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Heller v. Nicholas Applegate Capital Management

July 26, 2007


The opinion of the court was delivered by: Gladys Kessler United States District Judge


Plaintiffs, the Trustees of the Electrical Workers Local No. 26 Pension Trust Fund (the "Fund"),*fn1 bring this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., on behalf of the Fund seeking recovery of monetary damages for alleged breaches of fiduciary duty by the Fund's investment managers. Defendants are Trust Fund Advisors, Inc. ("TFA"), a corporation with its principal place of business in the District of Columbia, Nicholas Applegate Capital Management, LLC ("NACM"), a Delaware limited liability company with its principal place of business in San Diego, California, and Allianz AG ("Allianz"), a German corporation with its principal place of business in Munich.

This matter is before the Court on Allianz's Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2) and for Failure to State a Claim pursuant to Fed. R. Civ. P. 12(b)(6) [Dkt. No. 62].*fn2 Upon consideration of the Motion, Opposition, Reply, and the entire record herein, and for the reasons stated below, Allianz's Motion is granted.


A. Facts*fn3

1. The Fund's Relationship with TFA and NACM

In 1995, the Fund retained TFA and NACM as investment managers for a portion of the Fund's assets. Am. Compl. ¶ 11. TFA served as the manager of the assets, and NACM was responsible, as a sub-advisor, for investing a certain portion of the assets in "International Equity" and "Growth Equity & Growth Balanced" investments. Declaration of Ira R. Mintzer, Oct. 3, 2005 ("Mintzer Decl."), Ex. 1. The performance of Fund assets managed by TFA and NACM was compared to a benchmark index--the Russell 1000 Growth Index of large capitalization growth stocks. Am. Compl. ¶ 21.

From 1995 to 2001, Craig Occhialini, an employee of NACM, was the Fund's primary contact person with TFA and NACM. Id. ¶ 18. Plaintiffs allege that TFA and NACM held Mr. Occhialini out as a "Portfolio Manager" and a "Key Individual." Id. Based on these representations, the Fund's Trustees "believed that Mr. Occhialini was a portfolio manager who participated in managing the Fund's account and a key person on that account." Id. ¶ 19.

Plaintiffs allege that, at some point in 2000, Mr. Occhialini was demoted to a mere marketing role. Id. ¶ 31. This change was not disclosed to the Fund's Trustees. Id. They only became aware of Mr. Occhialini's changed role, and subsequent departure from NACM, on September 19, 2001. Id. ¶ 36.

Plaintiffs allege that the portfolio managed by TFA and NACM on behalf of the fund demonstrated stellar returns until the market downturn for large capitalization growth stocks occurred in 2000. Id. ¶ 34. In the fourth quarter of 1999, for example, these assets appreciated by approximately 35%, compared to approximately 25% for the Russell 1000 benchmark index. Id. ¶ 21. By contrast, the portfolio depreciated in value by approximately 25% in the fourth quarter of 2000, compared to a loss of approximately 21% by the benchmark index. Id. ¶ 35. The poor performance of the assets managed by TFA and NACM allegedly corresponded in time with Mr. Occhialini's changed role at NACM.

Once the Trustees of the Fund learned that Mr. Occhialini had left NACM, the Trustees unilaterally voted to terminate TFA's and NACM's management of the Fund's assets. Id. ¶ 36. Plaintiffs allege that the failure of the Defendants to disclose the change in Mr. Occhialini's role and subsequent departure from NACM was a breach of fiduciary duty. Plaintiffs have presented no evidence tying Allianz to Mr. Occhialini's alleged demotion or his departure from NACM.*fn4

2. Allianz's Acquisition of NACM in 2000-2001

At some time prior to October 2000, NACM retained an investment bank to explore strategic opportunities with other companies in the financial services industry. Deposition of Dr. Ilja-Kristin Seewald, Aug. 17, 2005 ("Seewald Dep."), Ex. 26. A competitive bidding process for the sale of NACM ensued, and Allianz submitted the winning bid. Id. The record is silent as to when and where the negotiations between Allianz and NACM occurred, but there is no evidence of any connection between the sale and the District of Columbia. The acquisition was publicly announced on October 18, 2000 and the sale closed on January 31, 2001.

Media reports in September 2000 first revealed the possibility that Allianz might purchase NACM. Am. Compl. ¶ 25. This revelation apparently came as a surprise to TFA. On September 19, 2000, Grover McKean, President of TFA, sent a letter to Arthur E. Nicholas, Managing Partner of NACM, complaining that TFA had learned of the possible acquisition of NACM from the Wall Street Journal. Deposition of Eric S. Sagerman, Aug. 24, 2005 ("Sagerman Dep."), Ex. 26.

3. Communications by Allianz and NACM Regarding the Acquisition

As part of the process of finalizing Allianz's acquisition of NACM, Dr. Ilja-Kristin Seewald, Head of Financial Communications for Allianz and Richard Shaughnessy, who was at that time Head of Communications for NACM, worked together to create documents announcing the acquisition. Sagerman Dep., Ex. 10. As part of this effort, Mr. Shaughnessy created a timetable for communicating with various constituencies. Deposition of Richard F. Shaughnessy, July 27, 2005 ("Shaughnessy Dep."), at 107, Ex. 22; Seewald Dep., Ex. 24. Dr. Seewald drafted a document titled "Suggestions for internal and external [c]ommunications" that discussed "[s]takeholders who might wish to be informed." Seewald Dep., Ex. 46. The document gave NACM the responsibility for informing its own major clients of the acquisition. Id. at 88-89, Ex. 46.

Seewald and Shaughnessy exchanged multiple drafts of the press release announcing the acquisition. Seewald Dep., Exs. 37-45. The two drafted a "Master Q&A" document to assist in responding to anticipated inquiries from the media. Seewald Dep. at 61, Ex. 27. Dr. Seewald also drafted two documents containing information that was incorporated into the "Master Q&A" document. Seewald Dep., Exs. 33-34. NACM also separately created a document titled "Questions and Answers for Nicholas-Applegate Clients" to be used to answer questions from NACM clients which was similar in format and content to the "Master Q&A" document. Shaughnessy Dep. at 124-25, Ex. 24. Dr. Seewald testified at her deposition that she had never seen this separate Q&A document for NACM clients in that format. Seewald Dep. at 61; Ex. 26.

NACM prepared form "Dear Client" letters to be sent to its clients announcing the acquisition. See id., Ex. 13. One such "Dear Client" letter was sent on October 18, 2000 to Cathy Humphrey at TFA. Shaugnessy Dep., Ex. 44. The letter was accompanied by a copy of the press release announcing the acquisition. Declaration of Seth Richardson, Aug. 25, 2004 ("Richardson Decl."), Ex. D. Plaintiffs have not pointed to any other evidence of communications between NACM and TFA that is relevant here, or of any communications whatsoever between Allianz and TFA.

4. TFA's October 18, 2000 Letter to the Fund (the "Hartman Letter")

Later in the day on October 18, 2000, Kenneth T. Hartman, Regional Vice President of TFA, drafted and sent a letter informing the Fund of Allianz's acquisition of NACM. Id., Ex. C.*fn5 Mr. Hartman enclosed a copy of the press release TFA had earlier received from NACM. Id., Ex. D. The letter was sent from TFA's offices in the District of Columbia to the Fund's agent: Edward Godfrey of National Fiduciary Advisors in Los Angeles, California. Id., Ex. C.

There is no evidence in the record that TFA was instructed by either NACM or Allianz to send the Hartman Letter, although much of the second paragraph of the Hartman Letter paraphrased portions of NACM's October 18, 2000 "Dear Client" letter. In their depositions, Arthur Nicholas, Richard Shaughnessy, and Eric Sagerman---all NACM employees--testified that they had never seen the Hartman Letter before. Nicholas Dep. at 77; Shaughnessy Dep. at 149; Sagerman Dep. at 54. Nor is there any evidence of any discussion between TFA, NACM, or Allianz, about informing the Fund of Allianz's acquisition of NACM. See Shaughnessy Dep. at 150 (witness not aware of any discussions with anyone regarding a letter to go to TFA).*fn6

5. Allianz Discussions Regarding NACM Personnel

In August 2000, approximately two months prior to the announcement of the acquisition, Allianz's internal documents reflect discussions regarding the future of key NACM personnel following the acquisition. Seewald Dep., Ex. 48. A facsimile from Dr. Joachim Faber, a member of Allianz's Board of Directors, to Milton Berlinski lists "[p]osition of Art Nicholas, John McDonnell, and Cathrine [sic] Somhegyi after a transaction" and "[r]etention of key people after a transaction" as topics worth being discussed at an upcoming meeting. Id. Other Allianz documents reflect ...

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