissed for failure to state a claim where the allegations plausibly show "that the pleader is entitled to relief." Bell Atlantic, 127 S.Ct. at 1965. Conversely, a complaint should be dismissed for failure to state a claim where the factual allegations do not raise the "right of relief above the speculative level." Id.

The Court must accept as true all factual allegations in the complaint and must draw all reasonable inferences from those allegations, construing the complaint in the light most favorable to the plaintiff. Westland Water Dist. v. Firebaugh Canal, 10 F.3d 667, 670 (9th Cir. 1993); see also Enesco Corp v. Price/Costco, Inc., 146 F.3d 1083, 1085 (9th Cir. 1988). "The court need not, however, accept as true allegations that contradict matters properly subject to judicial notice or by exhibit." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001) (citing Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994)). "Nor is the court required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Id.

Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies of the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir. 1996)); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000); Polich v. Burlington N., Inc., 942 F.2d 1467, 1472 (9th Cir. 1991).

ANALYSIS

1. PRELIMINARY MATTER

Defendants have requested that the Court take judicial notice of three documents referenced and relied on in the FAC. Plaintiff has not objected to this request. Accordingly, the Court takes judicial notice of (1) the Impac Companies 401(k) Savings Plan, as amended and restated, effective January 24, 2001; (2) the Summary Plan Description; and (3) Defendant Impac's Form 11-K for 2007 filed with the Securities and Exchange Commission ("SEC") on October 15, 2007.

2. WHETHER PLAINTIFF HAS STANDING TO BRING THIS CLAIM

Plaintiff resigned as an employee of Defendant Impac on June 12, 2006 and received a full distribution of her benefits under the Plan on January 23, 2007. (Defendant Impac's Motion 4:2-8.) She did not bring her claim against Defendants until December 17, 2007. Because Plaintiff had already "cashed out" of her benefit plan before bringing suit, Defendants argued in their initial briefing on these Motions that Plaintiff lacked standing under the Employee Retirement Income Security Act ("ERISA") to bring her claims.

ERISA provides that only the Secretary of Labor or a "fiduciary," "participant," or "beneficiary" of a retirement plan may sue for relief under ERISA. 29 U.S.C. § 1132(a). If a plaintiff is not one of those persons when she files her complaint, she lacks standing to sue under ERISA, and federal courts lack subject matter jurisdiction to hear her case. Curtis v. Nevada Bonding Corp., 53 F.3d 1023, 1026 (9th Cir. 1995). Plaintiff argues that she was a participant of the Plan when she filed her complaint. In their initial briefing on these Motions, Defendants argued that Plaintiff was no longer a "participant" when she filed her complaint.

In September 2008, after briefing on these Motions was completed, the Ninth Circuit addressed the standing issue directly in Vaughn v. Bay Environmental Management, Inc., 544 F.3d 1008 (9th Cir. Sept. 19, 2008). In Vaughn, the Ninth Circuit concluded that: former employees who have received a full distribution of their account balances under a defined contribution pension plan have standing as plan participants under ERISA to recover losses occasioned by a breach of fiduciary duty that allegedly reduced the amount of their benefits.

Vaughn, 544 F.3d at 1016. The court explained that the holding was necessary to "maintain[] consistency among the circuits" and to "give effect to one of the primary goals of ERISA, preventing the misuse and mismanagement of plan assets by fiduciaries." Id. (internal quotation and citations omitted). Defendants now concede that "[u]nder the Vaughn holding, Plaintiff likely ...


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