Plaintiffs, the principals of a corporation and the trustee of the corporation's defined benefit pension - timscotty/timscotty GitHub Wiki

Appeal Court Decision Plaintiffs, the principals of a corporation and the trustee of the corporation's defined benefit pension plan, challenged a judgment of the Superior Court of Orange County (California), which declined to grant them leave to amend their complaint as to defendant, a marketer of pension plans, after sustaining a demurrer to their amended complaint that contained causes of action for fraud and a violation of California's unfair competition law.

Overview: business lawyer

Plaintiffs alleged that defendant and other defendants persuaded them to establish a pension plan under former 26 U.S.C. § 412(i) by representing contributions to the plan were tax deductible under the Internal Revenue Code. The court held that plaintiffs failed to allege all of the elements for a fraud claim. Plaintiffs failed to allege the statements by defendants' agents concerning the favorable tax treatment of plaintiffs' 412(i) plan were false when made, and, to the extent they could be so construed, it simply was not reasonable for plaintiffs to rely on representations concerning how the Internal Revenue Service would treat their pension plan in the future. Nor had plaintiffs made a sufficient showing that they could amend the complaint to adequately state valid causes of action. Given the representations in defendant's marketing materials and opinion letters that its 412(i) plan "more likely than not" would qualify for favorable tax treatment, plaintiffs did not explain how they could allege they could reasonably expect or assume the Internal Revenue Service would never disqualify their plan or revise its interpretation of the tax laws.

Outcome The court affirmed the judgment.