Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 1 of 19
`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 1 of 19
`
`Case No. 19-cv-1608 (JMF)
`ROK;oD
`QU
`
`UNITED STATESDISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`THE CITY OF PHILADELPHIA, MAYOR
`AND CITY COUNCIL OF BALTIMORE,
`THE BOARD OF DIRECTORS OF THE SAN
`DIEGO ASSOCIATION OF
`GOVERNMENTS,ACTING AS THE SAN
`DIEGO COUNTY REGIONAL
`TRANSPORTATION COMMISSION,
`
`Plaintiffs,
`
`V.
`
`BANK OF AMERICA CORPORATION, BANK OF
`AMERICA,N.A., BANC OF AMERICA
`SECURITIES LLC, MERRILL LYNCH,PIERCE,
`FENNER & SMITH INCORPORATED,
`BARCLAYSBANKPLC, BARCLAYS CAPITAL
`INC., CITIGROUP,INC., CITIBANK N.A.,
`CITIGROUP GLOBAL MARKETSINC.,
`CITIGROUP GLOBAL MARKETSLIMITED,
`GOLDMAN SACHS & CO. LLC, JEMORGAN
`CHASE BANK, N.A., J.P. MORGAN SECURITIES
`LLC, MORGAN STANLEY, MORGAN STANLEY
`SMITH BARNEY LLC, MORGAN STANLEY&
`CO. LLC, MORGAN STANLEY CAPITAL
`GROUP INC., THE ROYAL BANK OF CANADA,
`RBC CAPITAL MARKETSLLC, WELLS FARGO
`BANK, N.A., WACHOVIA BANK, N.A., WELLS
`FARGO FUNDS MANAGEMENT,LLC, WELLS
`FARGO SECURITIES LLC,
`
`Defendants.
`
`
`
`DEFENDANTS’ REPLY MEMORANDUM OF LAW
`IN FURTHER SUPPORT OF JOINT PARTIAL MOTION TO DISMISS
`THE AMENDED CONSOLIDATED CLASS ACTION COMPLAINT
`
`

`

`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 2 of 19
`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 2 of 19
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`TABLE OF CONTENTS
`
`TABLE OF AUTHORITIES 2.00... eccccecesecseeseeececesesecsceaeeeescseeesscesecaesaesecacsaeseeaceaeeasseeseeeseeeeeeateaeees i
`
`ARGUMENT... ceeccsceseeeesceseeecsceaeeecscseecesceseeacseesecacsaesecacsaeseeacaeeasaceaeeeeseeseeeeeaeeceaeaeecaceareneeeeaeeass 1
`
`I.
`
`IL.
`
`Il.
`
`Plaintiffs Fail to Allege a Fiduciary Relationship Between SANDAGandthe
`Fiduciary Claim Defendant............cccecccssccesneeseneceeecseeeeeneecanecsaecsenessaeecnecseeeseeeesneeeeneeseesans 1
`
`Baltimore’s New Fiduciary Duty Claim Against JPMorgan Should Be Dismissed............ 5
`
`SANDAG’s Claims Are Mostly Time-Barred............ccsccssscssseecsecsecseeeeseeeceuecseeeseneesneeeeneees 7
`
`CONCLUSION... cceceececeseeceeeseeeesseseceesceseeacsaesecacsaesecacsaeaesceaeeeesaeseeaesaesceacsaesaeaceaeeaesaeaeeeeeneeeeateae 10
`
`

`

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`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 3 of 19
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`TABLE OF AUTHORITIES
`
`CASES
`
`Page(s)
`
`Aas v. Superior Court,
`24 Cal. 4th 627 (2000) .0...ceececcecceseecceecsceseceneeeceaeencsaecacesecaeesecneeaeeaeeneeaecaeeaecneeeeeaeeeeeaeeneeaes2
`
`Akins v. Seterus, Inc.,
`No. 216-cv-01656-TLN-KJN, 2019 WL 4243221 (E.D. Cal. Sept. 6, 2019)... cece 3
`
`In re Aluminum Warehousing Antitrust Litigation,
`520 F. Supp. 3d 455 (S.D.N.Y. 2021)... cccccccscceeceneeeeeaeeneeaecacececaneecneeessaeeaeeaeeneeaeeaeeeeanees 6
`
`Axiom Investment Advisors, LLC v. Deutsche Bank AG,
`234 F. Supp. 3d 526 (S.D.N.Y. 2017)... cccccccscesecseeeeceneseeeaeeeceaecaeeecaeeeeceneeeeeaeeneeaeeaeeaeeaneeees 7
`
`BPP Illinois, LLC v. Royal Bank ofScotland Group PLC,
`603 F. App’x 57 (2d Cir. 2015) oe cccccccssscseesecseeeeceneeecsaeeeceaecaeesecaeesecneeeseaeeaeeaeeneeaeeaeeaeeanees 7
`
`Brass Metal Products, Inc. v. E-J Enterprises, Inc.,
`189 Md. App. 310 (Md.Ct. Spec. App. 2009) 20... ccccssccsstcesneecenecseeeseeeesneeceneeseeseneeeneees 7
`
`In re Bridge Construction Services ofFlorida, Inc.,
`140 F. Supp. 3d 324 (S.D.NLY. 2015)... cccccccssecseeeeceneeeeeaeeeesaecaeeaecaceeceeeeeeeaeeneeaeeaeeeeaneeees 5
`
`Brooks v. Euclid Systems Corp.,
`151 Md. App. 487 (Md.Ct. Spec. App. 2003) .......cceecccsssessteeceeecseecseeeeeeeeceneeseeseneesneees 6, 7
`
`Brown v. Wells Fargo Bank, N.A,
`168 Cal. App. 4th 938 (2008) oo... cececceceeeeceseceeeecseeecneeeceaeeeecaeeaeeaecaeesecaneeeeeaeeeeeaeeneeaeenees4
`
`Cash & Carry America, Inc. v. RoofSolutions, Inc.,
`223 Md. App. 451 (Md. Ct. Spec. App. 2015) oo... eee ccccesccsstcesneeceeecseeesereesaeeceneeseeeseneesneees 6
`
`Cleveland v. Johnson,
`209 Cal App. 4th 1315 (2013) ...cccccccccesecseeseeeaeeecsaecaceseceeeeeceneseeeaeeneeeecaceaeceneeeeeaeeaeeareneeaes 5
`
`Comptroller ofMaryland. v. Broadway Services, Inc.,
`250 Md. App. 102, 248 A.3d 1117 (Md. Ct. Spec. App. 2021)... ceeccesesseesestesseeseeeseees 6
`
`Dennis v. JPMorgan Chase & Co.,
`343 F. Supp. 3d 122 (S.D.N.Y. 2018)... cccccccesccseeeeceeeeeeeaeeneeaeeaeesecaeeeeceneeeeeaeeneeaeeaeeaeeaneeees 7
`
`Domenikosv. Roth,
`288 F. App’x 718 (2d Cir. 2008) .0..ceececccccesscnceeeceneeecsneseeeaeenesaecacesecaeeeceneeeeeaeeneeaeeaeeaeeaneeees 9
`
`i
`
`

`

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`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 4 of 19
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`Fernandez v. UBS AG,
`222 F. Supp. 3d 358 (S.D.N.Y. 2016),.......ccescssssssesecsseessecssecnesneeseesseeseeeseessnecneesnesseeseeseaees 9
`
`Green v. H & R Block, Inc.,
`355 MG. 488 (1999) oo... cesccssesscesscssecssecsnessessnesseessecsuecesessesseeseessaeseeecsesseesseesereseesenesneesneseness 6
`
`Hands on Video Relay Services, Inc. v. American Sign Language Services Corp.,
`No. CIV. S-09-996 LKK/DAD,2009 WL 8691614 (E.D. Cal. Aug. 12, 2009) wwe 2
`
`In re Interest Rate Swaps Antitrust Litigation,
`261 F. Supp. 3d 430 (S.D.N-Y. 2017)... cee ceccceeeceseceeeeeseceaeceeeeaeeeeeeeeeeeeceaeeaneeaeeeaeeeeeeeeeates 7
`
`Kabushiki Kaisha Megahouse v. Anjar Co. LLC,
`No. 2:14-cv-00598-CAS, 2014 WL 5456523 (C.D. Cal. Oct. 20, 2014) oo. eceeeeeeseeeeeens 5
`
`Michelson v. Hamada,
`29 Cal. App. 4th 1566 (1994) oo... ceceeccssecssesssessesseessecssecsseseseseesseeseesseessneseeesseeseeseessaeeaass2,4
`
`Migliori v. Boeing N. American. Inc.,
`114 F. Supp. 2d 976 (C.D. Cal. 2000) oo... ce ccceecceeeceeeeeseceaeeceeeaeeseeeeeeeaeceaeeaneeaeeeeeeeeeeaeeeates 9
`
`Monterrey Bay Military Housing, LLC v. Ambac Assurance Corp.,
`No. 19 Civ. 9193 (PGG), 2021 WL 1226984 (S.D.N.Y. Mar. 31, 2021)... ee eeeeeeeereeees 9
`
`Oracle USA, Inc. v. XL Global Services, Inc.,
`No. C 09-00537 MHP, 2009 WL 2084154 (N.D. Cal. July 13, 2009)... eeeeeeeseeeeeenes 2
`
`Qwest Communication v. Herakles, LLC,
`No. 07-cv-00393-MCE-KJM,2008 WL 3864620 (E.D. Cal. 2008) .........cesscessssseesseees3,5
`
`Rogers v. Postmates Inc.,
`No. 19-cv-05619-TSH, 2020 WL 3869191 (N.D. Cal. July 9, 2020) oo. eee eeceeeeeeeeeeeeeee 3
`
`Sacramento Regional Public Safety Communications Center v. Tyler Technologies, Inc.,
`No. 2:18-cv-1792-KJM-KJN, 2019 WL 1255252 (E.D. Cal. Mar. 19, 2019)... eeeeeeees 10
`
`Slotkin v. Citizens Casualty Co.,
`614 F.2d 301 (2d Cir, 1979)... ccccccescescssecsceseceeeeeceneeeceaeeaeeaecaeeaecaeeecneeeseaeeaeeaeeaeeaeeaeeaeeanens 6
`
`Sonoma Foods, Inc. v. Sonoma Cheese Factory, LLC,
`No. C 07-00554 JSW, 2007 WL 3231724 (N.D. Cal. Oct. 30, 2007) ........eesesesseeseeees 2,5
`
`Staehr v. Hartford Financial Services Group., Inc.,
`547 F.3d 406 (2d Cir. 2008)... .cccccescsscsseceeseceeeeceneeeeeaeeeeeaecaeeaecaeeaecaneeeseaeeaeeaeeneeaeeaeeaeeanens 9
`
`State ex rel. Edelweiss Fund, LLC v. JPMorgan Chase & Co.,
`58 Cal. App. Sth 1113 (2020) 20... eeccssccssecsneeseessesssessecssecnesneeseesseeseessaeenesneesneseneseeesaes 10
`
`i
`
`

`

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`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 5 of 19
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`Travel Committee, Inc. v. Pan American World Airways, Inc.,
`91 Md. App. 123 (Md. Ct. Spec. App. 1992) oo... ceeecssecssecsseceeneeceeecseeeseeeeseeecenesseeseneesneees 7
`
`Wolfv. Superior Court,
`107 Cal. App. 4th 25 (2003) oo... eeseseesessesececesesecaeeateecsceaeeeescesececseesecaesaeeesaeeareeeeeeaeeneeees2,5
`
`STATUTES
`
`Cal. Civ. Code § 2295... isceccssesscsceseeeesceseeecsceseeacscesecessaesecaesaesecacsaesacaceseeeeseesesaeeaesecaeeareeeaceateneeees3
`
`Cal. Gov't Code § 12650(b)(8) oe. ececesceeeeesceseeecseeseeeescesecaeeaesecacsaesceacsaeacsceseaeseeseeaeaeeeeaeeateneas 10
`
`Cal. Gov’t Code § 12652(c)(8)(A).... ee eeccescecesceseeeceeseeeescesecaceaesecacsaesecacsaeaesceseeaeseeseeeeaeeeeaeeatenees 10
`
`RULES
`
`Fed. R. Civ. P. 12(H)(2).... cc eeecceceseeceseeseeeesceseeececeseeeesaesecacsaeesacsaesaeaceaeeeeseeseeeeeaseceacaeecaceareneeaeaeeass 6
`
`Iv
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`

`

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`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 6 of 19
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`SANDAG’s breach of fiduciary duty claim should meet the same fate as Philadelphia’s—
`
`and be dismissed.' In an effort to avoid that outcome,plaintiffs drum up distinctions between
`
`California and Pennsylvania law where no material differences exist. Ultimately, for SANDAG
`
`as for Philadelphia, the only relevant allegations relate to obligations defined in the parties’
`
`contracts, and there is no basis in those agreementsor the parties’ conduct to plead a fiduciary
`
`relationship. And despite plaintiffs’ meritless procedural objections, Baltimore’s newly asserted
`
`fiduciary duty claim against JPMorgan fails under Maryland law for similar reasons.
`
`Nor has SANDAGadequately pleaded fraudulent concealment. Plaintiffs do not dispute
`
`that a 2014 California qui tam action alleged that certain defendants inflated interest rates on
`
`SANDAG-issued VRDOs,just as SANDAGalleges now. SANDAGwasrequired by law to
`
`receive notice of those claims from the California Attorney General. Thus, by 2014, SANDAG
`
`wasat least on inquiry notice of the conduct alleged here, and its protestations that it cannot
`
`locate the notice today have no logical connection to any purported fraudulent concealment by
`
`defendants that could save its claims.
`
`ARGUMENT
`
`1.
`
`Plaintiffs Fail to Allege a Fiduciary Relationship Between SANDAGandthe
`Fiduciary Claim Defendants
`
`Plaintiffs cannot salvage SANDAG’s breach of fiduciary duty claim byasserting that
`
`California has a broader definition of fiduciary duty than Pennsylvania. Plaintiffs both overstate
`
`the law and mischaracterize the Court’s opinion dismissing Philadelphia’s nearly identical claim.
`
`The Court’s holding that Philadelphia failed to “allege any facts to show that it had a
`
`special relationship of trust with the Banks that would giverise to a fiduciary duty,” MTD
`
`' Capitalized terms carry the same meaning as in defendants’ Memorandum of Law (ECF No.
`232 (“Memo.”).)
`
`

`

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`Opinionat 26, is equally applicable to SANDAG’s near-identical claims. Plaintiffs claim that
`
`Pennsylvania’s “gist of the action” doctrine wasa “key basis” of the MTD Opinion andthat
`
`California does not recognize it. (ECF No. 240 (“Opposition or Opp.”) at 11.) But plaintiffs
`
`overlook California’s similar economicloss rule, which barstort claims“for the breach of duties
`
`that merely restate contractual obligations.” Aas v. Superior Court, 24 Cal. 4th 627, 643 (2000)
`
`(superseded by statute on other grounds); see also Oracle USA, Inc. v. XL Glob. Servs., Inc.,
`
`2009 WL 2084154,at *3 (N.D. Cal. July 13, 2009).”
`
`Plaintiffs do not dispute that tort claims, whether under California or Pennsylvania law,
`
`require allegations of an independent duty beyond contractual obligations.* (Opp.at 12.) Nor can
`
`they: in California, as in Pennsylvania, a fiduciary obligation flows from a special relationship of
`
`trust that goes beyond ordinary course contractualrelations, resulting in the agent’s duty to act
`
`for the benefit of the principal. See, e.g., Wolfv. Superior Court, 107 Cal. App. 4th 25, 29-30
`
`(2003) (holding that a fiduciary relationship is a “relation .
`
`.
`
`. wherein one ofthe parties is in
`
`duty bound to act with the utmost good faith for the benefit of the other” and is “founded upon
`>
`
`the trust or confidence reposed by one personin the integrity and fidelity of another. .. .’
`
`? Plaintiffs attempt to distinguish defendants’ caselaw by noting that each court found no
`independent duty (Opp. at 12), but the lack of any independent duty is precisely the point. Cases
`that permit both tort and contract claims to proceed involve independent duties and are therefore
`distinguishable. See Hands on Video Relay Servs., Inc. v. Am. Sign Language Servs. Corp., 2009
`WL 8691614, at *5 (E.D. Cal. Aug. 12, 2009) (permitting breach of fiduciary duty counterclaim
`against joint venturer); Michelson v. Hamada, 29 Cal. App. 4th 1566, 1575 (1994) (affirming
`sufficient evidence offiduciary relationship where defendant represented principal in dealings
`with third parties); Sonoma Foods, Inc. v. Sonoma Cheese Factory, LLC, 2007 WL 3231724,at
`*5 (N.D. Cal. Oct. 30, 2007) (finding sufficient allegations that party becamefiduciary “through
`its conduct,” which “extend[ed] beyond the obligations [allegedly] established by the
`agreement”).
`
`3 Plaintiffs argue that parties’ conduct mayestablish an agency relationship in the absence of
`contractual obligations but do not point to any conduct sufficient to establish a fiduciary
`relationship here, and instead only cite the parties’ contractual agreements. (Opp.at 15.)
`
`

`

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`(internal citations omitted)). Here, the only duties plaintiffs identify are those specified by the
`
`remarketing agreements governing the parties’ relationships. Andplaintiffs do not identify a
`
`single case holding that a remarketing agent (or any entity with similarly defined obligations)
`
`owesa fiduciary duty to its contractual counterparty. Instead, plaintiffs offer only ipse dixit that
`
`the Fiduciary Claim Defendants must be fiduciaries because they are “agents” and have “agreed
`
`to act on behalf and for the benefit of SANDAG.” (Opp.at 11.) But an “agent”label is not
`
`dispositive when determining legal agency for fiduciary purposes. See Rogers v. Postmates Inc.,
`
`2020 WL 3869191, at *4 (N.D. Cal. July 9, 2020) (dismissing plaintiffs claim on the grounds
`
`that a “marketing agent” was not defendant’s legal “agent” where plaintiff did not sufficiently
`
`allege control).
`
`Asplaintiffs concede (Opp. at 13-14), under California law, an agentis “one who
`
`represents another, called the principal, in dealings with third persons.” Cal. Civ. Code § 2295;
`
`see also Akins v. Seterus, Inc., 2019 WL 4243221, at *4 (E.D. Cal. Sept. 6, 2019) (holding that
`
`agencyrelationship requires “that the agent .
`
`.
`
`. holds powerto alter legal relations between the
`
`principal and third persons and between the principal and himself”). An agency relationship
`
`further requires that “the principal has the right to control the conductof the agent.” Akins, 2019
`
`WL 4243221, at *4. None of SANDAG’s factual allegations establish that the Fiduciary Claim
`
`Defendants meet this exacting standard.
`
`First, plaintiffs do not and cannotallege that the Fiduciary Claim Defendants “represent”
`
`SANDAGin dealings with third parties, as that term is interpreted under California law. See
`
`Qwest Commc’n v. Herakles, LLC, 2008 WL 3864620, at *5 (E.D. Cal. Aug. 19, 2008) (finding
`
`plaintiff failed to allege agency relationship becauseit failed to allege the purported agent “shad
`
`the powerto alter legal relations betweenthird parties and [plaintiff]’). To the contrary, plaintiffs
`
`

`

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`concedethat the Fiduciary Claim Defendants only “help Plaintiffs remarket their bonds, and
`
`facilitate interactions with third-party investors.” (Opp. at 15.) “Helping” and “facilitating
`
`interactions”are insufficient to establish an agencyrelationship.
`
`Second,there is no allegation, nor can there be, that the Fiduciary Claim Defendants were
`
`controlled by SANDAG.Aseven the Amended Complaint makesclear, the Fiduciary Claim
`
`Defendants had an obligation to act independently with respect to their remarketing activities, as
`
`the parties’ contracts explicitly stated. (See Am. Compl. § 84 (“Each [VRDO]rate shall be the
`
`rate of interest that ... would, in thejudgmentof the Remarketing Agent, .
`
`.
`
`. be the lowest
`
`interest rate that would enable the Remarketing Agent to place such [VRDOs] .
`
`. .” (emphasis
`
`added)).) Plaintiffs rely on Michelson v. Hamada for the purported proposition that control can
`
`be manifested by a principal’s ability to unilaterally end a relationship, but that case involved
`
`significant other indicia of control and agency—defendant managedplaintiffs office operations,
`
`including billing and collection functions, and,critically, represented plaintiff in dealings with
`
`third parties. See 29 Cal. App. 4th 1566, 1577-78 (1994).* Michelson does not remotely resemble
`
`the remarketing arrangementat issue here. Moreover,if, as plaintiffs suggest, the mere ability to
`
`unilaterally terminate a relationship were sufficient to establish agency,nearly all service
`
`contracts would establish fiduciary relationships, and agency law would subsumeanycontractual
`
`relationship where oneparty performs a service for another underan at-will agreement.°
`
`4 Plaintiffs search in vain for evidence of control in remarketing agents’ contractual obligation to
`remarket the bondsat the lowest interest rate that will allow the bondsto sell at par. (Opp. 14.)
`They identify no California law suggesting that this contractual provision demonstrates control
`of an agent by a principal. And contractual obligations are insufficient to establish a fiduciary
`relationship.
`
`> Plaintiffs’ authority involvesrelationships completely dissimilar to those at issue here. See
`Brown v. Wells Fargo Bank, N.A, 168 Cal. App. 4th 938, 961 (2008)(fiduciary relationship
`where bank “induced [an] elderly and increasingly frail couple to rely on it to handle their
`
`(cont'd)
`
`4
`
`

`

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`Because SANDAG’s allegations do not support an agencyrelationship or any other basis
`
`for a fiduciary relationship under California law, SANDAG’s fiduciary duty claim should be
`
`dismissed. See Wolf, 107 Cal. App. 4th at 31; Qwest Commc’n, 2008 WL 3864620,at *5-6.
`
`Il.
`
`Baltimore’s New Fiduciary Duty Claim Against JPMorgan Should Be Dismissed
`
`Plaintiffs incorrectly argue that the law of the case doctrine bars this Court from
`
`considering a motion to dismiss Baltimore’s breach offiduciary duty claim against JPMorgan.
`
`First, that doctrine does not apply because this claim is new. Under Marylandlaw,a contractual
`
`relationship is an essential element of Baltimore’s fiduciary duty claim, see MTD Opinionat 21
`
`n.4, and Baltimore only alleged a contractual relationship with JPMorganfor the first time in the
`
`Amended Complaint.
`
`Second, the law of the case doctrine “applies only to issues actually previously litigated.”
`
`In re Bridge Constr. Servs. ofFla., Inc., 140 F. Supp. 3d 324, 334 (S.D.N.Y. 2015). JPMorgan
`
`did not actually litigate—and had no reasonto litigate—the defects in Baltimore’s fiduciary
`
`claim previously because Baltimore had not alleged the necessary contractual relationship with
`
`JPMorganat that time. See (Memo. at 4); MTD Opinionat 23, 25. Nor did this Court’s opinion
`
`address the defects raised in defendants’ instant motion. The Court only addressed whether
`
`Marylandrecognizes breach of fiduciary duty as a distinct tort cause of action. See MTD
`
`Opinionat 23, 25.
`
`financial affairs”); Cleveland v. Johnson, 209 Cal App. 4th 1315, 1342 (2012) (liability on
`grounds that a corporation and corporate insider who promoted an investment may owefiduciary
`duties to an investor); Kabushiki Kaisha Megahouse v. Anjar Co., 2014 WL 5456523, at *12
`(C.D. Cal. Oct. 20, 2014) (allegations of fiduciary obligation sufficient where defendants
`allegedly held and managedplaintiffs trademarkson its behalf and there were additional
`allegations regarding defendants assumption offiduciary duties); Sonoma Foods, 2007 WL
`3231724, at *4 (allegations that plaintiff “knowingly .
`.
`. undertook to act on [defendants’]
`behalf... with respect to the managementof [certain] trademarks”sufficient to state claim for
`breach of fiduciary duty).
`
`

`

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`Third, the Court has broad discretion regarding whether to apply law of the case with
`
`respect to its own decisions, and applying the doctrine here would be inefficient because law of
`
`the case would not bar JPMorgan from asserting the same arguments in a Rule 12(c) or Rule 56
`
`motion. Fed. R. Civ. P. 12(h)(2); Slotkin v. Citizens Cas. Co. ofN.Y., 614 F.2d 301, 312 (2d Cir.
`
`1979); In re Aluminum Warehousing Antitrust Litig., 520 F. Supp. 3d 455, 485 (S.D.N.Y. 2021).
`
`Plaintiffs’ arguments on the merits fare no better, and the Court should reach the same
`
`conclusion required under Pennsylvania and California law that the circumstances here do not
`
`create fiduciary duties. Plaintiffs assert that JPMorgan wasobligated to use its independent
`
`judgmentandbest efforts to set VRDO rates (Opp. at 14-17), but as with SANDAGand
`
`Philadelphia, these allegations largely rehash basic elementsofthe parties’ contractual
`
`interactions, which fail to establish a fiduciary relationship. Under Marylandlaw,“trusting and
`
`relying on the other party to perform its side of the transaction is not enough; rather, something
`
`‘apart’ from the transaction itself is required to create a confidential relationship.” Comptroller of
`
`Md. v. Broadway Servs., Inc., 250 Md. App. 102, 248 A.3d 1117, 1129 (Md. Ct. Spec. App.
`
`2021), cert. granted, 475 Md. 2 (2021); see also Cash & Carry Am., Inc. v. RoofSols., Inc., 223
`
`Md. App. 451, 466 (Md. Ct. Spec. App. 2015) (Maryland’s economiclossrule generally
`
`“prohibits a plaintiff from recovering tort damages for what in fact is a breach of contract’’).
`
`And in any event, JPMorgan’s alleged use of independent judgmentin resetting rates cuts
`
`against finding that Baltimore had the “ultimate responsibility to control the end result of
`
`[JPMorgan’s| actions”—akey feature of an agencyrelationship. Green v. H & R Block, Inc., 355
`
`Md.488, 510 (1999); see Brooks v. Euclid Sys. Corp., 151 Md. App. 487, 511-12 (Md. Ct. Spec.
`
`App. 2003) (“significant degree of discretion” in performing contractual duties undermined
`
`claim that alleged agent “was obligated to act primarily for the benefit” of purported principal);
`
`

`

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`Travel Comm., Inc. v. Pan Am. World Airways, Inc., 91 Md. App. 123, 179-80 (Md.Ct. Spec.
`
`App. 1992) (agreement requiring airline to use “best efforts” to assist travel agency did not
`
`establish sufficient “influence, control, and dominance”for a fiduciary obligation). Further, the
`
`expectation that a contractual counterparty will comply with obligations and industry standards
`
`doesnot establish the level of control required for a fiduciary relationship. See, e.g., Brooks, 151
`
`Md. App.at 509.° Baltimore’s new fiduciary duty claim against JPMorgan thus should be
`
`dismissed.
`
`it.
`
`SANDAG’s Claims Are Mostly Time-Barred
`
`SANDAG?’s contention that defendants fail to carry the burden ofa statute of limitations
`
`affirmative defense (Opp. at 18-19) ignores the well-settled rule that plaintiffs must plausibly
`
`plead facts establishing fraudulent concealmentat the pleading stage to proceed on facially time-
`
`barred claims.’ See In re Int. Rate Swaps Antitrust Litig., 261 F. Supp. 3d 430, 488-90 (S.D.N.Y.
`
`2017) (finding claims time-barred whereplaintiffs “were on inquiry notice” and failed to plead
`
`6 Although sophisticated entities may retain fiduciary advisors, that is not the capacity in which
`Baltimore retained JPMorgan. (See Opp. at 17.) Instead, Baltimore consulted “outside advisers”
`to “regularly monitor[]” its VRDOs and conducted “due diligence to try to avoid being harmed
`by” defendants (Am. Compl. ¥ 174), which is inconsistent with the dominion by one party over
`another typically required to create a fiduciary relationship. See Brass Metal Prods., Inc. v. E-J
`Enters., Inc., 189 Md. App. 310, 356-58 (Md. Ct. Spec. App. 2009).
`
`7 The cases on whichplaintiffs rely do not suggest, much less hold, that the sufficiency of
`fraudulent concealmentallegations cannot be determined on a motion to dismiss. See Dennis v.
`JPMorgan Chase & Co., 343 F. Supp. 3d 122, 195 (S.D.N.Y. 2018) (finding fraudulent
`concealmentallegations sufficient despite argumentthat earlier settlements put plaintiffs on
`notice of claims because defendants did not admit wrongdoing); Axiom Inv. Advisors, LLC by &
`through Gildor Mgmt., LLC v. Deutsche Bank AG, 234 F. Supp. 3d 526, 539-40 (S.D.N.Y. 2017)
`(complaint alleged defendant prevented plaintiff from discovering its claims by “providing a
`misleading explanation .
`.
`. on which [plaintiff] reasonably relied”). BPP JIL, LLC v. Royal Bank
`ofScotland Grp. PLC, 603 F. App’x 57, 59 (2d Cir. 2015) is also of limited relevance becauseit
`considered only Pennsylvania law.
`
`(cont'd)
`
`

`

`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 13 of 19
`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 13 of 19
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`they lacked knowledge ofthe alleged fraudulent concealment). SANDAGdoesnot contest that it
`
`seeks damages stemming from defendants’ alleged inflation of interest rates associated with the
`
`same VRDOsthat are the subject of a California gui tam proceeding—filed in 2014—also
`
`alleging that certain of the same defendants “inflated VRDOinterest rates.” (See ECF No. 233-1
`
`(CFCA Complaint) 4 6.)® Nor can SANDAGreasonably claim ignorance to save its claims
`
`because SANDAGwasstatutorily required to receive actual notice of the CFCA Complaint.
`
`Unable to dispute these facts, plaintiffs resort to the facially implausible assertion that the
`
`CFCA Complaint wasinsufficient to place SANDAGonnotice becauseits allegations relate to
`
`“robo-resetting” of VRDO interest rates and are insufficiently similar to the allegations here.
`
`(Opp. at 23-24.) For example,as plaintiffs highlight (id.), the CFCA Complaintalleges that
`
`defendant banksparticipated in a “scheme where they mechanically set [VRDOinterest] rates en
`
`masse without any consideration of the individual characteristics of the bondsor the associated
`
`market conditions or investor demand.” (CFCA Compl. § 2; see also id. | 37 (“defendants have
`
`engaged in a practice of setting their VRDOrates mechanically and collectively”).) As a result,
`
`defendants supposedly “succeeded in maintainingartificially high VRDOinterestrates.” (/d.
`
`4 116.) But plaintiffs’ Amended Complaint in this case makes conspicuously similar allegations
`
`that “rather than giving individual attention to resetting the rates of each specific VRDO on a
`
`weekly basis, Defendants would reset tens, hundreds, or thousands of VRDOsin a processthat
`
`could take less than thirty minutes.” (Am. Compl. J 160.)’ Plaintiffs also ignore that the CFCA
`
`8 Plaintiffs’ assertion that defendants seek a secondbite at the apple on statute oflimitations
`(Opp. at 19) is belied by the unique facts relating to SANDAG,which defendants could only
`raise once SANDAGfiled suit and joined the Amended Complaint. (See also Memo, at 15, n.7.)
`
`? (See also Am. Compl. § 160 (a defendant would “mechanically reset the rate for hundreds of
`CUSIPsall at once’”).)
`
`(cont'd)
`
`

`

`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 14 of 19
`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 14 of 19
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`Complaint, like the pleadings in this case, implied that the defendants’ rate-setting conduct was
`
`the product of a “conspiracy, contract or agreement” between remarketing agents at different
`
`banks. (See CFCA Compl.at p. 31, Prayer for Relief.)'°
`
`Asthe “scheme”alleged in the CFCA Complaint involved much of the same purportedly
`
`improperrate-setting conduct alleged here, it was more than sufficient to put SANDAGonat
`
`least inquiry notice ofits claims. See Domenikos v. Roth, 288 F. App’x 718, 720 (2d Cir. 2008)
`
`(affirming dismissal of plaintiffs’ claim as time-barred where allegations in a previously filed
`
`class action that defendant had misstated its financial results triggered plaintiffs’ duty to
`
`investigate claims of financial improprieties over a different time period); Fernandez v. UBS AG,
`
`222 F. Supp. 3d 358, 383-84 (S.D.N.Y. 2016) (finding claims time-barred whereplaintiffs were
`
`on inquiry notice dueto priorlitigation involving schemesimilar to plaintiffs’ allegations).!'
`
`10 Both complaints also allege that defendants “succeeded in maintainingartificially high VRDO
`interest rates [allowing defendants] to sidestep their corresponding duty to remarket the bonds
`when investors wish to redeem them.” (CFCA Compl. § 116; compare to Am. Compl. J 14 (“By
`keeping rates high, Defendants ensured that investors would not exercise their put options on the
`bonds on a widespreadbasis [allowing] Defendants to continue to collect remarketing fees for
`doing, essentially, nothing.”).)
`
`'! Plaintiffs again rely on inapposite authority. (See Opp. at 24 n.10.) In Migliori v. Boeing N.
`Am.Inc., the priorlitigation did not allege the cause of injury that wasthe basis ofplaintiffs
`claim. See 114 F. Supp. 2d 976, 986 (C.D. Cal. 2000). In Staehr v. Hartford Fin. Servs. Grp.,
`Inc., appellants pointed only to cursory press reports and a lawsuit that was not “reasonably
`accessible to an ordinary investor.” 547 F.3d 406, 416, 427-28, 435-36 (2d Cir. 2008). Notably,
`the Second Circuit emphasized that “[a]n investor does not have to have notice of the entire fraud
`being perpetrated to be on inquiry notice.” Jd. at 427 (citation omitted). In contrast, the 2014
`CFCA Complaint alleged the same injury—inflated VRDOinterest rates caused by the banks’
`supposed scheme to mechanically reset rates—relating to some of the same bondsthat are the
`subject of the present action, and SANDAGwasrequired to receive notice. And in Monterrey
`Bay Mil. Hous., LLC v. Ambac Assurance Corp., there was no indication that plaintiffs had prior
`notice of wrongdoing. See 2021 WL 1226984, at *26 (S.D.N.Y. Mar. 31, 2021).
`
`(cont'd)
`
`

`

`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 15 of 19
`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 15 of 19
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`Plaintiffs’ remaining arguments fall similarly flat. For example, they brush aside the
`
`statutory notice requirement as an “unsupported premise” (Opp. at 20), but do not (and cannot)
`
`dispute that where both state and political subdivision fundsare at issue, as in the California qui
`
`tam action, the California Attorney General is required by law to give notice to the “local
`
`governmentofficial charged with investigating, filing, and conducting civil legal proceedings on
`
`behalf of, or in the nameof, a particular political subdivision.” Cal. Gov’t Code §§ 12650(b)(8),
`
`12652(c)(8)(A). Plaintiffs ignore the California Attorney General’s representation in the qui tam
`
`action that it provided such notice. See State ex rel. Edelweiss Fund, LLC v. JPMorgan Chase &
`
`Co., 58 Cal. App. 5th 1113, 1118 (2020). And plaintiffs concede that SANDAGhas“referred to
`
`itself” in court filings as a “prosecuting authority.” (Opp.at 22.)'2 What is more, SANDAGhas
`
`relied on its status as a “prosecuting authority” to take legal action under California’s qui tam
`
`statute. (ECF No. 233-3, Complaint in Intervention by SANDAG(interveningin its role as
`
`“prosecuting authority” under CFCA).)
`
`Without the benefit of tolling for fraudulent concealment, the vast majority of
`
`SANDAG’s claimsare time-barred—a point SANDAGneveronce disputes. (See Memo. at 15-
`
`16.)
`
`CONCLUSION
`
`For the foregoing reasons, defendants’ motion should be granted.
`
`12 Although SANDAGattemptsto evade the implications of the CFCA by arguingthatit is not a
`“prosecuting authority” becauseit is not “county counsel, city attorney, or other local
`governmentofficial charged with investigating, filing, and conductingcivil legal proceedings on
`behalf of .
`.
`. a particular political subdivision” (Opp. at 21), California courts have given a
`“broad interpretation” to “prosecuting authority.” Sacramento Reg’! Pub. Safety Commc’ns Ctr.
`v. Tyler Techs., Inc., 2019 WL 1255252, at *5 (E.D. Cal. Mar. 19, 2019).
`
`10
`
`

`

`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 16 of 19
`Case 1:19-cv-01608-JMF Document 243 Filed 11/15/21 Page 16 of 19
`
`Dated: November 15, 2021
`
`Respectfully submitted,
`
`WILMER CUTLER PICKERING HALE
`AND DORR LLP
`
`SKADDEN, ARPS, SLATE,
`MEAGHER & FLOM LLP
`
`By:/s/ Jamie Stephen Dycus*
`
`By:/s/ Boris Bershteyn
`
`Jamie Stephen Dycus
`Julia Lichtenstein
`7 World Trade Center
`250 Greenwich Street
`New York, NY 10007
`Telephone: (212) 230-8800
`Fax: (212) 230-8888
`jamie.dycus@wilmerhale.com
`julia. lichtensten@wilmerhale.com
`
`Attorneysfor Defendants Bank ofAmerica
`Corporation, Bank ofAmerica, N.A., and
`Merrill Lynch