Lindie L. Banks, individually and on behalf of all others similarly situated; Erica LeBlanc, Plaintiffs-Appellants,
Northern Trust Corporation; Northern Trust Company, Defendants-Appellees.
and Submitted May 15, 2019 Pasadena, California
from the United States District Court for the Central
District of California No. 2:16-cv-09141-JFW-JC John F.
Walter, District Judge, Presiding
J. Malloy (argued) and Thomas J. Brandi, The Brandi Law Firm,
San Francisco, California; Derek G. Howard, Derek G. Howard
Law Firm, Mill Valley, California; for Plaintiffs-Appellants.
C. Martin (argued), Brienne M. Letourneau, Amanda S. Amert,
Daniel J. Weiss, and Craig C. Martin, Jenner & Block LLP,
Chicago, Illinois; for Defendants-Appellees.
Before: Jacqueline H. Nguyen and John B. Owens, Circuit
Judges, and John Antoon II, [*] District Judge.
Litigation Uniform Standards Act of 1998
panel reversed the district court's dismissal, as barred
by the Securities Litigation Uniform Standards Act of 1998
("SLUSA"), of a putative class action brought
against Northern Trust alleging violations of state law
involving breaches of fiduciary duty by a trustee.
deprives a federal court of jurisdiction to hear certain
state-law class actions.
panel held that SLUSA did not preclude plaintiffs'
imprudent investment claims. Specifically, the panel held
that SLUSA's "in connection" requirement did
not preclude claims brought by an irrevocable trust
beneficiary - who has no control over the trustee - alleging
imprudent investments by that trustee. Here, the district
court's dismissal relied entirely on its conclusion that
Northern was an agent of the trusts' beneficiaries, a
conclusion unsupported by the moving papers and First Amended
panel held that the district court erred in dismissing
plaintiffs' fee-related tax preparation and overcharging
claims on SLUSA-preclusion grounds. The panel also held that
plaintiffs' fee-related claims survive a Fed.R.Civ.P.
12(b)(6) motion to dismiss.
the panel held that because plaintiffs' elder abuse
claims and the claims against Northern's corporate parent
were not precluded by SLUSA, and because the briefing
provided no other basis for dismissal, the dismissal of those
claims were reversed.
Banks and her daughter Erica LeBlanc ("Banks"),
hoping to represent a class of plaintiffs, appeal from the
dismissal of their putative class action lawsuit against
Northern Trust Company and Northern Trust Corporation
("Northern") for violations of state law involving
breaches of fiduciary duty by a trustee. The district court
interpreted the Securities Litigation Uniform Standards Act
of 1998 ("SLUSA") to bar the case from proceeding
in federal court. We have jurisdiction under 28 U.S.C. §
1291, and we reverse and remand.
FACTUAL AND PROCEDURAL BACKGROUND
is the beneficiary of the irrevocable Lindstrom Trust,
created under California law. As trustee, Northern has sole
discretion on how to manage the trust's assets; Banks
cannot participate in, direct, or be involved in those
to the First Amended Complaint ("FAC"), Northern
invested the trust's assets in Northern's own
affiliated "Funds Portfolio," rather than seeking
superior investments outside its financial umbrella. This
practice allegedly led to the trust suffering suboptimal
returns, which would not have happened if Northern
prioritized the interests of the trust beneficiaries (and not
merely its own). Banks argues that favoring these inferior
affiliated funds - over better-performing non-Northern funds
- put money in the pockets of Northern, which thereby
violated its duties of prudent investment and loyalty to
also alleges that Northern, as part of an "undisclosed
internal decision to create a new profit center,"
charged improper and excessive fees for "routine
preparation of fiduciary tax returns" and failed to
maintain records to justify these expenses. These new fees,
which previously were "part of the base fee and a
fundamental duty for a trustee," allegedly breached
Northern's duty of prudent administration.
addition, the FAC alleges elder abuse and unfair competition
claims under California law, both premised on the same
factual allegations underlying the investment and fee-related
filed a Rule 12(b)(6) motion to dismiss, contending that
SLUSA prohibited these state-law claims from proceeding in
federal court. Over Banks' objection, the district court
agreed with Northern and dismissed the FAC without leave to
amend. The court reasoned that the allegedly imprudent
investments were in connection with the purchase or sale of
covered securities and featured material misrepresentations
or omissions. The court concluded that SLUSA precluded Banks
from bringing state-law fiduciary duty claims as a class
action in federal court.
district court dismissed the fee, elder law, and unfair
competition claims without directly addressing them.
Northern moved to dismiss for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6), the parties now
agree that Rule 12(b)(1) - lack of subject matter
jurisdiction - is the proper rule to challenge a complaint
under SLUSA. See Hampton v. Pac. Inv. Mgmt. Co., 869
F.3d 844, 846-47 (9th Cir. 2017) (holding that Rule 12(b)(1),
and not Rule 12(b)(6), governs SLUSA motions to dismiss).
review de novo whether the district court should have
dismissed this case under Rule 12(b)(1). See U.S. ex rel.
Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121, 1126
(9th Cir. 2015) (en banc).
SLUSA does not preclude Banks' imprudent ...