Free Reply Memorandum - District Court of California - California

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NICOLLE L. JACOBY (admitted pro hac vice) [email protected] DECHERT LLP 30 Rockefeller Plaza New York, NY 10112-2200 Telephone: 212.698.3500 Facsimile: 212.698.3599 H. JOSEPH ESCHER III (No. 85551) [email protected] FRANCE JAFFE (No. 217471) [email protected] DECHERT LLP One Maritime Plaza Suite 2300 San Francisco, CA 94111-3513 Telephone: 415.262.4500 Facsimile: 415.262.4555 Attorneys for Defendants AIG MATCHED FUNDING CORP., AIG FINANCIAL SECURITIES CORP., AIG FINANCIAL PRODUCTS CORP., AMERICAN INTERNATIONAL GROUP, INC., and BANQUE AIG

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

RICHARD T. THIERIOT, an individual, Plaintiff, v. AIG MATCHED FUNDING CORP., AIG FINANCIAL SECURITIES CORP., AIG FINANCIAL PRODUCTS CORP., AMERICAN INTERNATIONAL GROUP, INC., BANQUE AIG, and DOES ONE THROUGH THIRTY, inclusive, Defendants.

Case No. C-07-05069 JW RS Action Filed: October 2, 2007 REPLY MEMORANDUM IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS AND STRIKE (Fed. R. Civ. P. 9(b), 12(b)(6), 12(f)) Date: Time: Dep't: Judge: April 7, 2008 9:00 a.m. Courtroom 8, 4th Floor Honorable James Ware

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1 TABLE OF CONTENTS 2 Page 3 INTRODUCTION .......................................................................................................................... 1 4 ARGUMENT .................................................................................................................................. 1 5 I. 6 7 8 III. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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PLAINTIFF ADMITS HIS PLEADINGS ARE INSUFFICIENT TO INVOKE THE APPLICATION OF THE "DISCOVERY RULE."....................... 1 THE WRITTEN CONTRACTUAL DISCLOSURES AGREED TO BY PLAINTIFF BAR HIS CLAIMS. ........................................................................... 9 PLAINTIFF HAS NOT MET THE PARTICULARITY REQUIREMENTS OF RULE 9(b). ..................................................................................................... 11 PLAINTIFF'S CLAIM FOR UNJUST ENRICHMENT FAILS BECAUSE HE HAS NOT ALLEGED ANY FACTS SUFFICIENT TO RESCIND THE CONTRACTS. ............................................................................................. 12 PLAINTIFF'S UCL CLAIM FAILS. ................................................................... 13 PLAINTIFF WAIVED HIS RIGHT TO JURY TRIAL....................................... 14

II.

IV.

V. VI.

CONCLUSION ............................................................................................................................. 15

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TABLE OF AUTHORITIES Page Cases 131 Main Street Assocs. v. Manko, 897 F. Supp. 1507 (S.D.N.Y. 1995)............................................................................................. 8 131 Main Street Assocs. v. Manko, 179 F. Supp. 2d 339 (S.D.N.Y. 2002).................................................................................. 2, 3, 5 Acebey v. Shearson Lehman Bros., Inc., No. CV 92-5926-WMB, 1993 U.S. Dist. LEXIS 19659 (C.D. Cal. June 4, 1993) ..................... 2 Applied Elastometrics, Inc. v. Z-Man Fishing Prods., Inc., 521 F. Supp. 2d 1031 (N.D. Cal. 2007) ..................................................................................... 14 Bennett v. Hibernia Bank, 47 Cal. 2d 540 (1956) .................................................................................................................. 2 Brumbaugh v. Princeton Partners, 985 F.2d 157 (4th Cir. 1993).................................................................................................... 5, 6 Cardonet, Inc. v. IBM Corp., No. C-06-06637 RMW, 2007 U.S. Dist. LEXIS 14519 (N.D. Cal. Feb. 14, 2007) .................... 9 Conwill v. Arthur Andersen LLP, 12 Misc.3d 1171(A), 2006 N.Y. Misc. LEXIS 1527 (Sup. Ct. N.Y. Cty. 2006)....................... 10 DeMarco v. Lehman Bros. Inc., 309 F. Supp. 2d 631 (S.D.N.Y. 2004).......................................................................................... 3 Dodds v. Cigna Sec., Inc., 12 F.3d 346 (2d Cir. 1993)........................................................................................................... 5 Dunkin v. Boskey, 82 Cal. App. 4th 171 (2000) ...................................................................................................... 13 Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797 (2005) ................................................................................................. 2, 4, 5, 7, 8 Hodge v. Superior Court, 145 Cal. App. 4th 278 (2006) .............................................................................................. 14, 15 Huskinson & Brown, LLP v. Wolf, 32 Cal. 4th 453, 463 (2004) ....................................................................................................... 13 Interactive Multimedia Artists v. Superior Court, 62 Cal. App. 4th 1546 (1998) .................................................................................................... 14 Karl Storz Endoscopy-America, Inc. v. Surgical Techs., Inc., 285 F.3d 848 (9th Cir. 2002)...................................................................................................... 14

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Katz v. Zuckerman, 481 N.Y.S. 2d 271 (Sup. Ct. Queens Cty. 1984) ....................................................................... 12 McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784 (2008) .................................................................................................... 10 McKeown v. First Interstate Bank, 194 Cal. App. 3d 1225 (1987)...................................................................................................... 7 Medimatch, Inc. v. Lucent Techs., Inc., 120 F. Supp. 2d 842 (N.D. Cal. 2000) ....................................................................................... 14 Merrill Lynch & Co. v. Allegheny Energy, Inc., 382 F. Supp. 2d 411 (S.D.N.Y. 2003)........................................................................................ 10 Mirman v. Berk & Michaels, P.C., No. 91 Civ. 8606 (JFK), 1992 U.S. Dist. LEXIS 16707 (S.D.N.Y. Oct. 30, 1992) .................... 5 Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459 (1992) ................................................................................................................... 9 O'Brien v. Nat'l Prop. Analysts Partners, 719 F. Supp. 222 (S.D.N.Y. 1989)............................................................................................... 2 Seippel v. Sidley, Austin, Brown & Wood, LLP, 399 F. Supp. 2d 283 (S.D.N.Y. 2005).......................................................................................... 6 Snow v. A.H. Robins Co., 165 Cal. App. 3d 120 (1985)........................................................................................................ 2 Unpingco v. Hong Kong Macau Corp., 935 F.2d 1043 (9th Cir. 1991)...................................................................................................... 1 Statutes and Rules

18 Fed. R. Civ. P. 9(b) .......................................................................................................... 1, 2, 11, 12 19 Cal. Bus. & Prof. Code §§ 17200 et seq. ("UCL") ........................................................ 1, 13, 14, 15 20 Other 21 22 23 24 25 26 27 28
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W. Stern, Bus. & Prof. Code §17200 Practice ¶ 5:291 at 5-85 (2007)................................................................................................................ 14

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INTRODUCTION Discretely tucked away in a footnote on page nine of the Opposition to the Motion to Dismiss ("Opp'n"), plaintiff Richard Thieriot ("Plaintiff") acknowledges a fatal deficiency in his pleading. Recognizing that he must invoke the delayed discovery rule in order to survive Defendants' statutes of limitations defense to alleged conduct that took place eight years ago, he asserts that he "first learned about AIG's true role in helping to create and promote tax shelters with Arthur Andersen, thanks to information shared by the government with Plaintiff's counsel" in "late 2006" but "concedes his omission of this allegation in the Complaint[.]" Opp'n at 9 & n.2 (emphasis added). Rather than provide any details as to what Plaintiff's counsel supposedly learned from the government, Plaintiff weakly suggests that, "if given leave to amend, [Plaintiff] can plead it in detail in a subsequent complaint." Opp'n at 9 n.2. Plaintiff fails to explain why he omitted such crucial details from the Complaint in the first place; or indeed, why he omits them from his Opposition. Nor does Plaintiff remedy the other fundamental problems Defendants identified in their motion to dismiss: the effect of contractual disclosures; the complete lack of pleading particularity required by Federal Rule of Civil Procedure 9(b); the existence of a contract that precludes any claim for unjust enrichment; and the fact that his California Unfair Competition Law ("UCL") claim is barred by the choice of law and/or the statute of limitations. ARGUMENT I. PLAINTIFF ADMITS HIS PLEADINGS ARE INSUFFICIENT TO INVOKE THE APPLICATION OF THE "DISCOVERY RULE." Effectively conceding that his claims are barred by the applicable statutes of limitations, plaintiff now seeks to invoke the "discovery rule" to delay accrual of his claims and save his case. See Opp'n at 9 & n.2 (arguing claims surrounding events in 2000 are timely because Plaintiff did not "suspect . . . AIG's fraud until late 2006" and "conceding his omission of this allegation in the Complaint"). This failure alone justifies dismissal. See Unpingco v. Hong Kong Macau Corp., 935 F.2d 1043, 1046 (9th Cir. 1991) (granting summary judgment where plaintiffs "simply have failed to present, either in their complaint or in [an] affidavit, any facts supporting their 1
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contention that the facts constituting the fraud were concealed . . . and they have failed to explain what happened . . . that finally put them on notice"). "[W]henever reasonable minds can draw only one conclusion from the evidence, the question [of accrual and delayed discovery] becomes one of law." Snow v. A.H. Robins Co., 165 Cal. App. 3d 120, 128 (1985); see also Acebey v. Shearson Lehman Bros., Inc., No. CV 92-5926-WMB, 1993 U.S. Dist. LEXIS 19659, at *21-*25 (C.D. Cal. June 4, 1993) (statute of limitations and inquiry notice questions properly determined on motion to dismiss where there can be no genuine difference of opinion as to impact of notice on a reasonable person). In order to invoke the discovery rule, a plaintiff "must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence." Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 808 (2005) (internal quotation marks omitted); see also Bennett v. Hibernia Bank, 47 Cal. 2d 540, 563 (1956) (allegations regarding discovery rule must "afford the court means of determining whether or not the discovery of the asserted invasion was made within the time alleged, that is, whether plaintiffs actually learned something they did not know before"); 131 Main Street Assocs. v. Manko, 179 F. Supp. 2d 339, 346-47 (S.D.N.Y. 2002) (party seeking to avoid dismissal with discovery rule must show (1) fraudulent concealment of injury either by showing defendant took affirmative steps to prevent plaintiff from discovering injury or that wrong was of such nature as to be selfconcealing; (2) ignorance of cause of action; and (3) exercise of due diligence). Not only does Plaintiff admit that his Complaint omits all such facts (Opp'n at 9 n.2), his failure to even describe such facts also suggests that he cannot meet this burden if given leave to amend. 1 In 131 Main Street, the district court denied plaintiffs leave to amend their complaint to
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As with any fraud-based claim, Plaintiff also would have to meet the particularity requirements of Federal Rule 9(b) in order to sufficiently plead the delayed discovery/fraudulent concealment doctrine. Plaintiff wholly fails to do so. See Point III, infra; see also O'Brien v. Nat'l Prop. Analysts Partners, 719 F. Supp. 222, 231-32 (S.D.N.Y. 1989) (requiring plaintiff specifically identify which individual defendant in multi-defendant case committed which acts of concealment to dissuade plaintiff from filing suit because "a plaintiff may not use fraudulent concealment by one defendant as a basis for tolling the statute of limitations against another defendant who did not engage in affirmative fraudulent acts to conceal"). 2
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plead fraudulent concealment in order to establish that their RICO claim was not time-barred. 179 F. Supp. 2d at 354. The court concluded that such an amendment would be futile because even though the defendants in fact concealed the fraud, plaintiffs could not as a matter of law establish the other elements of fraudulent concealment. Plaintiffs were not diligent in investigating possible claims after learning the IRS issued an audit report "that presented what should have been alarming statements regarding the company." Id. at 350. Despite receipt of the report, plaintiffs failed to respond to the IRS to challenge its contents and also failed to investigate whether the report presented any cause of concern. Upon receipt of the report, lawyers representing the partnership did not investigate the content of the IRS report but concentrated solely on defending the partnership in the IRS proceeding. Id. at 351. Plaintiffs, having failed to establish that they investigated the issues raised by the IRS notice, could not establish they were diligent in researching their claims. Id. The same rule should require dismissal here. Plaintiff argues that the April 13, 2004 IRS Notice of Final Partnership Administrative Adjustment ("April 2004 Notice") did not put Plaintiff on notice of any potential fraud because "there are many reasons, other than fraud on the part of [a tax shelter's] managers and trading partners, for an investment in a tax shelter limited partnership to become worthless and for its associated tax deductions to be disallowed by the IRS" (Opp'n at 8 (internal quotation marks omitted)). This does not rescue Plaintiff's claims. 2 Plaintiff alleges in the Complaint that the transaction "was simply marketed as a sound investment strategy that provided additional, legal tax benefits" (Compl. ¶ 12), that Plaintiff did not know that the transaction "was an abusive tax shelter or would be characterized as an abusive tax shelter" (Compl. ¶ 16), and that he "reasonably relied on the tax advice, investment advice Plaintiff cites DeMarco v. Lehman Bros. Inc., 309 F. Supp. 2d 631, 637 (S.D.N.Y. 2004) for the proposition that knowledge of injury does not necessarily trigger knowledge of the existence of deceit. See Opp'n at 8-9. However, in DeMarco, unlike here, the plaintiff alleged specific details of fraud that allowed the court to evaluate his delayed discovery argument, including allegations that the defendant issued research reports which recommended purchase of a stock; that on a specific date the SEC subsequently released emails that revealed this recommendation was false; and quoting the emails released by the SEC that showed the defendant did not, in fact, believe the stock deserved a "buy" rating. 309 F. Supp. 2d at 634, 635, 637. Unlike Plaintiff here, the DeMarco plaintiff met the particularity requirements of Rule 9(b). See Point III, infra. 3
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and professional services rendered by defendants" (Compl. ¶ 19). However, the IRS rejected all of these contentions in its April 2004 Notice: · "It is determined that Parrott Enterprises, LLC was a sham, lacked economic substance, and . . . was formed or availed of in connection with a transaction . . . a principal purpose of which was to reduce substantially the present value of the partners' aggregate federal tax liability in a manner that is inconsistent with the intent" of the law (RJN Ex. 1, Exhibit A thereto at 12 (Explanation of Items) ¶ 1); · Plaintiff did not establish the transactions "were entered into for profit" or that he had "the requisite profit intent" (Id. at 13 (Explanation of Items) ¶¶ 6, 7); · "the adjustments of partnership items . . . are attributable to a tax shelter for which no substantial authority has been established for the position taken, and for which there was no showing of reasonable belief . . . that the position taken was more likely than not the correct treatment of the tax shelter and related transactions" (id. at 13 ¶ 8); and also noting, · "It should not be inferred . . . that fraud penalties will not be sought on any portion of an underpayment subsequently determined to be attributable to fraud or that prosecution for criminal offenses will not be sought . . ." (Id.). Plaintiff does not deny that he received this notice or understood the importance of its contents. At a minimum, he therefore understood no later than April 13, 2004 that the IRS was taking the very positions he now uses to support his fraud claim. A reasonable person would have inquired into the matter after learning that the IRS believed that the transaction was a sham, an abusive tax shelter, that Plaintiff had no "good faith" basis for claiming the deductions, and that he was at risk of criminal fraud prosecution. In other words, he had inquiry notice of his potential fraud claim against the entities who were involved in the transaction, whether or not he knew their identity or the precise facts linking those entities to the alleged misrepresentation claim. See Fox, 35 Cal. 4th at 808-09 (in order to invoke the discovery rule, "a potential plaintiff who suspects that an injury has been wrongfully caused must conduct a reasonable investigation of all potential causes of that injury. If such an investigation would have disclosed a factual basis 4
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for a cause of action, the statute of limitations begins to run on that cause of action when the investigation would have brought such information to light"); Dodds v. Cigna Sec., Inc., 12 F.3d 346, 352 (2d Cir. 1993) ("[T]he issue is not whether [the investor] was given inadequate information about the advisability of investments in multiple limited partnerships but whether she had constructive notice of facts sufficient to create a duty to inquire further into the matter"); 131 Main Street, 179 F. Supp. 2d at 352, 354 (rejecting plaintiff's suggestion that "actual knowledge of the claim is necessary to bar the tolling of the statute of limitations" because "all that is necessary is that [p]laintiffs have some suspicion of the fraud" which plaintiff should have had when he received IRS report suggesting defendant's activities were fraudulent); Mirman v. Berk & Michaels, P.C., No. 91 Civ. 8606 (JFK), 1992 U.S. Dist. LEXIS 16707, at *9-*10 (S.D.N.Y. Oct. 30, 1992) (concluding that investor could not claim delayed discovery because "[a]n IRS inquiry into an investment partnership intended as a tax shelter would raise the suspicions of a person of ordinary intelligence and thus give rise to his duty to inquire further"). Brumbaugh v. Princeton Partners, 985 F.2d 157 (4th Cir. 1993) is directly on point. In that case, an investor in a limited partnership sued the promoters of the transaction after the IRS disallowed claimed tax losses upon concluding that the partnership was an illegal tax shelter. 985 F.2d at 160-61. To support his common law fraud claim, the investor alleged that the private placement memorandum that had described the limited partnership failed to reveal that the partnership would not be treated as such for tax purposes and that the transaction was a sham. Id. In order to explain why he had waited until 1990 to file suit and avoid the statute of limitations, the plaintiff alleged that he did not know that the 1982 transaction was fraudulent until 1988 when the investor received the IRS report concluding that the limited partnership was a sham. Id. at 161. The district court granted the motion to dismiss on statute of limitations grounds; plaintiff appealed, arguing that the district court should have applied the discovery rule. The Fourth Circuit affirmed, concluding that the plaintiff's eight-year old claims should be dismissed regardless of whether the discovery rule applied because he had not been diligent in investigating his claims: Inquiry notice is triggered by evidence of the possibility of fraud, 5
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not by complete exposure of the alleged scam. Merely bringing suit after the scheme has been laid bare through the efforts of others, in this case the IRS, will not satisfy the requirements of due diligence when there have been prior warnings that something was amiss. The PPM contained a host of prior warnings making it plain that [plaintiff] was purchasing, to put it mildly, a highly speculative investment. [Plaintiff] is charged with constructive knowledge of the contents of the PPM. . . . [which] specifically warned of the possibility that the IRS would disallow the tax deductions that flowed from the investment. That risk came to pass--and now, in hindsight, [plaintiff] claims that he was defrauded. Equity would not be served by tolling the limitations periods in this case. The PPM put [plaintiff] on inquiry notice of the violations he now charges. Brumbaugh, 985 F.2d at 162 (citations omitted). The April 2004 Notice put Plaintiff on notice of all the elements of his fraud, unjust enrichment and Unfair Competition Law claims, yet he chose to do nothing ­ he did not sue Arthur Andersen, Sidley, AIG, or any fictitious defendants. 3 Instead, he waited until October 2007 to sue the AIG defendants, whose supposed liability he claims to have discovered sometime in "late 2006." This was too late. Plaintiff's proffered excuse for the delay ­ ignorance of the facts regarding AIG's alleged participation ­ is belied by the allegations of the Complaint. The Complaint alleges that Plaintiff was harmed by Defendants' representation that the transaction was "legitimate" and "lawful," which was controverted when the IRS subsequently determined

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Plaintiff hired Preston Gates & Ellis to represent him in the Tax Court proceedings no later than July 2004 (RJN Ex. 1), but he does not allege that he or his attorneys investigated the tax shelters, or contemplated suing Arthur Andersen or Sidley at that time. Nor does Plaintiff allege that, after receipt of the April 2004 Notice, the AIG defendants gave him any assurances that would have lulled him into sitting on his rights. For this reason, the authorities cited by Plaintiff in which the defendant specifically reassured the plaintiffs as to the validity of the defendants' prior advice, thereby lulling the plaintiffs into inaction, are inapplicable here. See, e.g., Seippel v. Sidley, Austin, Brown & Wood, LLP, 399 F. Supp. 2d 283, 291 (S.D.N.Y. 2005) (concluding that warning signs in IRS notice were negated by words of comfort from defendants assuring plaintiff that the notice did not apply to their transactions, and thus plaintiff was not on "inquiry notice" of his claims). Plaintiff alleges that Sidley assured him that IRS Notice 2000-44 did not apply to his transactions (Compl. ¶ 24), but he never alleges that AIG gave such assurances; more important, he does not allege that any entity involved with the transactions gave him any assurances after he received the April 2004 Notice. Even applying the logic of Seippel, Plaintiff cannot argue that AIG lulled him into complacency after he received the April 2004 Notice. 6
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that the transactions were not legitimate and imposed penalties. See, e.g., Compl. ¶¶ 28, 38. In his Opposition, Plaintiff focuses entirely on the allegation that AIG concealed its role in "creating and promoting" the transaction and "passed itself off as a `neutral' bank, not a promoter of tax shelters connected with Arthur Andersen and Sidley." Opp'n at 11. But the Complaint does not allege a separate injury was caused by Plaintiff's ignorance of the details of AIG's role ­ it alleges that Plaintiff was injured because the transaction did not have the tax benefits Arthur Andersen and Sidley claimed it would provide. 4 As in McKeown v. First Interstate Bank, 194 Cal. App. 3d 1225, 1229 (1987), the IRS' position in its April 2004 Notice put Plaintiff on notice that there was a problem with his investment, and also had a "direct bearing on the truth of [Defendants'] specific representations" (Opp'n at 11). 5 The April 2004 Notice put Plaintiff on notice that his advisors' positions were disavowed by the IRS. It is irrelevant that the IRS did not name AIG, or that Plaintiff allegedly did not know all of the supposed facts about AIG's involvement. See Fox, 35 Cal. 4th at 807 ("The discovery rule . . . allows accrual of the cause of action even if the plaintiff does not have reason to suspect the defendant's identity. The discovery rule does not delay accrual in that situation because the identity of the defendant is not an element of a cause of action") (citations omitted and emphasis added). The only allegation Plaintiff asserts that differs from the allegations against Arthur Andersen or Sidley is the unsupported mischaracterization of the fees paid by AIG to Arthur Andersen (which were disclosed in the ISDA Master Agreement) as "kick-back" fees. See Compl. ¶ 13; see also Opp'n at 16 n.6 (acknowledging that ISDA Master Agreement discloses AIG paid fees to Arthur Andersen). Plaintiff correctly points out that McKeown's holding does not determine when a plaintiff should know the essential facts of a claim, but only when "appreciable harm" occurs. See Opp'n at 10-11; McKeown, 194 Cal. App. 3d at 1228. However, the McKeown court's discussion and the cases cited therein conflate the concept of when the harm occurs and when a plaintiff should know he has sustained such harm: "[W]hen the appellant received the notice of tax deficiency . . . we are of the opinion that any reasonable and prudent man . . . would have known or certainly should have known at that time, that he had sustained legal harm as of that date, if not before." Id. at 1230 (internal quotation marks omitted). Plaintiff alleges he purchased a tax shelter and was defrauded because his investment did not deliver the promised benefits; receipt of the April 2004 Notice would have made "any reasonable and prudent man" investigate the issue. Plaintiff does not allege that either he or his Preston, Gates & Ellis lawyers investigated the issue, contacted Defendants, or received any assurances from Defendants. 7
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For that same reason, Plaintiff's reliance on 131 Main Street Associates v. Manko, 897 F. Supp. 1507 (S.D.N.Y. 1995) for the proposition that IRS notices of disallowance do not provide notice of potential fraud claims pertaining to parties who were not named in the notice (Opp'n at 11-12) is misplaced. Rather than focus on the identity of a third party, that decision focuses on the distinction between transactions that are "sham in substance" and "sham in fact." 897 F. Supp. at 1518-19. The issue there was whether an IRS notice gave plaintiffs notice of a particular type of injury. Id. The court concluded that the IRS notice gave plaintiffs notice that the government believed that the transactions at issue were "sham in substance." 897 F. Supp. at 1519. The IRS notice did not, however, give notice that the underlying trades, on which the tax shelters were meant to be premised, were never in fact made by the defendant third party and were entirely fictitious: "It is one thing, for example, for the IRS to say that [a transaction] was not sufficiently profit-motivated to merit the claimed tax treatment. It is another thing for the IRS to say that the claimed sales and purchases of commodities cannot be recognized because they never in fact occurred." Id. at 1518. Until the investors learned that the transactions had not occurred at all, they had no basis to suspect the "third party" who was supposed to be executing the transactions of wrongdoing, and thus the claim did not accrue until the investors had reason to know about the fictitious transactions. 6 Plaintiff here does not allege that AIG never completed the transactions or somehow did not fulfill its obligations as outlined in the governing contracts; he only alleges that the transactions were "sham in substance." That is the very same injury he could have diligently investigated when he received the April 2004 Notice. All of Plaintiff's claims, under either the New York or California statutes of limitations 7 , therefore are time-barred. Fox, 35 Cal. 4th at 811 (Opp'n at 9) makes the same point. In that case, the California Supreme Court held that the statute of limitations for product liability claims was tolled to allow a bariatric surgery patient to sue the manufacturer of a surgical staple after she discovered, in the course of deposing the surgeon in her (timely-filed) medical malpractice case, that the surgeon had used a particular type of staple and suspected the staple had malfunctioned. Until the deposition, the Supreme Court reasoned, the plaintiff had no cause to suspect any element of a product liability claim, and thus could not know the identity of any product liability defendant such as the staple manufacturer. Plaintiff contends that New York law does not apply to tort claims because such claims do not "arise out of" the ISDA Master Agreement containing the choice of law clause. See Opp'n at 3. 8
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II. THE WRITTEN CONTRACTUAL DISCLOSURES AGREED TO BY PLAINTIFF BAR HIS CLAIMS. Plaintiff is a wealthy, experienced investor who, with the assistance of various advisors, chose to enter into a series of highly sophisticated transactions for the purpose of hedging the value of his concentrated stock position, deriving investment income, and securing some form of tax advantage. See Opp'n at 1; see also RJN Ex. 1 at §6(a) (describing Plaintiff as "a full time investor for over 25 years"), §6(b)-(m) (describing purposes of transaction). He, or someone acting on his behalf, executed more than sixty documents with Defendants to achieve those goals. See MPA at 3 n.1; Strauch Decl. Exs. A-F. The ISDA Master Agreement represents that Plaintiff consulted with financial, tax and legal advisors. See MPA at 4-5. Plaintiff confirms in his Opposition that that is exactly what he did. See Opp'n at 1 (Plaintiff consulted with his advisors at Arthur Andersen and obtained a legal opinion from a recommended, nationally known law firm), 9 (Plaintiff "relie[d] heavily on others, such as accountants and attorneys, as alleged here"), 11 ("Arthur Andersen and Sidley provided advice to Plaintiff about the tax consequences of the transaction"). There is no reason not to enforce the contractual provisions Plaintiff now seeks to evade. Plaintiff therefore is contractually estopped from at least the following: claiming that AIG advised him regarding the transaction; from denying that he had sufficient knowledge, experience and access to professional advice to make his own legal, tax, accounting and financial evaluation of the merits and risks of the transaction and reviewed the transaction with his advisors; denying that he is solely responsible for determining and evaluating the consequences of the transaction; claiming that AIG should have understood and/or guaranteed the effectiveness of the transaction

That is contrary to the position taken by the California Supreme Court. See Memorandum of Points and Authorities in Support of Motion to Dismiss and Strike ("MPA") at 8-10 (citing Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459, 469 (1992)); see also Cardonet, Inc. v. IBM Corp., No. C-06-06637 RMW, 2007 U.S. Dist. LEXIS 14519, at *6-*17 (N.D. Cal. Feb. 14, 2007) (concluding parties' choice of New York law was enforceable as to all their claims, including fraud and UCL claims). Regardless of which law applies, however, all of Plaintiff's claims should be dismissed. 9
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as a tax strategy; and claiming he did not know that AIG paid fees to Arthur Andersen for its assistance in that transaction, in prior similar transactions, and may do so again in the future. See MPA at 4-6 (quoting from ISDA Master Agreement). Plaintiff's attempt to deflect the impact of Conwill v. Arthur Andersen LLP, 12 Misc.3d 1171(A), 2006 N.Y. Misc. LEXIS 1527 (Sup. Ct. N.Y. Cty. 2006) fails. See Opp'n at 18 n.7. The Conwill court did dismiss the plaintiff's breach of fiduciary duty claim based on the contractual disclaimer, but it also dismissed his claims for fraud, negligent misrepresentation and fraudulent inducement against the defendant because "[w]here no fiduciary duty is implied by law, contractual disclaimers may be given effect, and enforced in accordance with their terms." Id. at *12. Thus, Conwill is precisely on point. Plaintiff's abstract argument that "boilerplate" disclaimers cannot insulate defendants from their own fraud (Opp'n at 17) is misplaced. In McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 793 (2008), the defendant landlords misstated the square footage of a property and dissuaded plaintiff from measuring it herself. When plaintiff sued, the defendants attempted to use the lease's disclaimers, which included representations that the plaintiff had the opportunity to examine and measure the property, to bar her misrepresentation claims. Id. at 794. The court disagreed, concluding that the defendants' verbal assurances and dissuasion from measuring the property established justified reliance on their representations. Id. at 798. Unlike in McClain, Plaintiff does not allege that Defendants made any misrepresentations that were contrary to the "boilerplate" disclaimers or offered "assurances" that the disclaimers were accurate. In other words, Defendants are not seeking to rely on the disclaimers in order to bar the use of parol evidence. The situation is more analogous to Merrill Lynch & Co. v. Allegheny Energy, Inc., 382 F. Supp. 2d 411, 416-18 (S.D.N.Y. 2003), a case Plaintiff also cites. There, the district court explained that "it is settled in New York that where a party specifically disclaims reliance upon a representation in a contract, that party cannot, in a subsequent action for fraud, assert it was fraudulently induced to enter into the contract by the very representation it has disclaimed. However, a disclaimer is generally enforceable only if it tracks the substance of the alleged misrepresentation." Id. at 417 (citations and internal quotation marks omitted). Even though the district court concluded that the disclaimer at issue was "general" and did not track the alleged 10
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misrepresentation, it nonetheless concluded that the disclaimer should be given effect because it was between sophisticated parties and negotiated at arms' length. Id. at 417-18. In the case at bar, the disclaimers not only were between sophisticated parties and negotiated at arms' length, but they do specifically track the substance of the alleged misrepresentations. See MPA at 4-8. For example, the disclaimers state that AIG did not provide any tax or legal advice to Plaintiff regarding the transactions and that Plaintiff relied on his own counsel to decide whether to enter into the transactions. Strauch Decl. Ex. A, Schedule §5(f)(v), (vi). Plaintiff claims AIG misled him as to the viability of a tax shelter. Compl. ¶¶ 11-12, 16, 28. Similarly, the disclaimers state that AIG paid Arthur Andersen for this and other similar transactions. Strauch Decl. Ex. A, Schedule §5(f)(viii). Plaintiff claims AIG did not disclose it paid fees to Arthur Andersen and that this was not a transaction unique to Plaintiff. Compl. ¶¶ 13-14, 17-18. The disclaimers preclude Plaintiff from arguing that AIG had a duty to disclose anything more than it did, or that AIG concealed or misrepresented any material fact. III. PLAINTIFF HAS NOT MET THE PARTICULARITY REQUIREMENTS OF RULE 9(b). The allegations Plaintiff identifies as sufficient to meet the stringent requirements of Federal Rule of Civil Procedure 9(b) (Opp'n at 15-16 (citing Compl. ¶¶ 12-13, 15-17, 20, 23, 25, 28)) fall far short of providing the who, what, where and when of any misrepresentation by AIG. See MPA at 15-16. Paragraph 12 alleges that AIG documentation "contributed to the appearance and semblance" of the transaction "as a legitimate investment strategy" but it fails to identify what documentation was misleading, or how it misled Plaintiff; any claim that Plaintiff relied on AIG's documentation to invest in the transaction is also foreclosed by the disclaimers in the ISDA Master Agreement. Paragraph 13 alleges, on information and belief, that AIG helped create, coordinate, promote and facilitate the transaction; paid "kick-back" fees to Arthur Andersen; and helped set up the limited partnerships that were formed to carry out the transactions. But any fraud allegation made on information and belief must be accompanied by a statement disclosing the basis for the Plaintiff's information and belief. See MPA at 16. Paragraph 15 accuses AIG of having failed to register the transaction as a tax shelter, but Plaintiff does not allege that AIG (as 11
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opposed to Arthur Andersen) had a duty to so register the transactions (and such allegation would be contradicted by the ISDA Master Agreement). Paragraph 16 discusses Sidley, not AIG. Paragraph 17 accuses AIG of creating documentation that gave the transaction the false semblance of being a legitimate investment, omitted mention of "kick-back" fees or that the transaction was an abusive tax shelter. These allegations are either contradicted by the ISDA or not sufficiently pleaded because they do not identify the documentation at issue or allege how the documentation was misleading. Paragraphs 20, 23 and 25 accuse AIG of knowing that the transaction would be deemed an abusive tax shelter but nonetheless marketing them to Plaintiff and numerous others. Interestingly, Plaintiff does not plead these allegations on information and belief, even though he now alleges that he obtained this information from an unidentified government official in "2006". See Opp'n at 2 & 9 n.2. In any event, Plaintiff explicitly disclaimed any reliance on AIG for tax or investment advice. Finally, paragraph 28 alleges that AIG "made numerous knowingly false affirmative representations and intentional omissions of material fact" through its documentation but Plaintiff still refuses to identify the documentation he alleges was misleading. This is insufficient to sustain a fraud claim. See MPA at 15-16. IV. PLAINTIFF'S CLAIM FOR UNJUST ENRICHMENT FAILS BECAUSE HE HAS NOT ALLEGED ANY FACTS SUFFICIENT TO RESCIND THE CONTRACTS. Plaintiff's contention that the contracts with AIG are "illegal" does not save his unjust enrichment claim. Plaintiff has not pleaded rescission as a remedy, nor has he pleaded any facts sufficient to bring about rescission of his agreement with AIG. See Point III, supra (fraud claims must be pleaded with particularity). Thus, the contract is not "unenforceable" or "void", and Plaintiff cannot seek to recover for unjust enrichment. See MPA at 20-22. The cases Plaintiff cites all support the uncontroversial proposition that a party who performed a service for another should not be deprived of just payment for work performed even if the contract that guaranteed those fees is found to be illegal. For example, Katz v. Zuckerman, 481 N.Y.S. 2d 271 (Sup. Ct. Queens Cty. 1984) held that a doctor who entered into an illegal feesplitting agreement with medical technicians should still be able to collect fees for the valuable 12
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services he rendered to the technicians under an unjust enrichment theory. Similarly, the court in Huskinson & Brown, LLP v. Wolf, 32 Cal. 4th 453, 460-61, 463 (2004), held that a lawyer whose fee sharing agreement was illegal should not be entitled to the referral fee guaranteed by the illegal contract, but was nonetheless entitled to recover the value of the legal services he performed under a quantum meruit theory so that the attorneys to whom he referred the case were not unjustly enriched. In Dunkin v. Boskey, 82 Cal. App. 4th 171, 196-98 (2000), the court concluded that even though a contract promising a non-biological father custody and visitation rights was void for public policy, the father could sue the mother for unjust enrichment after she terminated the relationship and refused to give him parental rights. None of these decisions has any application to Plaintiff's apparent intent to undo a contract whose terms were in fact fully performed by AIG. The terms of the ISDA Master Agreement called for AIG to perform options transactions. Plaintiff, in his Tax Court case, claims that the options transactions were "without regard to tax benefits" and intended as an investment and hedge vehicle. See RJN Ex. 1 § 6(k) ("The Thieriot family believed that in entering into the transactions that they had a reasonable opportunity to earn a profit, in excess of all fees and transaction costs from the transactions without regard to tax benefits, and also to hedge against a collapse in the value of the Thieriot family assets"). There is no allegation in the Complaint that the investment and hedge aspects of the transactions were not accomplished, or that AIG failed to perform any of the obligations set forth in the ISDA Master Agreement. V. PLAINTIFF'S UCL CLAIM FAILS. The Court need not resolve the choice of law issue 8 because even if California law did apply, Plaintiff's UCL claim would be barred by the applicable statute of limitations. Plaintiff suggests that it is "unsettled" whether the discovery rule applies to UCL claims. See Opp'n at 22 n.11. The vast majority of courts that have considered the issue, including the Ninth Circuit,
8

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While Plaintiff cites an unpublished decision in support of his contention that the UCL claim is viable despite the parties' choice of New York law, the better-reasoned cases, including the more recent and/or published cases, support AIG's position. See MPA at 22 and cases cited therein. 13
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however, are in accord that the discovery rule does not toll the statute of limitations for such claims. See W. Stern, Bus. & Prof. Code §17200 Practice ¶ 5:291 at 5-85 (2007) ("The `discovery rule' does not apply to UCL claims") (citing numerous cases, including Karl Storz Endoscopy-America, Inc. v. Surgical Techs., Inc., 285 F.3d 848, 857 (9th Cir. 2002) (holding that UCL claims not subject to discovery rule)); see also Medimatch, Inc. v. Lucent Techs., Inc., 120 F. Supp. 2d 842, 861 (N.D. Cal. 2000) (citing cases for the proposition that the discovery rule does not apply to UCL claims and concluding plaintiff's UCL claim was time-barred). Because AIG's last act was to execute the 2000 transactions Plaintiff now argues were unfair, his UCL claim accrued at the latest on that date, and the statute of limitations expired nearly four years ago, in 2004. 9 VI. PLAINTIFF WAIVED HIS RIGHT TO JURY TRIAL. "The right to a jury trial in federal court is governed by federal law and, under federal law, parties may contractually waive their right to a jury trial." Applied Elastometrics, Inc. v. Z-Man Fishing Prods., Inc., 521 F. Supp. 2d 1031, 1044 (N.D. Cal. 2007). Plaintiff executed contracts in which he specifically and unambiguously waived his right to jury trial. See Strauch Decl. Ex. A, Schedule §4(k). California policy notwithstanding, he waived his right to jury trial on all claims. Moreover, the waiver is not based on a "choice of law" (Opp'n at 24), but on a specific contractual provision in a contract that the parties chose to be governed and construed by New York law. Thus, the choice of law analysis does not extend to the validity of the jury waiver clause, which is valid under New York law. Even if the Court did conclude that California law barred the jury waiver clause, there is no right to jury trial under California law for equitable claims. See Interactive Multimedia Artists v. Superior Court, 62 Cal. App. 4th 1546, 1556 (1998); Hodge v. Superior Court, 145 Cal. App.

9

Because Plaintiff has not pleaded an unfair competition law claim under New York law, AIG will not address whether such a claim would be timely (Opp'n at 22). However, AIG will note that Plaintiff has not sufficiently pleaded any facts to support his fraudulent concealment argument. See n.1 and Point III, supra. 14
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4th 278, 284-85 (2006) (holding there is no right to jury trial in UCL cases). Thus, regardless of what law applies, or of the enforceability of the jury waiver, Plaintiff is not entitled to trial by jury on his unjust enrichment or UCL claims. CONCLUSION The motion to dismiss and strike should be granted, without leave to amend.

Dated: March 24, 2008

NICOLLE L. JACOBY H. JOSEPH ESCHER III FRANCE JAFFE DECHERT LLP

By:

/S/ FRANCE JAFFE Attorneys for Defendants AIG MATCHED FUNDING CORP., AIG FINANCIAL SECURITIES CORP., AIG FINANCIAL PRODUCTS CORP., AMERICAN INTERNATIONAL GROUP, INC., and BANQUE AIG

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