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Wilkov v. Ameriprise Financial Services, Inc.

United States District Court, S.D. New York

March 30, 2017

JENNIFER S. WILKOV, Plaintiff,
v.
AMERIPRISE FINANCIAL SERVICES, INC., f/k/a AMERICAN EXPRESS FINANCIAL ADVISORS, INC., and NEW YORK COUNTY DISTRICT ATTORNEY, Defendants.

          MEMORANDUM OPINION AND ORDER

          LAURA TAYLOR SWAIN, United States District Judge.

         On October 7, 2015, Defendant Ameriprise Financial Services, Inc., f/k/a American Express Financial Advisors, Inc. (“Ameriprise”), removed this case from the Supreme Court of the State of New York, asserting that this Court has subject matter jurisdiction of this case under 28 U.S.C. § 1332. (Docket entry no. 1 (“Notice of Removal”).) In the Notice of Removal, Ameriprise asserted that, although both Plaintiff Jennifer S. Wilkov and Defendant New York County District Attorney (the “DA” and, together with Ameriprise, “Defendants”) were citizens of the State of New York, the New York County District Attorney had been “improper[ly]” joined to the matter because “there is no possibility, based on the pleadings, that the plaintiff can state a cause of action against the [DA].” (Notice of Removal, p. 3.)

         This Court ordered Ameriprise to show cause why the joinder of the DA to this action was fraudulent (docket entry no. 47), and Ameriprise responded on December 21, 2016 (docket entry no. 49). Additionally, both Ameriprise and the DA have moved, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss Plaintiff's Amended Complaint (docket entry no. 24) for failure to state a claim.

         The Court has carefully reviewed the submissions of all parties submitted in connection with the instant motions, including Ameriprise's response to the Court's Order to Show Cause and, for the following reasons, finds that the joinder of the DA to this action was fraudulent and therefore does not defeat this Court's subject matter jurisdiction, and further grants both Defendants' motions to dismiss.

         Background

         The following recitation of facts is drawn from the Amended Complaint (docket entry no. 24 (“AC”)), the well-pleaded factual allegations of which are taken as true for the purposes of this motion to dismiss, as well as the public record, including records of earlier civil and criminal cases, of which the Court may take judicial notice.[1]

         Ameriprise hired Wilkov as a financial advisor in approximately December 2000, pursuant to an employment agreement. (AC ¶¶ 7-8.) In approximately 2004, Wilkov became a Franchisee with Ameriprise, and signed Ameriprise's Franchise Agreement. (AC ¶ 9.) Wilkov alleges, upon information and belief, that the Franchise Agreement required Ameriprise to supervise all aspects of Wilkov's activities as an investment advisor. (AC ¶ 10.)

         Also in 2004, Wilkov began investigating a possible investment opportunity in the California real estate market with a company called CPM Holdings. (AC ¶¶ 12-13.) Wilkov was referred to this opportunity by her brother. (AC ¶ 12.) Wilkov alleges that Ameriprise was required to review all transactions involving family members, but did not provide any independent review or supervision of Wilkov's investments in CPM Holdings. (AC ¶ 14.) However, Wilkov did make her compliance supervisor aware of the CPM Holdings investment, and was told that Ameriprise did not invest in real estate, and Wilkov was therefore “on her own” with respect to that investment. (AC ¶ 15-16.) Wilkov alleges that Ameriprise required her to complete a form that was not compliant with applicable regulations in order to continue investing with CPM Holdings. (AC ¶ 16-17.)

         According to public records maintained by the Financial Industry Regulatory Authority (“FINRA”), Wilkov's association with Ameriprise ended in August 2005. (See Declaration of Virginia T. Shea, Esq., at Ex. A (FINRA BrokerCheck report).) The CPM Holdings investment was ultimately revealed to be fraudulent, leading Wilkov to plead guilty on January 22, 2008, to multiple fraud-related charges in New York State court. (See docket entry no. 30 (Declaration of ADA Elizabeth Krasnow (“Krasnow Decl.”)), Ex. B (People v. Wilkov, Ind. No. 2765/07, Plea Transcript (“Plea Tr.”)).) Wilkov alleges, on information and belief, that in testimony before the Grand Jury considering whether to indict her, Ameriprise employees falsely represented to the Grand Jury that Wilkov did not inform Ameriprise about the investment in CPM Holdings. (AC ¶ 21.)

         During her plea allocution, Wilkov admitted that she began soliciting investors for the investments in CPM Holdings in January 2005. (Plea Tr. 13:25-14:3.) Wilkov further admitted that she failed to disclose to her Ameriprise clients that she was receiving commissions from CPM Holdings. (Plea Tr. 14:10-15.) She also admitted that she falsely told her Ameriprise clients that she had worked with CPM Holdings and its principals in the past, and had done due diligence on the investment, when in reality she “had no basis for recommending their company and their investments.” (Plea Tr. 15:3-7.) Wilkov's investors lost all of their money. (Plea Tr. 15:25-16:2.) Wilkov herself received $142, 000 in referral commissions from CPM Holdings. (Plea Tr. 15:21-22.)

         Separately from the criminal case, in June 2007, the DA commenced a civil asset forfeiture proceeding against Wilkov. (AC ¶ 45.) In connection with the forfeiture proceeding, Wilkov was ordered to liquidate her apartment and provide the proceeds to the DA. (AC ¶ 46.) Wilkov did so, and her attorneys provided checks totaling $190, 192.22 to the DA to be placed in escrow. (AC ¶ 47.) From that escrow account, the New York State Court overseeing the forfeiture proceeding ordered certain funds paid to Wilkov's lawyers and additional monies paid to Wilkov's victims. (AC ¶¶ 48-51.) Wilkov alleges that a remaining balance of $21, 528.36 was not allocated or returned to her. (AC ¶ 51.) Wilkov signed a Stipulation of Discontinuance of the asset forfeiture proceeding in which Wilkov specifically waived “each and every defense, objection, remedy and/or right of appeal she may have under the constitutions, statutes, common law, and equitable doctrines of the United States and the State of New York in connection with the . . . disposition of the . . . civil forfeiture action against her.” (Krasnow Decl., Ex. H (Morgenthau v. Wilkov, No. 405072/07, Stipulation of Discontinuance).)

         In 2011, Plaintiff's father commenced a FINRA proceeding against Ameriprise.[2]In that proceeding, Ameriprise was “found to have committed common law fraud, securities fraud, negligence, breach of contract, and other findings, ” and Plaintiff was absolved of contributory liability. (AC ¶ 25.) The Amended Complaint asserts, without specificity, that “testimony” from the FINRA hearing “made it clear that facts, including the allegations proffered to the District Attorney were deliberately false.” (AC ¶ 26.)

         In her Verified Complaint filed in New York State Court, Wilkov asserted two causes of action against Ameriprise (for breach of contract or unjust enrichment, and for fraud) and one cause of action against the DA. (Notice of Removal, Ex. 1 (Verified Complaint).) The cause of action against the DA was captioned as one “for permanent injunction, mandamus, and/or other equitable relief.” (Id., p. 7.)

         In her Amended Complaint filed in this Court, Wilkov reasserted these three claims and added a fourth cause of action, against the DA, for prosecutorial misconduct and for ...


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