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Schafler v. Bank of America Merrill Lynch

United States District Court, N.D. California

August 8, 2014

PEPI SCHAFLER, Plaintiff,
v.
BANK OF AMERICA MERRILL LYNCH, Defendant.

ORDER

PHYLLIS J. HAMILTON, District Judge.

Before the court is the motion of defendant Bank of America Merrill Lynch to dismiss the above-entitled action pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, the court hereby GRANTS the motion.

INTRODUCTION

Plaintiff Pepi Schafler filed this action on April 23, 2014, against defendant Bank of America Merrill Lynch, alleging two causes of action for breach of fiduciary duty and two causes of action for negligence.

In the complaint, plaintiff alleges that she moved to California in 1999. Cplt ¶ 4. She claims that her former husband fabricated a story that she had concealed assets in a bankruptcy filing in Maryland, and "partnered with two San Francisco attorneys" - Dennis Davis and Richard Spear - to pressure the Bankruptcy Court in the Northern District of California to grant them access to her retirement funds. See Cplt ¶¶ 6-10. According to plaintiff, the Bankruptcy Court ordered her to "surrender her retirement assets" (in the form of securities) to the court, and designated Mr. Spear and Mr. Davis as "bailees for this property to hold it until a full proceeding will be held and decisions made." Cplt ¶¶ 11-14.

Plaintiff asserts that on June 30, 2000, her attorney delivered "the demanded securities" to the Bankruptcy Court, whereupon Mr. Davis "deposited" the "securities" with Merrill Lynch (which is now owned by Bank of America) in two accounts, and "ignored" plaintiff's right and title to the securities. Cplt ¶¶ 15-17. She claims that the value of the securities on that date was $429, 645, and that the securities that were delivered included 1300 shares of Disney, 250 shares of AT&T, 600 shares of McDonald's, 400 shares of Coca Cola, 100 shares of Chevron, 100 shares of Eli Lily, 2120 shares of AOL, 800 shares of GE, 337 shares of Symbol Tech, 562 shares of Cardinal Health, 720 shares of Microsoft, 256 shares of Lucent Tech, 200 shares of Biogen, 125 shares of Dell, and 200 shares of Amazon.

Plaintiff alleges that a hearing was scheduled for April 25, 2001 "to decide the future of these securities and other somewhat bizarre issues." Cplt ¶ 19. She claims that she later learned that Mr. Davis "came to the hearing with prepared, fabricated, orders, and the court[]s signature forged." Cplt ¶ 21. Ten minutes after the conclusion of "the hearing, " Mr. Davis allegedly "filed the forged order in the clerk[]s office" and then "presented the forged order" to Bank of America Merrill Lynch, "asking them to liquidate the securities and turn them into cash, " which the bank did. Cplt ¶¶ 22-23. She claims that Mr. Davis "promptly pocketed several hundred thousand dollars." Cplt ¶ 23.

Plaintiff alleges that a pursuit "for these stolen and converted assets" ensued. She refers to an appeal filed with the Ninth Circuit BAP, at which she did not evidently prevail, and a petition for certiorari filed with the United States Supreme Court, which was denied. Cplt ¶ 25. She asserts that "[f]inding out that it was a conspiracy and a criminal act by Mr. Davis and Bank of America Merill Lynch Inv. that deprived [p]laintiff of her funds is shocking and outrageous." Cplt ¶ 25. She claims that "[l]ong after the embezzlement and theft of her securities, " she was "informed by a federal district judge of this theft, fraud, forgery, conversion and conspiracy by Mr. Davis." Cplt ¶ 26.

Plaintiff alleges four causes of action. In the first cause of action, she asserts that defendant Bank of America Merrill Lynch "retitled" her property (the securities), which breached the "clear obligations of a fiduciary institution to respect property ownership." In the second cause of action, she alleges that defendant "through gross unforgiveable negligence" accepted an order from Mr. Davis "with a forged judicial signature" and "quickly liquidated and converted [p]laintiff[]s assets." In the third cause of action, plaintiff asserts that defendant "through gross unforgiveable reckless negligence" accepted "several home made, self fabricated orders" from Mr. Davis, with a "forged judicial signature, " and "handed over to the forger-extortionist several hundred thousand dollars of [p]laintiff[]s stolen and converted funds calling them fees.'" In the fourth cause of action, plaintiff alleges that defendant breached its fiduciary duty by failing to "notify [p]laintiff of the fate of her property." The court interprets the first and fourth causes of action as asserting claims of breach of fiduciary duty, and the second and third causes of action as asserting claims of negligence.

FACTUAL AND PROCEDURAL BACKGROUND

The following facts are based on court records, including clerk's dockets and orders issued by the Bankruptcy Court, the U.S. District Court, the Ninth Circuit, and the United States Supreme Court, in actions involving Pepi Schafler, plaintiff in the above-entitled action. The court takes judicial notice of these facts. Fed.R.Evid. 201(b); see 21B Wright, et al., Fed. Prac. & Proc. Evid. (2d ed) § 5106.4 (2014).

On March 6, 1996, Ms. Schafler filed a chapter 7 petition in the Bankruptcy Court for the District of Maryland. See In re Schafler, 96-12203 (Bankr. D. Md). She listed the following assets in Schedule B - Personal Property: "Trustee of trust, the beneficiaries of whom are debtor's adult children. Debtor interest: 1.00. Location: In debtor possession." See In re Schafler ( Spear v. Schafler) , 263 B.R. 296, 298 (N.D. Cal. 2001). She also attached a Statement of Financial Affairs, in which she stated that she had not transferred any property "within one year immediately preceding the commencement of this case." Id . On July 9, 1996, the Bankruptcy Court entered a Discharge Order, closing the case. Id.

Approximately two years after the case was closed, the Trustee, Scott D. Field, moved to reopen the case to allow investigation and pursuit of recovery of estate assets that may have been undisclosed. The Bankruptcy Court granted the motion and the case was reopened on May 7, 1998. In early 1999, Ms. Schafler moved to California to care for a terminally ill brother. On March 12, 1999, pursuant to Ms. Schafler's request, the case was transferred to the Bankruptcy Court for the Northern District of California. In re Schafler, 99-42138 (Bankr. N.D. Cal.).

Successor Trustee Richard Spear, who was appointed when the case was transferred, sought and obtained approval to retain attorney Dennis D. Davis (and Davis' law firm - Stinnett, Meyers & Davis) to represent him as needed in connection with matters related to the Schafler bankruptcy. On May 5, 1999, the Trustee, initiated an adversary proceeding, seeking to recover undisclosed assets. Spear v. Schafler , 99-4231 (Bankr. N.D. Cal.).

On November 3, 1999, the Trustee filed an amended complaint in the adversary proceeding, seeking a declaration that certain assets, namely stock certificates and bonds held in trust and a condominium held by the above-referenced trust (the "Max Family Trust") were property of the bankruptcy estate. He alleged that the Max Family Trust was a sham, and that Ms. Schafler had transferred her assets for no consideration into the trust before filing for ...


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