IN RE BEACON ASSOCIATES LITIGATION

letters Ivy sent to BAMC does not support an inference of scienter because there is no allegation that Friedburg actually reviewed these letters. "[M]erely alleging that the auditor had access to the information by which it could have discovered the fraud is not sufficient." In re IMAX Secs. Litig., 587 F. Supp. 2d at 484.

We also join the courts that have found the alleged red flags to be either not so obvious that an auditor must have known of them or not strong enough to support an inference of scienter. See Stephenson, 700 F. Supp. 2d at 623-24 (finding following red flags not so obvious that auditor must have known of them: "BMIS' transactions were at

variance with market evidence; . . . BMIS did not permit access to its computers, and many of its reported trades could not have actually taken place at the prices reported; . . . BMIS' independent auditor, Friehling and Horowitz, was small, not well known, and not properly certified"); see also Anwar, 2010 WL 3341636, at *65 (rejecting following red flags, if known to auditor, as indicative of intent to deceive: "Madoff did not provide electronic confirmations to the Funds that he managed, and instead gave them delayed, paper confirmation of supposed trades[;] . . . Madoff purport[ed] to turn consistent investment returns during good times and bad times in the market[;] . . . All of the Funds' assets were managed by Madoff, who acted as investment advisor, broker-dealer, and custodian of those assets — a highly unusual arrangement with no checks and balances."); In re Tremont Secs. Law, State Law and Ins. Litig., 703 F. Supp. 2d 362 (S.D.N.Y. 2010) (finding that similar red flag allegations against auditor of Madoff feeder fund did not establish scienter). Plaintiffs' additional red flag allegations, such as Madoff's lack of an industry standard SAS 70 report, either are not sufficiently alleged to have been known to Friedburg, or do not support an inference of an intent "approximat[ing] an actual intent to aid in the fraud being perpetrated by the audited company." Rothman v. Gregor, 220 F.3d 81, 98 (2d Cir. 2000) (internal quotation marks omitted).

Plaintiffs also raise allegations relating to Footnote Five of the audited Beacon financials, which states that Friedburg "is not able to obtain the specific investments at some of the underlying private investment funds due to lack of available data." Zieff Decl. Ex. A ("2007 Financials"), at 8. However, this note pertains to investments comprising approximately twenty-five percent of the Beacon Fund's assets (i.e., the non-Madoff holdings). Moreover, even if this note was read to refer to Madoff, it would simply corroborate the inference that Friedburg did not investigate Madoff, rather than the inference that Friedburg was aware of the various alleged red flags.

The securities fraud claims against Friedburg are dismissed.

b. ERISA Claims

Plaintiffs raise a number of claims under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., against the Beacon, Ivy, BONY, and Jeanneret Defendants. Counts against all four groups of Defendants include breach of the fiduciary duty of prudence (Count VIII), failure to comply with documents and instruments governing the plan (Counts IX-X), misrepresentation, failure to disclose, and concealment of breach of fiduciary duty (Count XI), and co-fiduciary liability (Count XII). Plaintiffs also assert a claim for disgorgement of profits against the Ivy and BONY Defendants (Count XIII).

ERISA's primary purpose is to "protect beneficiaries of employee benefit plans." Slupinski v. First Unum Life Ins. Co., 554 F.3d 38, 47 (2d Cir. 2009) (citing 29 U.S.C. § 1001(b)). ERISA holds plan fiduciaries to the "[p]rudent man standard of care" in exercise of their duties. 29 U.S.C. § 1104(a). ERISA measures prudence "according to the objective `prudent person' standard developed in the common law of trusts." Katsaros v. Cody, 744 F.2d 270, 279 (2d Cir.), cert. denied, 469 U.S. 1072 (1984). Trustees' fiduciary obligations to the participants and beneficiaries of an ERISA plan have been described as "the highest known to the law." Chao v. Merino, 451 F.3d 174, 182 (2d Cir. 2006) (quoting Donovan v. Bierwirth, 680 F.2d 263, 272 n. 8 (2d Cir.), cert. denied, 459 U.S. 1069 (1982)).

Specifically, ERISA lists four duties required of fiduciaries. Fiduciaries are to (1) act "solely in the interest of the participants and beneficiaries," and for the purpose of benefiting participants and defraying reasonable administration expenses; (2) discharge their duties "with the care, skill, prudence, and diligence under the circumstances then prevailing"; (3) diversify investments "so as to minimize the risk of large losses"; and (4) act "in accordance with the documents and instruments governing the plan" so long as they are consistent with ERISA itself. 29 U.S.C. §§ 1104(a)(1)(A)-(D).

i. The Jeanneret Beacon Defendants

Neither party moves to dismiss the ERISA claims against the individual Jeanneret and Beacon Defendants on the grounds that personal liability is only warranted under "special circumstances." See infra pp. 65-66. Accordingly, the Court does not consider this argument here and addresses the claims as to all Jeanneret and Beacon Defendants.

Plaintiffs assert four claims against the Jeanneret and Beacon Defendants: breach of the duty of prudence and loyalty (Count VIII), failure to comply with documents and instruments governing the plan (Counts IX and X), prohibited transaction (Count X), and co-fiduciary liability (Count XII).

The SCAC also alleges "Concealment of Breach of Fiduciary Duty" against the Jeanneret and Beacon Defendants in Count XI. Count XI describes Ivy's alleged failures to disclose material facts to the Jeanneret and Beacon Defendants. However, it does not identify the section of ERISA under which Plaintiffs seek relief, nor does it include any factual allegations of wrongdoing by the Jeanneret or Beacon Defendants. See JPJA Supp. Mem. 13-14. In supplemental pleading, Plaintiffs identify ERISA § 413, 29 U.S.C. § 1113, as the operative section. Pls.' Supplemental Mem. Opp'n Mot. Dismiss 93. Section 413 states: "[I]n the case of fraud or concealment, [an ERISA breach of fiduciary duty] action may be commenced not later than six years after the date of discovery of such breach or violation." 29 U.S.C. § 1113. This provides Plaintiffs with a potentially longer statute of limitations period.
To the extent that Plaintiffs include the concealment charge in Count XI in order to meet this standard, the Court finds they have sufficiently pleaded fraud or concealment to obtain the extended limitations period. However, Plaintiffs do not sufficiently plead an independent claim for concealment against the Jeanneret and Beacon Defendants in Count XI.

1. Duty of Prudence

ERISA requires fiduciaries to discharge their duties "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." 29 U.S.C. § 1104(a)(1)(B). When assessing the Defendants' decisions, the Court must focus on facts as they existed at the time of the challenged transaction. Henry v. Champlain Enters., Inc., 445 F.3d 610, 618 (2d Cir. 2006). Hindsight cannot form the basis of an ERISA claim. Id.; Katsaros v. Cody, 744 F.2d at 279 (fiduciary conduct must be viewed "from the perspective of the time of the [challenged] decision rather than from the vantage point of hindsight"). However, where a "fiduciary was aware of a risk to the fund, he may be held liable for failing to investigate fully the means of protecting the fund from that risk." Chao v. Merino, 452 F.3d 174, 182 (2d Cir. 2006) (finding defendant's "silence and failure to take any action to protect the fund fell far short of the duties she assumed as a fiduciary and led to the loss the Fund experienced" when associate later embezzled funds); see also Barker v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995) (finding defendant breached ERISA's prudence standards by failing to investigate or inform beneficiaries of suspicions regarding problems with plan maintenance).

The Jeanneret Defendants do not dispute their status as ERISA fiduciaries with respect to the investment of employee benefit plan assets. Rather, they assert that Plaintiffs fail to allege more than speculative facts that give rise to ERISA claims. See Twombly, 550 U.S. at 555 (plaintiff seeking to survive motion to dismiss must allege facts that "raise a right to relief above a speculative level"). Giving the Plaintiffs' factual allegations the "careful and holistic evaluation" they deserve, Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (noting ERISA plaintiffs often "lack the inside information necessary to make out their claims in detail unless and until discovery commences"), the Court finds that Plaintiffs plead sufficient facts to "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.ct. 1937, 1949 (2009).

As the Jeanneret Defendants acknowledge, Plaintiffs' breach of the fiduciary duty of prudence arguments essentially mirror those raised in the 10b-5 claims. They allege that the Jeanneret Defendants were aware that Ivy had ceased performing due diligence on Madoff, which presented a potential material risk to the Beacon Fund, but failed to act on that knowledge. Accordingly, Plaintiffs plead a viable claim for breach of the duty of prudence under ERISA. The Jeanneret Defendants' motion to dismiss Count VIII is denied.

This same reasoning supports denial of the Beacon Defendants' motion to dismiss Count VIII. Like the Jeanneret Defendants, the Beacon Defendants do not dispute their status as fiduciaries, which gives rise to a duty to "employ[] the appropriate methods to investigate the merits of the investment and to structure the investment." Henry v. Champlain Enters., Inc., 445 F.3d at 618. As held supra, Plaintiffs adequately allege Beacon became aware that no due diligence would be performed on Madoff, but did nothing to address the risk that this presented. Plaintiffs have alleged sufficient facts to make it plausible that Defendants breached their duty of prudence under ERISA. The Beacon Defendants' motion to dismiss Count VIII is denied.

2. Failure to Comply with Plan Documents and Prohibited Transactions

Plaintiffs next allege the Jeanneret and Beacon Defendants violated ERISA § 1104(a)(1)(D), which requires fiduciaries to act in accordance with plan documents. Specifically, they allege Defendants received management fees based in part on assets and returns that turned out to be fictional. Plaintiffs assert that, because the DIMAs and OMs governing the plans required investment management fees to be calculated as a percentage of actual assets under management, the miscalculation violated the agreements. We disagree.

Section 1104(a) requires Defendants to act according to the "[p]rudent man standard of care" in complying with plan documents. 29 U.S.C. § 1104(a). "The plain meaning of this provision is that if the terms of the plan documents and instruments are consistent with ERISA, a plan trustee has a fiduciary duty to adhere to those terms." Cement and Concrete Workers Dist. Council Pension Fund v. Ulico Cas. Co., 387 F. Supp. 2d 175, 185 (E.D.N.Y. 2005). According to the Supreme Court, the section is intended to limit discretion by providing fiduciaries with a straightforward rule where an issue is expressly covered by plan documents. Kennedy v. Plan Adm'r for DuPont Sav. Inv. Plan, 129 S.Ct. 865, 875 (2009) (finding administrator had duty under ERISA to follow designation in plan documents over conflicting federal common-law waiver); see also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995) (ERISA's statutory scheme "is built around reliance on the face of written plan documents"). This rule "forecloses any justification for enquiries into nice expressions of intent, in favor of the virtues of adhering to an uncomplicated rule." Id.

Claims under this section typically involve noncompliance with guidelines and procedures set out in the documents. See, e.g., L.I. Head Start Child Dev. Servs., Inc. v. Econ. Opportunity Com'n of Nassau Cnty., Inc., 634 F. Supp. 2d 290, 313 (E.D.N.Y. 2009) (finding defendant breached section 1104(a)(1)(D) when it failed to terminate coverage for member that did not make premium payments as required by documents); Dardaganis v. Grace Capital, Inc., 664 F. Supp. 105, 108 (S.D.N.Y. 1987), aff'd in part and vacated in part, 889 F.2d 1237, 1242-43 (2d Cir. 1989) (failure of investment manager to adhere to plan guidelines limiting stock investments to no more than 50% of total assets was held to violate section 404(a)(1)(D) and to subject manager to liability for losses on stocks purchased after 50% limit had been reached). It does not generally apply to areas where fiduciaries are given discretion, so long as the actions comply with the letter of the documents. Laborers Nat'l Pension Fund v. Northern Trust Quantitative Advisors, Inc., 173 F.3d 313 (5th Cir. 1999) (finding investment manager had not violated section 404(a)(1)(D) or plan guidelines by investing in derivatives); Ganton Tech., Inc. v. Nat'l Indus. Grp. Pension Plan, 76 F.3d 462, 466 (2d Cir. 1996) ("When plan documents give the trustees the discretion to interpret plan terms, we will not substitute our judgment for theirs unless the trustees' interpretation is arbitrary and capricious.").

These cases differ significantly from the type of claim Plaintiffs advance. Given the asset figures reported to the Jeanneret and Beacon Defendants, their calculation of fees appears entirely consistent with the manner described in the Plan documents. In providing the terms by which fees were to be calculated, the DIMAs and OMs presumably anticipated that Defendants would use the figures reported to them to calculate fees. Plaintiffs do not really contend that Defendants' actions violated these procedures, but that Defendants knew or should have known the figures were false and used them anyway. This is a repackaging of their prior allegations of failure to discover the Madoff Ponzi scheme, and is unrelated to the terms stated on the face of the plan documents. As such, these claims are better addressed under the breach of the duty of prudence (above) and as prohibited transactions (below). The claims under section 1104(a)(1)(D) are dismissed.

In the alternative, Plaintiffs allege the receipt and retention of fees based on the miscalculated assets constituted a prohibited transaction under ERISA § 1106(a). Section 1106(a)(1)(D) prohibits a fiduciary from "caus[ing] the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect . . . transfer to, or use by or for the benefit of a party in interest, of any assets of the plan." As fiduciaries, the Jeanneret and Beacon Defendants are parties in interest for the purposes of ERISA. Section 1106 "requires proof that the fiduciary in question either knew or reasonably should have known that the transaction constituted" a prohibited transaction. Reich, 57 F.3d at 280. The provision does not prohibit a fiduciary from "receiving any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan." 29 U.S.C. § 1108(c)(2).

The Court of Appeals for the Third Circuit interpreted this claim as having five elements: "(1) the person or entity is `[a] fiduciary with respect to [the] plan'; (2) the fiduciary `cause[s]' the plan to engage in the transaction at issue; (3) the transaction `use[s] plan assets'; (4) the transaction's use of the assets is `for the benefit of' a party in interest; and (5) the fiduciary `knows or should know' that elements three and four are satisfied." Reich v. Compton, 57 F.3d 270, 279 (3d Cir. 1995).

Plaintiffs allege the investment management fees paid were unreasonable to the extent they were based on assets misappropriated by Madoff. They allege the Jeanneret and Beacon Defendants knew or should have known, based on a series of publicly available red flags, that these calculations were based on false data, and they thus engaged in an improper transfer of plan assets. This would require finding that the red flags were sufficiently obvious that the Defendants should have known Madoff was a fraud, and that the figures reported were false. The Court has already considered and rejected this argument in the context of the Beacon and Friedburg 10b-5 claims. Because Plaintiffs do not allege sufficient factual evidence of the Defendants' knowledge, the claims in Count X are dismissed.

Plaintiffs also allege the Beacon Defendants violated their duty to act in accordance with plan documents by investing Beacon Fund assets with Madoff (Count IX). Plaintiffs claim Beacon failed to comply with plan documents when they invested the Beacon Fund's assets with Madoff, "even though they knew or should have known that, neither Madoff nor BAMC ever employed the split-strike conversion strategy or the `Managing Members Large Cap Strategy' described in the Offering Memoranda." SCAC ¶ 513. The Beacon Defendants respond that the OMs are not plan documents or instruments within the meaning of ERISA, and, even if they were, Defendants complied with their terms. Whether or not the OMs are plan documents, Plaintiffs fail to allege adequately that investing Beacon monies with Madoff was a breach of fiduciary duty. The claim that Beacon should have known Madoff was lying about his strategy is essentially a repackaging of Plaintiffs' already rejected red flag theory. The claims against Beacon in Count IX are dismissed.

While Plaintiffs also name the Jeanneret Defendants in Count IX, they do not allege any facts that suggest investing in Madoff constituted a failure to comply with plan documents. If the Court were to construct such an argument, our analysis of it would parallel that of the allegations against Beacon and fail for the same reasons. Count IX is dismissed with respect to the Jeanneret Defendants.

3. Co-fiduciary Liability

Finally, Plaintiffs allege co-fiduciary liability under 29 U.S.C. § 1105(a). The section reads:

In addition to any liability which he may have under any other provisions of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances:

(1) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach;

(2) if, by his failure to comply with section 1104(a)(1) of this title in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach; or

(3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.

29 U.S.C. § 1105(a). As to the Beacon Defendants, Plaintiffs first allege they knowingly participated in the improper charging and retention of inappropriately calculated fees by Defendant Ivy in violation of section 1105(a)(1). Because the Court has held that the calculation of fees was not a breach of fiduciary duty, the claim under § 1105(a)(1) is dismissed.

Next, Plaintiffs allege the Beacon, Ivy, and BONY Defendants violated section 1105(a)(2) by "their failures to comply with their own fiduciary responsibilities, [which] enabled one or more other fiduciaries to commit a fiduciary breach." SCAC ¶ 540. By agreeing to halt the performance of due diligence on Madoff, Plaintiffs allege Beacon and Ivy each facilitated the other's fiduciary breach. Because the Court has allowed the aforementioned theories of breach to go forward, it is premature to dismiss the enabling claims at this time, and the motion to do so is denied. Because the Court has dismissed Plaintiffs breach of fiduciary duty claims against BONY, see infra pp 65-66., the enabling claim is also dismissed.

As to the Jeanneret Defendants, Plaintiffs allege Defendants violated section 1105(a)(2) by channeling Plaintiffs' investments into the Beacon Fund without conducting meaningful oversight. Plaintiffs allege this enabled breaches committed by the Ivy, Beacon, and BONY Defendants. That Ivy's breaches were enabled by Jeanneret's lack of oversight is sufficiently plausible to counsel against dismissal at this time, and the motion to do so is denied. As to Beacon, the only breach plausibly committed is a similar failure to conduct due diligence. Plaintiffs do not allege a connection between the Jeanneret and Beacon breaches that would suggest one facilitated the other. Nor do they suggest that, had the Jeanneret Defendants conducted due diligence, Beacon would have done so as well. Because Plaintiffs fail to allege facts supporting a reasonable inference that the breach by Jeanneret Defendants enabled that of the Beacon Defendants, the claim is dismissed. The claims against Jeanneret with regard to BONY fail for the same reasons stated above.

Finally, Plaintiffs allege the Jeanneret Defendants violated section 1105(a)(3) because they were aware of the "Beacon Defendants' failure to comply with the investment strategy they purported to follow" in the OMs and the Beacon Defendants' decision to invest in Madoff, despite knowledge that he did not comply with the required strategy. SCAC ¶ 542. The Court has held that neither act was a breach of the Beacon Defendants' fiduciary duties under ERISA. Thus, Plaintiffs' section 1105(a)(3) claim is dismissed.

ii. Ivy Defendants

1. Fiduciary Status Under ERISA

Ivy's principal argument against ERISA liability is that it is not an ERISA fiduciary. "To determine whether a person or entity is a fiduciary under ERISA, courts employ a functional test that focuses on the nature of the functions performed rather than on the title held." Zang v. Paychex, Inc., No. 08 Civ. 6046, 2010 WL 3021909, at *8 (W.D.N.Y. Aug. 2, 2010). Under the relevant provision of ERISA, "[A] person is a fiduciary with respect to a plan to the extent . . . he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so." 29 U.S.C. § 1002(21)(A).

Because the Court finds Ivy to be an ERISA fiduciary under the "investment advice for a fee" test, the Court declines to consider Plaintiffs' arguments based upon Ivy's control over plan assets. See 29 U.S.C. § 1022(21)(A) (person is ERISA fiduciary if he "exercises any discretionary authority or discretionary control respecting management of [an ERISA] plan or exercises any authority or control respecting management or disposition of its assets, . . . [or] he has any discretionary authority or discretionary responsibility in the administration of such plan").

Regulations define "Investment advice" within the meaning of section 3(21)(A)(ii) as follows:

Section 3(21)(A) of ERISA is codified at 29 U.S.C. § 1002(21)(A).

A person shall be deemed to be rendering "investment advice" to an employee benefit plan . . . only if:

(i) Such person renders advice to the plan as to the value of securities or other property, or makes recommendation as to the advisability of investing in, purchasing, or selling securities or other property; and

(ii) Such person either directly or indirectly (e.g., through or together with any affiliate) —

(A) Has discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the plan; or

(B) Renders any advice described in paragraph (c)(1)(i) of this section on a regular basis to the plan pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between such person and the plan or a fiduciary with respect to the plan, that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments.

29 C.F.R. § 2510.3-21(c)(1). Ivy protests that the services it provided do not fall under this definition because (i) it provided advice about investment advisors rather than individual investments; (ii) it provided advice to BAMC rather than to the ERISA plans that invested in the Beacon Fund; (iii) Ivy's advice to BAMC was not "individualized"; (iv) Ivy's advice to BAMC was not for a fee; and (v) Ivy's advice to BAMC was not the primary basis for its decision to invest in Madoff.

As to the fact that Ivy advised BAMC about investment advisors rather than individual investments, the Department of Labor (DOL) has interpreted this arrangement to fall under the definition of "investment advice" provided by the statute and regulations. See 74 Fed. Reg. 3822, 3824 (Jan. 21, 2009) ("It has long been the view of the Department that the act of making individualized recommendations of particular investment managers to plan fiduciaries may constitute the provision of investment advice within the meaning of section 3(21)(A)."). Furthermore, the Supreme Court has stated, "We normally accord particular deference to an agency interpretation of longstanding duration [because] well-reasoned views of an expert administrator rest on a body of experience and informed judgment to which courts and litigants may properly resort for guidance." Alaska Dep't of Envtl. Conservation v. E.P.A., 540 U.S. 461, 487 (2004) (citations and internal quotation marks omitted); see also Skidmore v. Swift Co., 323 U.S. 134, 140 (1944).

The January 21, 2009 rule was withdrawn on other grounds, but the above quoted provision of the preamble was reinstated by the Department of Labor on May 17, 2010. See 75 Fed. Reg. 9360, 9361 (to be codified at 29 C.F.R. § 2550).

Ivy argues that the DOL's interpretation bears only on section 408(g)(1) of ERISA, which governs investment advice given directly to plan participants and beneficiaries and is not at issue in the instant case. However, this argument is incorrect because the January 21, 2009 rule states the DOL's longstanding interpretation of the relevant section of ERISA, section 3(21)(A), and merely applies this interpretation to section 408(g)(1). See 74 Fed. Reg. 3822, 3824 ("The fiduciary nature of [advice regarding selection of investment managers] does not, in the Department's view, change merely because the advice is being given to a plan participant or beneficiary."). Ivy next argues that no deference is due to this statement from the January 21, 2009 rule because it appears in the preamble to a rule, citing Saunders v. City of New York, 594 F. Supp. 2d 346, 355 (S.D.N.Y. 2008). Saunders discussed deference under Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), rather than Skidmore deference, which is at issue here. While a regulatory preamble might not be entitled to dispositive force under Chevron, the Court finds the DOL's longstanding position persuasive because it rests on a "body of experience and informed judgment to which courts and litigants may properly resort for guidance." Alaska Dep't of Envtl. Conservation, 540 U.S. at 487. Additionally, contrary to Ivy's suggestion, no retroactivity issue is raised by the DOL's restatement of a longstanding position.

Moreover, the Court is not persuaded by Ivy's citation to Cohrs v. Salomon Smith Barney, Inc., No. 03 Civ. 505 (KI), 03 Civ. 506 (KI), 2005 WL 2104535 (D. Or. Aug. 31, 2005), aff'd sub nom, Stahly v. Salomon Smith Barney, Inc., 319 Fed. Appx. 654 (9th Cir. 2009). Cohrs held that the recommendation of investment advisors did not constitute "investment advice" sufficient to impose fiduciary duties under ERISA. Cohrs, 2005 WL 2104535, at *18. The Cohrs court did not cite or consider the DOL's longstanding view to the contrary, nor did it cite any authority directly on point. Furthermore, the Court of Appeals for the Ninth Circuit did not adopt the district court's reasoning on this issue because it relied on a separate ground for affirmance. Stahly, 319 Fed. Appx. at 657. And while the Cohrs court may have considered the connection between the Defendants' recommendation of an investment manager and that investment manager's independent decision to purchase or sell securities "too attenuated" to form the basis for ERISA fiduciary status, 2005 WL 2104535, at *18, there is a close connection in the instant case between Ivy's recommendation and discussion of Madoff's purported strategy and Madoff's purported execution of that strategy.

In opposing the first consolidated amended complaint, Ivy raised the argument that under the "plain language" of 29 C.F.R. § 2510.3-21(c)(1), Ivy was not a fiduciary because it did not provide advice "to the plan[s]" that invested in the Beacon Fund. Id. This argument was not raised again in either of Ivy's two submissions post-dating the SCAC, and is unpersuasive in light of the language of 29 C.F.R. § 2510.3-21(c)(1). As found above, Ivy made "recommendations as to the advisability of investing in, purchasing, or selling securities or other property," and such advice was rendered pursuant to an agreement "between such person and the plan or a fiduciary with respect to the plan. . . ." Id. Namely, Ivy's advice was rendered pursuant to agreements with BAMC and JPJA, and no party contends that BAMC and JPJA were not ERISA fiduciaries.

Ivy argues that its advice was not "individualized" as to any particular ERISA plan. "To be `individualized' within the meaning of the regulation, advice must pertain to investment policies or strategy or portfolio composition or diversification. . . . In other words, the advice must address the individual needs of the plan." Ellis v. Rycenga Homes, Inc., 484 F. Supp. 2d 694, 709 (W.D. Mich. 2007) (citing 29 C.F.R. § 2510.3-21(c)(1)(ii)(B)). However, "to be `individualized,' the advice need not be arbitrary or divorced from general principles of investment generated by a firm. . . . Obviously, the writers of the regulation were attempting to differentiate individualized investment advice, which is based upon the particular needs of the plan, from the general promotion of a product or service, pursuant to which a stockbroker might `recommend' a security to its customers at large." Ellis, 484 F. Supp. 2d at 709 n. 2.

Ivy's advice was not of the character of a stockbroker recommending a particular security to its customers at large; rather, Ivy made recommendations about fund diversification and allocations between various investments on an on-going basis. Moreover, an investment advisor need not review the entire allocation of a plan's assets to provide individualized investment advice. For example, an advisor may render "advice as to one type of investment and profess[] to understand [a plan's] needs in that area." Thomas, Head Greisen Emps. Trust v. Buster, 24 F.3d 1114, 1118 (9th Cir. 1994) (emphasis added). Pursuant to the Beacon OMs, Ivy provided advice to funds regarding managers not generally available to the public. 2004 OM, at 10-11. Furthermore, the length of Ivy's relationship with BAMC and JPJA, as well as the frequency of their communications about investment allocations, counsel in favor of finding Ivy's advice to be individualized. See id. ("The relationship of the parties, which developed over the course of nine years, coupled with the evidence of regular meetings between [the advisor] and the [plan] Trustees to discuss investment strategy, provided [the advisor] with sufficient information about the Trust to enable him to render individualized investment advice."). Indeed, it was Ivy that suggested to Jeanneret that he invest fund assets in Beacon to circumvent Madoff's limitations on accepting additional investments from Jeanneret's Income Plus fund. Drawing all inferences in favor of the non-moving party, these allegations are sufficient to survive a motion to dismiss, and the motion to do so is denied. See Lee, 166 F.3d at 543.

Ivy next argues that it did not provide investment advice for a fee because, pursuant to the 1995 consulting agreement, Ivy was paid only for "administrative services" relating to the Beacon Fund's Madoff accounts. However, the Court must "employ a functional test that focuses on the nature of the functions performed" in determining ERISA fiduciary status, rather than focus myopically on contractual language isolated from the totality of the alleged facts. Zang, 2010 WL 3021909, at *8. First, the 1995 consulting agreement, under which Ivy was paid fees, states the agreement was made because BAMC "desire[d] to compensate IVY for its introduction to Madoff, [and] to avail [itself] of the experience and assistance of IVY." 1995 BAMC-Ivy Agreement, at 2. Second, Plaintiffs allege Ivy provided ongoing investment advice to Danziger regarding Beacon's Madoff allocations took place over a multi-year period. Third, the Beacon OM explains that Ivy is an investment advisor, touts Ivy's credibility as an investment advisor, and provides that Ivy would be consulted as to all allocations of Beacon funds. Fourth, any possibility that Ivy was being compensated only for ministerial services is belied by a November 28, 2005 agreement between Ivy and BAMC, which states that

Ivy currently performs two distinct types of services: (i) consulting services to [BAMC], as managing member of the Companies, which include providing advice with respect to Manager selection and allocation of the Companies' assets among Managers and Investment Pools (the `Consulting Services'); and (ii) administrative and accounting services to the Companies (the `Administrative Services'). In consideration for such services, you currently are paid by us. . . .

Rosenthal Decl. Ex. D, pt. III ("November 28, 2005 Letter Agreement"), at 5. These alleged facts are sufficient under the required functional analysis.

Similar arguments underlie Ivy's objection that its advice did not "serve as a primary basis for investment decisions with respect to plan assets." 29 C.F.R. § 2510.3-21(c)(1). Ivy's claim that it performed "purely `ministerial' functions for a benefit plan" is unavailing in light of the above noted considerations. Zang, 2010 WL 3021909, at *8. Moreover, "the regulation does not require that a [fiduciary's] advice be `the' primary basis for investment decisions," Ellis, 484 F. Supp. 2d at 709, but merely "a" primary basis. Plaintiffs persuasively allege that Ivy's advice as to Madoff was a primary basis for investment decisions. Ivy introduced BAMC to Madoff, Ivy provided advice about allocating funds to and from Madoff, the Beacon OM provides that all allocation decisions would be made after consulting with Ivy, and there is no indication that BAMC or the Beacon Fund received substantial investment advice from any other party. While BAMC might have disregarded some of Ivy's muted advice to pursue a "below median allocation" to Madoff despite his "extremely strong" performance, NYAG Compl. ¶ 68, there can be no doubt that Ivy's advice provided a primary basis for the Beacon Fund's investment decisions relating to Madoff.

Accordingly, Plaintiffs successfully plead Ivy's fiduciary status under ERISA. Ivy's arguments against Plaintiffs' claim for disgorgement under 29 U.S.C. §§ 1109(a), 1132(a)(2) are premised on the rejected contention that Ivy was not a fiduciary, and Ivy's motion to dismiss the claim for disgorgement is denied.

Having found Ivy's fiduciary status based on allegations relating to Ivy's relationship with BAMC, the Court need not consider those allegations relating to Ivy's relationship with JPJA, as all JPJA funds involved in this action were invested in the Beacon Fund.

See 29 U.S.C.A. § 1109(a) ("Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.")

2. Breach of Fiduciary Duty, Failure to Comply with Plan Documents, and Prohibited Transactions

The duties of prudence and care require an ERISA fiduciary to act "solely in the interest of the participants and beneficiaries," and to discharge their duties "with the care, skill, prudence, and diligence under the circumstances then prevailing." 29 U.S.C. §§ 1104(a)(1)(A)-(D). The allegations against Ivy, which have been outlined in detail above, show that Ivy had grave doubts about Madoff, but failed to communicate them to BAMC and JPJA. Indeed, an internal Ivy memorandum from 2002 stated that Ivy was not "satisfied as a fiduciary to invest client assets" with Madoff. NYAG Compl. ¶ 114. This suffices to show a breach of the duty of prudence.

Ivy responds by repeating the argument that it was under no duty to provide investment advice, which the Court has rejected in finding Ivy's ERISA fiduciary status adequately pled. Ivy also argues that a fiduciary need only exercise care prudently and with diligence "under the circumstances then prevailing," 29 U.S.C. § 1104(a)(1)(B), and that a fiduciary's actions are not to be judged "from the vantage point of hindsight." Chao v. Merino, 452 F.3d at 182 (quoting Kastaros v. Cody, 744 F.2d at 279). However, the Court need not evaluate the issue from the "vantage point of hindsight" because Ivy itself said in 2002 that it was not "satisfied as a fiduciary to invest client assets" with Madoff. Id.; NYAG Compl. ¶ 114. And while a fiduciary need not "disclose its internal deliberations," Flanigan v. Gen. Elec., 242 F.3d 78, 85 (2d Cir. 2001) (quoting Mullins v. Pfizer, Inc., 23 F.3d 663, 669 (2d Cir. 1994)), Ivy's failure to disclose that it was not "satisfied as a fiduciary to invest client assets" with Madoff violated its fiduciary duty to disclose. See Glaziers Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Sec., Inc., 93 F.3d 1171, 1182 (3d Cir. 1996) (defining duty to disclose as "what a reasonable fiduciary, exercising care, skill, prudence and diligence, would believe to be in the best interest of the beneficiary to disclose" (internal quotation marks omitted)). Ivy's understated recommendation of a reduced Madoff allocation did not satisfy its duty to disclose under these circumstances.

Plaintiffs also sufficiently allege that Ivy breached its duty of loyalty for the same reasons that Plaintiffs adequately plead motive under the 10b-5 claims, discussed above. Plaintiffs allege that Ivy decided not to disclose the full extent of its doubts about Madoff to BAMC and JPJA because it believed that it would not reduce its legal liability by doing so, and it wished to keep its AUM high. Simon wrote in 1998, "one wonders if we ever `escape' the legal issue of being the asset allocator and introducer, even if we terminate all Madoff related relationships?" NYAG Compl. ¶ 76. Simon wrote in June 2001 that a client with a large Madoff investment "helped to contribute towards building Ivy's [assets under management] and credibility, despite our real concerns about [Madoff]." Id. ¶ 118. Simon concluded, "legal question: Now that [BONY] owns Ivy, who has the ultimate liability??" Id. ¶ 119. These allegations suffice to show that Ivy's conflict of interest "impeded [its] prudent decision-making with respect to the Plan." In re Polaroid ERISA Litig., 362 F. Supp. 2d 461, 479 (S.D.N.Y. 2005).

However, Plaintiffs' claims against Ivy for failure to comply with plan documents and for engaging in a prohibited transaction fail for the same reasons as those claims fail against the Jeanneret and Beacon defendants. These claims are a repackaging of Plaintiffs' theory that Ivy knew Madoff was operating a Ponzi scheme. Even though Ivy certainly knew more than the Beacon or Jeanneret Defendants, the totality of the allegations do not suggest this level of knowledge of Madoff's wrongdoing on Ivy's part. Ivy appears to have been uncertain as to exactly how Madoff operated, and it was this uncertainty, rather than knowledge of Madoff's Ponzi scheme, that led it to discuss serious doubts about Madoff, withdraw its proprietary funds from Madoff, and counsel some advisory clients to avoid Madoff. For instance, Wohl summarized Ivy's Madoff doubts in 1998 by saying that investment with Madoff "remains a matter of faith based on great performance — this doesn't justify any investment, let alone 3%." NYAG Compl. ¶ 75. The isolated allegation that Simon heard a rumor in 1991 that Madoff might be a Ponzi scheme does not alter the inference raised by the totality of the allegations. While Ivy's conduct suffices to state claims based on its failure to disclose these doubts, the facts alleged do not support the inference that Ivy knew or should have known that Madoff was falsifying account statements. Plaintiffs' claims for failure to comply with plan documents and engaging in a prohibited transaction are therefore dismissed.

3. Individual Ivy Defendants and BONY Defendants

"An individual cannot be held liable for corporate ERISA violations solely by virtue of his role as officer, shareholder, or manager." NYSA-ILA Med. Clinical Servs. Fund v. Catucci, 60 F. Supp. 2d 194, 206 (S.D.N.Y. 1999) (internal quotation marks citation omitted). "Under special circumstances, however, the imposition of personal liability for a corporation's ERISA obligations may be warranted." Trs. of the Bldg. Serv. 32B-J Pension, Health and Annuity Fund v. Hudson Serv. Corp., 871 F. Supp. 631, 638 (S.D.N.Y. 1994) (internal quotation marks omitted). "These `special circumstances' include: (1) knowingly participating in a fiduciary's breach of ERISA trust obligations; (2) conspiring to divert ERISA funds for personal benefit; (3) intermingling personal and corporate assets; (4) engaging in fraudulent conduct; or (5) where the individual is in fact the corporation or the corporation's alter ego." Id. (citation omitted). Specific allegations relating to fraud or knowing participation in breach are pleaded as to Simon, Wohl, Geiger, and Sloan. The motion to dismiss these claims is denied. However, Plaintiffs' conclusory assertions and descriptions of job titles do not suffice to state a claim for individual fiduciary liability as to the other individual Ivy defendants, and these claims are dismissed.

Plaintiffs' claims against BONY and the individual BONY defendants are conclusory, and fail to state a claim for fiduciary status. Plaintiffs plead no specific facts indicating that BONY or the individual BONY defendants were involved in or knew of any of the alleged wrongdoing on the part of Ivy; their allegations are mainly based on job descriptions culled from BONY's website, without any specific allegations that the individuals were connected with misconduct. Plaintiffs' allegations regarding the Ivy "risk committee" formed "under the aegis of BONY" are far too vague to support a connection between these defendants and Ivy's alleged violations. See Dardaganis v. Grace Capital, Inc., 889 F.2d 1237, 1242 (2d Cir. 1989) (holding that corporate officers, directors, and partners "are liable as fiduciaries under section 1109 only if they personally breach a fiduciary duty"). Moreover, "[a]s a general principle, `a parent corporation . . . is not liable for the acts of its subsidiaries.'" Trs. of the Local 464A UFCW Pension Fund v. Wachovia Bank, N.A., No. 09 Civ. 668 (WJM), 2009 WL 2152074, at *3 (D.N.J. July 14, 2009) (dismissing ERISA claims against a corporate parent, holding that "[a]bsent a showing sufficient to pierce the corporate veil, there is no basis upon which to find a fiduciary relationship between [parent corporation] and Plaintiffs") (quoting United States v. Bestfoods, 524 U.S. 51, 61 (1998)). Plaintiffs' ERISA claims against BONY and the individual BONY defendants are dismissed.

c. State Law Claims

Plaintiffs assert multiple state common law claims against Defendants, including common law fraud (Count XIV), aiding and abetting common law fraud (Count XV), breach of fiduciary duty (Counts XVI and XXIV), aiding and abetting breach of fiduciary duty (Counts XXI, XXII, XXIX, and XXX), negligent misrepresentation (Counts XVIII and XXVI), gross negligence (Counts XIX and XXVII), unjust enrichment (Counts XX and XXVIII), malpractice (Count XXXI), and breach of contract (Counts XVII, XXV, and XXXII). Defendants assert that most of these claims are preempted by the Securities Litigation Uniform Standards Act ("SLUSA"), Pub.L. No. 105-353, 112 Stat. 3227 (1998) (codified as amended at 15 U.S.C. § 78bb), and by New York's Martin Act. See N.Y. Gen. Bus. L. § 352 et seq.

i. SLUSA Preemption

Defendants move to dismiss Plaintiffs' direct common law claims for fraud (Count XIV), aiding and abetting common law fraud (Count XV), breach of fiduciary duty (Count XVI), breach of contract (Count XVII), negligent misrepresentation (Count XVIII), gross negligence (Count XIX), unjust enrichment (Count XX), and aiding and abetting breach of fiduciary duty (Counts XXI and XXII) as barred by SLUSA. SLUSA was enacted in 1998 to prparagraph The company does not currently have clear internal successors to these roles, with Ty's role being the most critical to replace. Although there are some potential individuals internally who could perform the job, this will likely require taking an individual from another critical role within the company and having to backfill that role, or may require that we place an individual who may not have the full qualifications we believe we need to perform this role in terms of experience or leadership. Both positions will be difficult to fill externally, as we have recently tried to fill some other development positions and the labor market is extremely competitive, We also anticipate that top quality candidates will be difficult to recruit because they will question the reasons for the resignations by Ty and Raimund, who are also well-regarded externally in the industry. The estimated time to replace these individuals would be approximately 6 to 12 months.

Analysis of Compensation Terms in the Event of Resignation

It is our view that at this point, the company has not triggered a "Constructive Dismissal" or a "Material Alteration in Compensation" that would warrant an Employee Resignation qualifying them for compensation as specified in the Special Severance Protection Program. Ty's responsibilities have been expanded to include responsibility for the development projects that were previously under Iberdrola USA, and Raimund would transfer to the Western Region from the Midwest Region but with comparable scope of responsibilities as prior to the Change in Control. There have not been any adjustments to their total remuneration other than the VAR Replacement Plan, which is arguably an enhancement to the VAR valuation methodology and in any event was voluntarily agreed to by both employees. Their bonus opportunity remains the same as previously, and the Annual Incentive Plan includes Change in Control protections this year which require that entire funding pool be paid out and administered according to the same. administrative practices as in effect prior to the Change in Control. The company has also made a commitment to maintain this same incentive structure through at least April, 2009.

Assuming that their proposed resignations are deemed not to be a "Qualifying Employee Resignation," the only compensation they would receive under normal resignation terms at this time would be their vested VARs in the VAR Replacement Plan, valued and paid out as of the next valuation date in October, 2008. This amount would be $307,903 and $311,442 for Ty and Raimund, respectively. They would forfeit their eligibility for any deferred bonus awards and a bonus for the current year, and they would not qualify for severance benefits under the Special Severance Protection (acceleration of their outstanding VARs, 12 months' base pay and target bonus as severance pay, six months' subsidized health benefits, 12 months' outplacement assistance, prorated annual incentive and payout of any deferred bonuses from prior years).

Recommended Strategy

There are three strategy scenarios available to us at this time:

(1) Allow the employees to trigger their Special Severance Protections and leave with the separation benefits under that program.

(2) Accept the resignations of the employees but dispute that they have any rights to Special Severance Protections.

(3) Negotiate with the employees to stay until established retention dates with agreed separation terms after those retention dates, Use the fact that they have not triggered their Special Severance Protections and the value they would be leaving unpaid as leverage for the negotiations.

Because of the business risks of having Ty and Raimund leave at this time, we recommend that the company first clarify its position that we do not agree they have triggered the Special Severance Protections if they should resign at this time, and then negotiate retention arrangements with these individuals so that Ty has a longer retention period (through October, 2008) and Raimund has a shorter retention period (through June, 2008). Although the remuneration they would earn during this retention period would be greater than if they were to sever at this time, the company would retain their services and the value contribution they make to the company. We recommend that the retention arrangements be structured as follows:

(1) The company would agree to limit the scope of their non-competition provisions to 3 months following termination for Ty and 6 months following termination for Raimund (both expiring in December, 2008). Instead, we would use the period of their continued employment to keep them from competing against us.

(2) The company would agree to extend a modified form of Special Severance Protections through the date of their retention periods so that they would have a longer time period in which to determine if a triggering event were to occur in the scope of their responsibilities or in the planned structure of compensation. The triggering events would continue to be Constructive Dismissal or Material Alteration in Compensation, but with some refinement to prohibit them from triggering severance during the retention periods and to narrow the definitions of the triggering events (the definitions do not reflect current circumstances such as the fact that the VAR has been replaced).

(3) Bonus awards during their retention periods would be tied to retention of employees on their respective teams and developing a strong successor for their positions, in addition to normal performance measures.

(4) If the employees stay through the designated retention dates and satisfactorily perform, they would be eligible to resign at that time and receive their deferred AIP awards and a prorated, performance-based annual incentive award. We recommend that we do include accelerated vesting of outstanding VARs unless the company triggers that accelerated vesting under the' terms of the VAR Replacement Plan. (By continuing their employment beyond June, they would also be eligible for a full year's performance-based incentive award for 2007/08 and the June, 2008 payout of their deferred bonuses from prior years, Additionally, they would qualify for an accelerated payout of their vested VARs in the October following their terminations). Additionally, if a triggering event has occurred as of their resignation date, they would be eligible to receive severance compensation as specified in the revised Special Severance program.

(5) The employees would be subject to strict confidentiality regarding their potential departures and the two-year nonsoliciation agreement.

(6) The company would agree to give 60 days' notice of any termination, and the employees would be required to give the company 60 days' notice of their intent to resign.

(7) The employees would be required to execute a Release of Claims in exchange for the company's agreement to provide for certain separation terms following their retention dates.

An analysis of the compensation terms of this recommended strategy is attached.

Exhibit Hall, John From: Delgado Piera, Alvaro [adelgadop@iberdrola.es] Sent: Tuesday, October 14, 2008 10:24 AM To: Fernando Manrique Subject: RV: People Importance: High De: Viteri Solaun, Xabier

Enviado el: sábado, 17 de noviembre de 2007 10:08

Para: Delgado Piera, Alvaro

Asunto: RV: People

Alvaro, Itienes una valoracion? Gracias. xvs

De: Viterl Solaun, Xabier

Enviado el: sábado, 17 de novlembre de 2007 9:17

Para: Hudgens, Terry

Asunto: RE: People

Terry, in a rush departure from Madrid I left my cell in the office. I hope to recover it this evening. I will call you. I will search for the mentioned letter. Regards, xvs

De: Hudgens, Terry [mailto:Terry.Hudgens@PPMEnergy.com]

Enviado el: viernes, 16 de noviembre de 2007 23:58

Para: Viteri Solaun, Xabier

Asunto: People

Xabier,

I have spoken with Ty Daul and Raimund Grube following their conversation yesterday with Martin. They believe they will be happier working elsewhere in the long run, but are concerned over receiving their future bonus and VAR payments which amount to a considerable sum for the both of them. Martin is working through his thoughts on whether to try to extend their work here or to shorten it which he and I will discuss further next week. I "think" there is an opportunity to keep them here and productive for 6 to 12 months if we want to try to go for that. I have asked that Linda put together a point sheet on the terms of their arrangements and bonus plan facts to share with Alvaro and us For me there is no clear right answer, My primary concern is that we need a strong leader In Portland wind group which Ty is today. Kevin Devlin is probably the next strongest leader. There will be collateral losses if Ty and Raimund leave as many people will ask themselves why stay if these 2 guys see a basis for leaving. We should talk this over when you have a chance.

On a separate matter, I received a call from Karl Olsoni saying that he had signed the relative documents which were being held by his attorney pending receipt of a letter from us setting forth the reason for his termination. I don't know anything about this letter, do you?

Terry

Este mensaje se dirige exclusivamente a su destinatario. Los datos incluidos en el presente correo son confidenciales y sometidos a secreto profesional, especialmente en lo gue respecta a los datos personales, se prohibe divulgarlos, en virtud de las leyes vigentes. Si usted no lo es y lo ha recibido por error o tiene conocimiento del mismo por cualquier motivo, le rogamos que nos lo comunique por este medio y proceda a destruirlo o borrarlo, y que en todo caso se abstenga de utilizar, reproducir, alterar, archivar o comunicar a terceros el presente mensaje y ficheros anexos, todo ello bajo pena de incurrir en responsabilidades legales. Cualquier idea contenida en este correo es exclusiva de su autor y no representa necesariamente el criterio de Iberdrola. El Wah, Linda From: Willey, Tonja Sent: Saturday, November 17, 2007 8:35 AM To: Wah, Linda Subject: FW: Summary Attachments: Daul VAR Estimates.doc; Mihalik VAR Estimates.doc; Grube VAR Estimates.doc Please see attached for VAR information.

From: Willey, Tonja

Sent: Friday, November 16, 2007 1:08 PM

To: Wah, Linda

Subject: RE: Summary

Per your request. I will provide your requested VAR information in a separate e-mail. To clarify, you want the VAR as if vesting accelerates, and you want the incremental difference, to be paid at the estimated value of Oct 1, 2008

Ty Daul

— Base Salary: $221,450

— Target Bonus: 70%

— Deferred Incentive outstanding

To be paid June, 2008

From 06-07 Award: $400,000 (NPV)

From 05-06 Award: $450,022 (NPV)

To be paid June, 2009:

From 06-07 Award: $400,000 (NPV)

Ralmund Grube

— Base Salary: $186,748

— Target Bonus: 60%

— Deferred Incentive outstanding

To be paid June, 2008

From 06-07 Award: $208,333 (NPV)

From 05-06 Award: $162,508 (NPV)

To be paid June, 2009:

From 06-07 Award: $208,334 (NPV)

Trevor Mihalik

— Base Salary:

— Target Bonus:

— Deferred Incentive outstanding

To be paid June, 2008:

From: Wah, Linda

Sent: Friday, November 16, 2007 12:20 PM

To: Willey, Tonja

Subject: Summary

Tonja, for those individuals who are in the "special severance protection" (Ty, Ralmund, Trevor), can you prepare a summary showing:

— Base Salary

— Target Bonus

— Deferred Bonuses currently outstanding

— VARs outstanding that would be accelerated and the value (assume a payout date of October 2008) Thanks.

Hall, John From: Fernando Manrique [fml@ialonsomartinez.com] Sent: Tuesday, October 14, 2008 8:22 AM. To: Dauenhauer, Lorne; Patton, William Subject: Fwd: RV: Revised Letters Attachments: Grube.Raimond.Letter.pdf; ATT5052762.htm; Daul.Ty.Letter.pdf; ATT5052763.htm Dear Lorne and Bill,

Please find enclosed copy of the documents I am relaying.

Regards

Fernando

Inicio del mensaje reenviado:

De: "Delgado Piera, Alvaro" adelgadop@iberdrola.es

Fecha: 14 de octubre de 2008 15:41:51 GMT+02:00

Para: "Fernando. Manrique" fml@ialonsomartinez.com

Asunto: RV: Revised Letters.

— Mensaje original —

De: Wah, Linda [mailto:Linda.Wah@PPMEnergy.com]

Enviado el: miércoles, 05 de diciembre de 2007 18:48

Para: Webber, Donna

CC: Delgado Piera, Alvaro; Suquet Guzman, Belen

Asunto: Fw: Revised Letters

Carácter: Confidencial

Here is the final letter for transmittal. Please copy Martin, T

Grube.Raimond.Letter.pdf Daul.Ty.Letter.pdf eny, Alvaro and Belen on the transmittal email. Thank you! Call me on my cell if you have questions.

— Original Message —

From: Irvine, Erica eirvine@iberdrolausa.com

To: Wah, Linda

Sent: Wed Dec 05 09:41:33 2007

Subject: RE: Revised Letters

Erica K. Irvine, PHR

Human Resources Manager

Willey, Tonja From: Willey, Tonja Sent: Thursday, January 10, 2008 2:41 PM To: Wah, Linda Subject: RE: Ty and Ralmund I spoke with Leslie (Rachel was in this a.m. but is out the rest of the day) and she said she would like to wait until tomorrow when Rachel is back to compile the payroll amounts below.

As far as the terms below, see my comments next to each.

— Original Message —

From; Wah, Linda

Sent: Thursday, January 10, 2008 1:27 PM

To: Willey, Tonja

Subject: Ty and Raimund

Alvaro has asked us to provide him with the amounts we owe Ty and Raimund under normal termination (resignation terms). I think this would be:

Final pay through Monday (does Rachel know to get check ready)? YES

Accrued unused PT for Raimund YES (not Ty)

Vested VAR payouts in October 2008 YES-we of course will not know the amount to be paid until the Oct 1 valuation, but we could estimate using the floor (20% CAGR) and/or 25% CAGR

Deferred comp (if Ty participated) NO — Ty did not participate

Normal 401(k) distribution No automatic distribution of 401(k) — does Alvaro want to know their 401(k) balance?

COBRA Assuming resignation, no subsidized COBRA; does Alvaro want to know what it will cost Ty and Raimund?

No deferred bonuses Correct, deferred AIP/NPV forfeited

No prorated bonus Correct, forfeit AIP/NPV for the current plan period

No compensation during the non-compete period because they resigned, Correct

Can you please confirm if this is how you would interpret their terms? Rosborough, Dan From: Wah, Linda Sent: Monday, July 14, 2008 1:07 PM To: Rosborough, Dan Subject: FW: Company Subsidized, Cobra Health Benefits — Original Message —

From: Wah, Linda

Sent: Friday, January 25; 2008 10:13 AM

To: `daulhouse@comcast.net'

Subject: Re: Company Subsidized Cobra Health Benefits

Ty, you should make sure. You enroll for COBRA so you don't lose coverage. Payment for COBRA can occur later and maybe we might have some movement on your severance claim in the meantime. As you know, this will be a slow process so make sure you keep your coverage.

I don't have any update other than to say a response approach is being reviewed in Spain.

Hope you're doing well. I am still out (had another bout of anemia) so working from home as I can.

— Original Message —

From: daulhouse@comcast.net daulhouse@comcast.net

To: Wah, Linda

Sent: Fri Jan 25 08:55:18 2008

Subject: Re: Company Subsidized Cobra Health Benefits

Linda,

I hope things are OK and you are feeling better. I'm sure it can't be any fun — especially when adding all the integration headaches and stress on top of it.

Take care,

Ty

— Original message —

From: daulhouse@comcast.net

Linda,

Attached is a letter with some questions and comments on the company subsidized cobra health benefits.

Thanks

Ty Rosborough, Dan From: Wah, Linda Sent: Monday, February 04, 2008 2:46 PM To: Rosborough, Dan; Fetzer, Julla Subject: Fw. Letter to Ralmund Importance: High Sensitivity: Confidential Attachments: Daul Grube Ltr.DOC; ATT1121152.txt Can you please see if you can open the attachment and send me a copy of the text in either word or email? I can't open it via blackberry or citrix. Thank you!

— Original Message —

From: Suquet Guzman, Belen bsuquet@iberdrola.es

To: Wah, Linda

Sent: Mon Feb 04 02:32:20 2008

Subject: Letter to Raimund

ATT1121152.txt

(282 B)

Hi L nda,

We would like you to send this letter to Raimund Grube.

The only information missing to be accomplish is highlighted in yellow.

Many thanks,

B

— Mensaje original —

De: Delgado Piera, Alvaro

Enviado el: viernes, 01 de febrero de 2008 17:55

Para: Suguet Guzman, Belen

Asunto: RV: Carta contrastada

Importancia: Alta

Carácter: Confidencial

Hola, buenas tardes:

Tenemos que enviar esta nota, contrasta por LP y FM, a Linda para que se la hagan llegar a Raimund Grube.

Many Thanks,

Un besos

Alvaro

— Mensaje original —

De: Fernando Manrique [mailto:fml@ialonsomartinez.com] Enviado el: viernes, 01 de febrero de 2008 16:52

Para: Delgado Piera, Alvaro

Asunto: Carta contrastada

PPM 00085

Querido Alvaro:

Conforme a lo acordado, adjunto remito la versión de borrador contrastada por el equipo legal de Estades Unidos, tal y como indicaba en mi anterior correo, y que como de costumbre somete a tu consideracion.

Tal y come puedes ver, resulta firme, desde una posicion prudente.

Para facilitar visualmente todo, he marcado en amazillo lo unico que quedaria per rellenar del texto, que seria la fecha efectiva de la ultima carta que en su dia se les xemitio, en la que se daba respuesta a sus preguntas.

Sin otro particular, recibe un cordial saludo.

Fernando Manrique

Este mensaje se dirige exclusivamente a su destinatario. Los datos incluidos en el presente correo son confidenciales y sometidos a secreto profesional, especialmente en lo que respecta a los datos personales, se prohibe divulgarlos, en virtud de las leyes vigentes. Si usted no lo es y lo ha recibido por error o tiene conocimento del mismo por cualquier motivo, le rogamos que nos lo comunique por este medio y proceda a destruirlo o borrarlo, y que en todo caso se abstenga de utilizar, reproducir, alterar, archivar o comunicar a texceros el presente mensaje y ficheros anexos, todo ello bajo pena de incurrir en responsabilidades legales. Cualquier idea contenida en este correo es exclusiva de su autor y no represents necesariamente el criterio de Iberdrola. El emisor no garantiza la integridad, rapidez o seguridad del presente correo, ni se responsabiliza de posibles perjuicios derivados de la captura, incorporaciones de virus o cualesquiera otras manipulaciones efectuadas por terceros.

This message is intended for the exclusive attention of the address(es) indicated. Any information contained herein is strictly confidential and privileged, especially as regards personal data, which must not be disclosed, in accordance with legislation currently in force. If you are not the intended recipient and have received it by mistake or learn about it in any other way, please notify us by return e-mail and delete this message from your computer system. Any unauthorised use, reproduction, alteration, filing or sending of this message and/or any attached files to third parties may lead to legal proceedings being taken. Any opinion expressed herein is solely that of the author(s) and does not necessarily represent the opinion of Iberdrola. The sender does not guarantee the integrity, speed or safety of this message, not accept responsibility for any possible damage arising from the interception, incorporation of virus or any other manipulation carried out by third parties.

Dear __________:

I am writing in response to your letter dated January 15, 2008. Again, we respectfully disagree that you are eligible for enhanced severance benefits under Section 2(b) of the "Special Severance Protections" and "Change in Control Severance Enhancement for Key PPM Employees" dated March 23, 2007. Our position on this matter was set out point-by-point in my December _____, 2007 letter to you. We do not see that anything has changed since that letter to support your claim that you experienced either a "Constructive Dismissal" or "Material Alteration in Compensation." I would be happy to sit down with you to discuss these issues further. If you would like to do so, please let me know so that we can set up a meeting.

Sincerely,

PPM ENERGY, INC.

PPM Energy A Scottish Power Company February 5, 2008

Mr. Ty Daul

11077 SE Rimrock Drive

Happy Valley, OR 97236

Dear Ty:

I am writing in response to your letter dated January 15, 2008. Again, we respectfully disagree that you are eligible for enhanced severance benefits under Section 2(b) of the "Special Severance Protections" and "Change in Control Severance Enhancement for Key PPM Employees" dated March 23, 2007. Our position on this matter was set out point-by-point in my December 5, 2007 letter to you. We do not see that anything has changed since that letter to support your claim that you experienced either a "Constructive Dismissal" or "Material Alteration in Compensation."

I would be happy to sit down with you to discuss these issues further. If you would like to do so, please let me know so that we can set up a meeting. Sincerely, ______________ Linda M. Wah VP Human Resources, PPM Energy LMW:bp

PPM Energy A Scottish Power Company February 5, 2008

Mr. Raimund Grube

7924 SE 36^th Avenue

Portland, OR 97202

Dear Raimund:

I am writing in response to your letter dated January 15, 2008. Again, we respectfully disagree that you are eligible for enhanced severance benefits under Section 2(b) of the "Special Severance Protections" and "Change in Control Severance Enbancement for Key PPM Employees" dated March 23, 2007. Our position on this matter was set out point-by-point in my December 5, 2007 letter to you. We do not see that anything has changed since that letter to support your claim that you experienced either a "Constructive Dismissal" or "Material Alteration in Compensation."

I would be happy to sit down with you to discuss these issues further. If you would like to do so, please let me know so that we can set up a meeting. Sincerely, ______________ Linda M. Wah VP Human Resources, PPM Energy LMW:bp Daul, Ty From: Grube, Ralmund Sent: Friday, December 07, 2007 11:24 AM To: Wah, Linda; Daul, Ty Cc: Hudgens, Terry Subject: Re: Meeting in Radnor No problem. I will plan to fly out on the 19th.

— Original Message —

From: Wah, Linda

To: Grube, Raimund; Daul, Ty

CC: Hudgens, Terry

Sent: Fri Dec 07 11:22:49 2007

Subject: RE: Meeting in Radnor

I think so. Alvaro and Belen are leaving on the evening of the 18th. You should probably plan to spend all day in Radnor because we could be delayed in getting together (they often have to spend all morning dealing with issues in Spain). Thanks.

— Original Message —

From: Grube, Raimund

Sent: Friday, December 07, 2007 11:21 AM

To: Wah, Linda; Daul, Ty

Cc: Hudgens, Terry

Subject: Re: Meeting in Radnor

Thank you Linda. We are making arrangements to arrive the evening of the 17th. Is it safe to assume we will not need to stay for meetings on the 19th? I am scheduled to meet with the team in Boulder that afternoon but could reschedule if necessary.

Raimund

— Original Message —

From: Wah, Linda

To: Daul, Ty; Grube, Raimund

CC: Hudgens, Terry

Sent: Fri Dec 07 10:20:58 2007

Subject: Meeting in Radnor

Hi Ty and Raimund,

As a follow-up, Alvaro would like to schedule a meeting with you on Tuesday, Dec 18th in Radnor. Can you please make travel plans to be there on that date? I don't have a specific time but perhaps you can also plan to do other business while you are there.

I will also be joining you. At this point, I don't know the process but will keep you apprised if there is any clarity over the next week. Thanks. Daul, Ty From: Grube, Raimund Sent: Monday, December 17, 2007 6:50 PM To: Wah, Linda: Daul, Ty Subject: RE: Tomorrow's meeting Thank you Linda. We will be in by 10AM and will be working from the hotel before then.

Ralmund

From: Wah, Linda

Sent: Monday, December 17, 2007 5:22 PM

To: Grube, Raimund; Daul, Ty

Subject: Tomorrow's meeting

Hl Ty and Raimund,

For tomorrow's meeting, Alvaro, Belen and I would like to meet with you at 10:00 a.m. in the large conference room. Please come prepared to discuss the following:

— whether you are committed to/interested in continuing your employment with I berdroia USA

— what you would like the company to change in order for you want to continue your employment with the company (both financial and non-financial)

— what caused you to submit notice of your resignation

— any proposal you might have in order to reach mutually agreeable terms with the company. For this purpose, you should presume that the company is going to dispute the fact that you have triggered severance provisions and is not willing to spend any more than what you have in terms of your compensation package. If you are not prepared to provide a specific proposal, you could discuss what elements are important to you in your pay package (such as the bonus certainty you mentioned), or you might provide a couple different scenarios (if you were to continue and If you were to resign).

The company is still interested in retaining you but they have not heard any compelling reasons why we should negotiate different terms than what you already have. You should spend this meeting getting the company to understand why you believe you need to leave the company or what it would take to motivate you to stay.

Please call me on my cell phone if you have any questions. Thanks.

(503) 805 5157 Daul, Ty From: Wah, Linda Sent: Wednesday, December 26, 2007 9:35 AM To: Daul, Ty; Grube, Raimund Subject: Unsolicited advice Hi, you can take or leave this counsel but I thought you should know that Alvaro is not the decision maker on the non-compete issue and that. Xabier feels strongly about it. I would suggest you focus on the payment terms and perhaps a Theo-like reduction in scope to the non-compete rather than duration. Also, the more you focus on non-compete the more suspicious they become re: your commitment to stay.

As I said, just thought you should know the negotiating boundaries and dynamics. Please delete this email.

Hope you had great holidays.

November 17, 2008

VIA HAND DELIVERY

The Honorable John V. Acosta

United States Magistrate Judge

U.S. District Court for the District of Oregon

Mark O. Hatfield U.S. Courthouse

1000 SW Third Avenue

Portland, OR 97204-2902 Re: Daul and Grube v. PPM Energy, Inc., now known as Iberdrola Renewables, Inc. US District Court for Oregon, Case No. CV 08-524 AC Dear Judge Acosta:

This letter responds to plaintiffs' letter of November 12, 2008, regarding this matter.

1. Documents.

Plaintiffs devote most of their letter to discussing their request for communications between Iberdrola employees in Spain. As PPM has previously indicated, it will produce documents reflecting non-privileged communications among Iberdrola and PPM employees in Spain, Portland, and Pennsylvania (where Mr. Mugica is based) regarding plaintiffs' claims. The process of searching for these documents (including e-mails) in these three locations has taken longer than PPM's counsel originally anticipated. PPM's counsel will be receiving documents from Spain and Mr. Mugica this week. To the extent that there are any non-privileged documents that have not already been produced, PPM will produce them to plaintiffs by November 24, 2008. PPM will also produce a privilege log by that date.

2. Protective Order.

As this Court knows, plaintiffs have refused to agree to a protective order governing the production of documents in this case. The court held a telephone conference on this issue and ordered that PPM produce to plaintiffs the documents which it deemed confidential and which should be subject to a protective order. PPM did so, producing 72 pages marked "Confidential." Plaintiffs have indicated that they do not believe any of the documents produced by PPM are confidential.

At this point, PPM renews its request that the Court enter a protective order in this matter. PPM's proposed protective order is attached hereto as Exhibit A. This proposed order is similar to the protective that the Court entered in Tinn v. EMM Labs, Inc., CV-07-963 AC (D. Or. 2008).

PPM has a compelling justification for requesting this order. When plaintiffs began their employment with PPM, they each signed a Confidentiality, Noncompetition and Nonsolicitation Agreement (the "Confidentiality Agreement"). Each of these agreements are attached as Exhibit B. In these Confidentiality Agreements, plaintiffs agreed to the following:

1. Confidentiality . I acknowledge that in the course of my employment I have or will have access to proprietary information, trade secrets, and other information treated by [PPM] and its parent company and affiliates (collectively referred to as "Employer") as confidential, that such information is a valuable asset of Employer and that its disclosure or unauthorized use will cause Employer irreparable harm. As used in this Agreement, the term "Confidential Information" includes, without limitation,: (a) proprietary information of Employer; (b) information marked or designated by Employer as confidential; (c) information that is known to me to be treated by Employer as confidential; . . . and (e) information that derives or maintains value because it is not publicly known. Confidential Information also includes, without limitation, trade secrets as defined under the Uniform Trade Secrets Act, information relating to Employer's business strategies, pricing, customers, technology, products, costs, employee compensation, marketing plans, computer programs or systems, inventions and developments of every kind and character. I agree that I will not disclose any Confidential Information to any person, agency or court . . .

2. Agreement Not to Discuss PPM Matters . I acknowledge and understand that my knowledge of Employer's business, its relationships or prospective relationships with other businesses or entities, and information about Employer's business strategies could benefit others and harm Employer. Consequently, I agree not to discuss nor provide information to any third party or unauthorized person about PPM's business strategies, its executives or board of directors, and their thinking about business strategies, without the express written consent of the President of PPM.

Ex. B at 1, 3 (italics added). The crux of plaintiffs' complaint in this matter is that certain business strategies adopted by PPM after the change in control adversely impacted plaintiffs' compensation. First Amended Complaint ¶¶ 17-19. Thus, many of the documents in the administrative record relate directly to "PPM's business strategies, its executives or board of directors, and their thinking about business strategies" and employee compensation — information which plaintiffs have expressly agreed to keep confidential.

The confidential memorandum prepared by Linda Wah, which plaintiffs have attached to their November 12, 2008, letter to the Court, is a good example of this. In that memorandum, Ms. Wah discusses "this year's business plans," and the business risks associated with plaintiffs' desires to leave the company. She also discusses compensation issues in detail. Ms. Wah designated this memorandum confidential when she prepared it in November 2007, and so did PPM when it recently produced it to plaintiffs.

The Court should enter PPM's requested protective order because it is plainly needed in order to protect PPM's contractual rights vis-à-vis the Confidentiality Agreements. Indeed, plaintiffs have already shown a willingness to disregard their contractual obligations by attaching Ms. Wah's confidential memorandum to their letter to the Court.

Moreover, plaintiffs have not articulated how they are prejudiced if the Court enters PPM's proposed protective order. The order would not prevent them from using any confidential information in this matter, provided they comply with the reasonable requirements of the order (such as filing documents under seal). The order also would not prevent plaintiffs from challenging a confidential designation if they feel the information is not covered by their Confidentiality Agreements or otherwise protected. Finally, the proposed protective order will enable plaintiffs to use information subject to their Confidentiality Agreements without breaching those agreements.

Accordingly, for the reasons set forth above, PPM respectfully requests that the Court enter the protective order which is attached hereto as Exhibit A.

3. Employment Agreements

Plaintiffs are not entitled to the employment agreements of Linda Wah, Terry Hudgens, Martin Mugica, Xabier Viteri, and Alvaro Delgado.

First, contrary to plaintiffs' assertion, conflict of interest evidence is irrelevant even if the standard of review is de novo. In Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001), the court stated as follows: "Because we hold that de novo review applies, we need not address Grosz-Salomon's contention that she should have been allowed further discovery to show a conflict of interest, since the point of showing a conflict of interest is to obtain a more demanding standard of review than abuse of discretion." Id. at 1162 n. 34; Leick v. Hartford Life and Ace. Ins. Co., 2007 WL 1847635 (E.D. Cal. 2007) (same).

Second, assuming that the standard of review is abuse of discretion, plaintiffs' have not made a threshold showing that the administrator's decision was tainted by the structural conflict of interest. The mere fact that Ms. Wah was considering various options in response to plaintiffs' claims (allowing the claims, denying the claims, or negotiating with plaintiffs) is not evidence of a conflict of interest.

Third, the Spanish law which may prevent disclosure of employment agreements by Iberdrola is the "Organic Law 15/1999, of 13th of December, on Personal Data Protection."

4. The Standard of Review Should be Decided Before Addressing Further Discovery.

Plaintiffs indicate in their letter that they want to take the depositions of various PPM and Iberdrola employees, Like their request for the employment agreements, any request for depositions is premature at this point.

As PPM has previously noted, the extent to which any discovery is permitted beyond the administrative record is dictated by the standard of review. If the abuse of discretion standard applies, then discovery is limited to information that the administrator had before it. Bendixen v. Standard Ins. Co., 185 F.3d 929, 944 (9th Cir. 1999).

If the standard of review is de novo, the Court in its discretion may allow very limited discovery beyond the administrative record. As the court explained in Silver v. Executive Car Leasing Long-Term Disability Plan, 466 F.3d 727 (9th Cir. 2006): "The Ninth Circuit `permits the district court in its discretion to allow evidence that was not before the plan administrator,' but we have advised that `[t]he district court should exercise its discretion . . . only when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.'" Id. at 731 n. 2 (quoting Mongeluzo v. Travenol LTD Benefit Plan, 46 F.3d 938, 944 (9th Cir. 1995)) (italics in original).

PPM understands that the reason for the court's telephone conference tomorrow is to establish a briefing schedule for the standard of review issue. Once that issue is resolved, the parties can discuss what, if any, discovery is warranted beyond the administrative record. Very truly yours, __________________ William T. Patton Enclosures cc (w/encs): Steven Larson, Esq. (via hand delivery) Robert E. Maloney, Jr., Esq.

EXHIBIT A

Robert E. Maloney, Jr., OSB No. 67085

maloneyr@lanepowell.com

Paul M. Ostroff, OSB No. 95473

ostroffp@lanepowell.com

William T. Patton, OSB No. 97364

pattonw@lanepowell.com

LANE POWELL PC

601 SW Second Avenue, Suite 2100

Portland, Oregon 97204-3158

Telephone: 503.778.2100

Facsimile: 503.778.2200

Attorneys for Defendant PPM Energy, Inc., now known as Iberdrola Renewables, Inc. UNITED STATES DISTRICT COURT DISTRICT OF OREGON TY DAUL and RAIMUND GRUBE, CV No. 3:08-CV-524-AC Plaintiffs, PROTECTIVE ORDER v. PPM ENERGY, INC., now known as IBERDROLA RENEWABLES, INC., and the CHANGE IN CONTROL SEVERANCE ENHANCEMENTS FOR KEY PPM EMPLOYEES PLAN, Defendants. Plaintiffs have requested, or stated that they will request, the production of documents and/or information that defendant PPM Energy, Inc., now known as Iberdrola Renewables, Inc. ("PPM") considers to be or contain confidential information, proprietary information, or trade secrets under applicable state law, and that are subject to protection under Federal Rule of Civil Procedure 26(c)(7) and Foltz v. State Farm Mutual Ins. Co., 331 F.3d 1122 (9th Cir. 2003). The categories of information that are considered confidential and proprietary information are set forth with more particularity in paragraph 2 below.

Good cause exists to protect the confidential and proprietary nature of the information contained in documents, interrogatory responses, or deposition testimony, such that the entry of this Protective Order is warranted to protect against disclosure of such documents and information.

Based upon the above, and the Court being duly advised;

IT IS HEREBY ORDERED as follows:

1. Scope. This Confidentiality and Protective Order ("Protective Order") shall govern discovery in this action and shall be applicable to all information that has been or will be provided, produced, or obtained, whether formally or informally, in the course of discovery in this action, including, without limitation, information provided, produced, or obtained in or through any depositions, interrogatory response, response to a request for admission, and any document or thing provided or made available for inspection and/or copying (collectively "document, thing, or testimony"). As used herein, the term "document" shall include all forms of information delineated in Fed.R.Civ.P. 34(a).

2. Protected Information. Any person or entity, whether a party or a nonparty, and whether acting on its own or through counsel (hereafter "person"), which is participating in discovery in this action may designate any document, thing, or testimony CONFIDENTIAL (or words to that effect) so long as such person reasonably believes that such document, thing, or testimony contains or discloses, respectively, information justifying a CONFIDENTIAL designation. CONFIDENTIAL Information is:

a. Proprietary information of PPM;

b. Trade secrets;

c. Information relating to PPM's business strategies, customers, or marketing plans;

d. Information relating to PPM's employees' compensation; and

e. Proprietary business and financial information and any other information, the public disclosure of which is likely to have the effect of causing substantial harm to the competitive position of the person from which the information is obtained, or causing harm resulting from the disclosure of personal confidential information.

3. Procedure for Designating Documents: Any person desiring to subject the information contained or disclosed in any document (including, without limitation, any document response to a Rule 34 request or to a Rule 45 subpoena, answers to interrogatories and responses to requests for admission) delivered to or served on any party to the confidentiality provisions of this Protective Order must designate such document CONFIDENTIAL in the manner provided herein, unless the parties agree to an alternative procedure, Any document delivered to or served on any party may be designated CONFIDENTIAL by affixing the legend "CONFIDENTIAL" to every page of the document. All correspondence, legal memoranda, motion papers, pleadings and other written material which quote or disclose the substance of any CONFIDENTIAL Information must also be treated as such in accordance with the provisions of this Protective Order, and such documents must be marked in accordance with this paragraph.

4. Inadvertent Failure to Desifinate. If a party, through inadvertence, produces any CONFIDENTIAL Information without labeling or marking or otherwise designating it as such in accordance with the provisions of this Protective Order, the designating party may give written notice to the receiving party that the documents or things produced is deemed CONFIDENTIAL Information and should be treated as such in accordance with the provisions of this Protective Order. The receiving party must treat such documents and things as CONFIDENTIAL Information from the date such notice is received. Disclosure of such CONFIDENTIAL Information, prior to the receipt of such notice, to persons not authorized to receive CONFIDENTIAL Information will not be deemed a violation of this Protective Order; provided, however, that the party making such disclosure shall notify the producing party in writing of all such unauthorized persons to whom such disclosure was made.

5. Procedure for Designating Deposition Testimony. If any person believes that CONFIDENTIAL Information belonging to it has been or may be disclosed in the course of any deposition (whether through any question, answer, colloquy and/or exhibit), then such person may designate the deposition, portion thereof, or exhibit as CONFIDENTIAL by (a) stating on the record of the deposition that such deposition, portion thereof, or exhibit is CONFIDENTIAL, or by (b) stating in a writing served on counsel for the other party, or in the case of testimony given by a third party pursuant to a subpoena, up to thirty (30) days after receipt of such deposition transcript by the designating person that such deposition, portion thereof, or exhibit is CONFIDENTIAL. All deposition transcripts and exhibits shall be treated as CONFIDENTIAL in accordance with the provisions of this Protective Order until written designation is made or the time within which to make such written designation has expired. Where a claim of confidentiality is made at any deposition, all persons in attendance who, by virtue of the terms of this Protective Order, do not have access to such CONFIDENTIAL Information will be excluded from attendance at the portion or portions of the deposition at which such CONFIDENTIAL Information will be or might be disclosed. If any of the depositions, portions thereof, or exhibits are identified as CONFIDENTIAL, then all originals, copies, and synopses thereof must be marked in accordance with this Protective Order.

6. Restrictions on Use and Disclosure of CONFIDENTIAL Information. All CONFIDENTIAL Information obtained on behalf of a party from any person through discovery in this lawsuit, and any summaries, abstracts, or indices thereof, may be used by the persons who receive such information ("Recipient") solely for the preparation and trial of this lawsuit (including appeals) and for no other purpose whatsoever. Unless otherwise authorized by the designating person or ordered by this Court, Recipients may not make CONFIDENTIAL Information public, may not use CONFIDENTIAL Information in any other civil action, and may not disclose or divulge CONFIDENTIAL Information to anyone except as permitted in this Protective Order.

7. Permitted Disclosure of CONFIDENTIAL Information. Any information which has been designated as CONFIDENTIAL Information in accordance with this Protective Order may be disclosed to:

a. Partners, members, shareholders, and associate attorneys of the law firms which are then of record for the party requesting the CONFIDENTIAL Information;

b. Any outside expert or consultant for each party; provided, however, that all such outside experts or consultant shall first have executed an Undertaking in the form of Exhibit 1 attached hereto, which Undertaking shall remain in the possession of counsel for the party which has retained such outside expert or consultant; and further provided that any such outside expert or consultant is not a direct or indirect competitor of defendant;

c. Language translators, if necessary;

d. Law clerks, paralegals, stenographic support, and clerical employees of the persons identified in paragraphs 9a through 9c hereof, whose functions require them to have access to the CONFIDENTIAL Information;

e. The officers, directors, or employees of the party producing the CONFIDENTIAL Information or of the person designating the CONFIDENTIAL Information;

f. With respect to any particular document designated as CONFIDENTIAL Information, any person who is named on the face of such document as having been its author or one of its recipients, or who appears from other documents or testimony to have been a recipient of such document;

g. The Court before which this case is pending, including court personnel who are authorized by the Judges and the Magistrate Judges of this District to review such information; and

h. Any stenographer or court reporter present in his or her official capacity at any hearing, deposition, or other proceeding in this case.

8. Filing Under Seal. Any paper, document, exhibit, or thing that contains or discloses CONFIDENTIAL Information that is to be filed or submitted with the Court shall be filed in a sealed envelope or other appropriate sealed container, prominently marked with the caption of the case and notation:

CONFIDENTIAL

Subject to Protective Order in:

TY DAUL and RAIMUND GRUBE vs. PPM ENERGY, INC., now known as IBERDROLA RENEWABLES, INC. and the CHANGE IN CONTROL SEVERANCE ENHANCEMENTS FOR KEY PPM EMPLOYEES PLAN

Civil No. 3:08-CV-524-AC

United States District Court District of Oregon

[Indication of Nature of Contents]

TO BE OPENED ONLY AS DIRECTED BY THE COURT

Such sealed envelope shall be opened and reviewed only be personnel authorized by this Court.

9. Disclosure at Trial. Disclosure of CONFIDENTIAL Information at trial shall otherwise be governed by further order of the Court.

10. Designation Not Conclusive. The designation of any document, thing, or testimony as CONFIDENTIAL is intended solely to facilitate preparation for trial, and the treatment of any document, thing, or testimony designated as such shall not be construed as an admission or an agreement that the designated document, thing, or testimony contains or discloses any trade secret or confidential information in contemplation of law. No person shall be obligated to challenge the propriety of any such designation, and any failure to do so shall not preclude a subsequent attack on the propriety of any CONFIDENTIAL designation.

11. Relief Available. In the event of a dispute with respect to the designation of any discovery material as CONFIDENTIAL Information, counsel shall endeavor in good faith to resolve their dispute on an informal basis before presenting the matter to the Court for resolution. In the event of such dispute, the designating party seeking to preserve the confidentiality of any such document must make the showing required by Federal Rule of Civil Procedure 26 and Foltz v. State Farm Mutual Ins. Co., supra, in order to maintain the secrecy of such document. The designating party must further assess whether redaction is a viable alternative to complete non-disclosure. Any party hereto may seek relief from, or modification of, this Protective Order, and may challenge the designation of any document, thing, or testimony as CONFIDENTIAL.

12. Procedure Upon Termination of Action. Within sixty (60) days of the final determination of this action, including all appeals, and unless otherwise agreed to in writing by counsel, each party shall (a) return any original documents and things constituting CONFIDENTIAL Information produced to a receiving party to the designating party, and (b) either certify in writing that the remaining copies of such documents and things have been destroyed or return them to the designating party, such election to be made by the designating party. Notwithstanding the foregoing, the attorneys of record for each party may retain all pleadings, briefs, memoranda, motions, and other documents containing their work product which refer to or incorporate CONFIDENTIAL Information, and will continue to be bound by the terms of this Protective Order with respect to all such retained information.

13. Privileged Information. Nothing contained in this Protective Order may be construed to require production of CONFIDENTIAL Information that is privileged or otherwise protected from discovery. If a party, through inadvertence, produces any document or information that it believes is immune from discovery pursuant to the attorney-client privilege and/or the work product privilege, such production will not be deemed a waiver of any privilege, and the producing party may give written notice to the receiving party that the document or information produced is deemed privileged and that return of the document or information is requested. Upon receipt of such written notice, the receiving party must immediately gather the original and all copies of the document or information of which the receiving party is aware and must immediately return the original and all such copies to the producing party. The return of the document(s) and/or information to the producing party will not preclude the receiving party from later moving the Court to compel production of the returned documents and/or information.

14. Continuing Order and Continuing Jurisdiction of This Court. The terms of the Protective Order shall survive the final termination of this action with respect to all CONFIDENTIAL Information that is not or does not become known to the public. This Court will retain jurisdiction, following termination of this action, to adjudicate all disputes either between the parties hereto or between a party hereto and a third party relating to or arising out of this Protective Order.

15. Custody of CONFIDENTIAL Information. Documents and things designated as containing CONFIDENTIAL Information and any copies or extracts thereof, will be retained in the custody of the attorneys of record during the pendency of this action, except as reasonably necessary to provide access to persons authorized under the provisions of this Protective Order.

16. Transmission of CONFIDENTIAL Information. Nothing in this Protective Order prohibits the transmission or communication of CONFIDENTIAL Information by hand delivery; face-to-face conference; in sealed envelopes of containers via the mails or an established freight, delivery or messenger service; or by telephone, telegram, facsimile, e-mail, or other electronic transmission system if, under the circumstances, there is no reasonable likelihood that the transmission will be intercepted and misused.

IT IS SO ORDERED.

DATED this _____ day of _______________, 2008. ________________________________________ United States Magistrate Judge

Submitted by:

Robert E. Maloney, Jr., OSB No. 67085

Paul M. Ostroff, OSB No. 95473

William T. Patton, OSB No. 97364

(503) 778-2100

of Attorneys for Defendant PPM Energy, Inc.

now known as Iberdrola Renewables, Inc.

EXHIBIT I

UNITED STATES DISTRICT COURT DISTRICT OF OREGON TY DAUL and RAIMUND GRUBE, CV No. 3:08-CV-524-AC Plaintiffs, UNDERTAKING v. PPM ENERGY, INC., now known as IBERDROLA RENEWABLES, INC., and the CHANGE IN CONTROL SEVERANCE ENHANCEMENTS FOR KEY PPM EMPLOYEES PLAN, Defendants. 1. My name is ___________________________________. I live at _______________ __________________________________________________________. I am employed as (state position) ______________________________ by (state name and address of employer) ______________________________________________________________ ________________________________________________________________.

2. I have read the Protective Order that has been entered in this case, and a copy of it has been given to me. I understand the provisions of this Order, and agree to comply with and to be bound by its provisions.

3. I declare under penalty of perjury under the laws of the state of Oregon that the foregoing is true and correct.

Executed this _____ day of _______________, 2008. ________________________________________ EXHIBIT B CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION AGREEMENT Ty P. Daul In consideration of my employment and the pay and benefits provided to me pursuant to the offer dated November 19, 2001 (the "[Letter Agreement]"), I agree to the following terms:

1. Confidentiality . I acknowledge that in the course of my employment I have or will have access to proprietary information, trade secrets, and other information treated by PacifiCorp Power Marketing ("PPM"), an Oregon corporation, and its parent company and affiliates (collectively referred to as "Employer") as confidential, that such information is a valuable asset of Employer and that its disclosure or unauthorized use will cause Employer irreparable harm. As used in this Agreement, the term "Confidential Information" includes, without limitation,: (a) proprietary information of Employer; (b) information marked or designated by Employer as confidential; (c) information that is known to me to be treated by Employer as confidential; (d) information provided to Employer by third parties which Employer is obligated to keep confidential and (e) information that derives or maintains value because it is not publicly known. Confidential Information also includes, without limitation, trade secrets as defined under the Uniform Trade Secrets Act, information relating to Employer's business strategies, pricing, customers, technology, products, costs, employee compensation, marketing plans, computer programs or systems, Inventions and developments of every kind and character. I agree that I will not disclose any Confidential Information to any person, agency or court unless compelled to do so pursuant to legal process (e.g., a summons or subpoena or as otherwise expressly required by law) and then only after providing the Employer with prior notice and a copy of the legal process, nor will I use such Confidential Information for my own benefit or that of any other person, corporation, government or other entity except as is required by law. I agree that upon my separation from employment as an employee and completion of my service as a consultant (or earlier if requested by Employer), I will return to Employer all originals and copies of documents and other materials relating to Employer or containing or derived from Confidential Information that are in my possession or control, accompanied, if requested, by written certification signed by me and satisfactory to Employer to the effect that all such documents and materials have been returned.

2. Agreement Not to Discuss PPM Matters . I acknowledge and understand that my knowledge of Employer's business, its relationships or prospective relationships with other businesses or entities, and information about Employer's business strategies could benefit others and harm Employer. Consequently, I agree not to discuss nor provide information to any third party or unauthorized person about PPM's business strategies, its executives or board of directors, and their thinking about business strategies, without the express written consent of the President of PPM.

3. Noncompetition . In order for Employer to protect its interests in the competitive use of any Confidential Information, I agree that Employer shall establish a minimum period of six (6) months and a maximum period of one (1) year after my employment with Employer terminates during which time I will not, directly or indirectly, whether as officer, director, employee, stockholder, agent, partner, consultant, paid or unpaid advisor, work for, engage in, or have any interest in or connection with any business (including, without limitation, utilities, power producers, power marketers or power traders), agency, cooperative, governmental entity or publicly-owned energy provider within North America, which directly or indirectly competes with Employer's businesses or planned future businesses. This noncompetition restriction is not applicable to ownership of not more than five percent of the stock of any publicly traded corporation. I acknowledge and agree that the terms of this noncompetition provision are reasonable in Employer's competitive and specialized business. If a court of competent jurisdiction holds that any portion of this paragraph is unenforceable, the maximum restrictions of time, scope of activities, and geographic area reasonable under the circumstances will be substituted for any such restrictions held unenforceable.

4. Non-Solicitation . I agree that for a period of (2) two years after my employment with Employer terminates I will not directly or indirectly, call on or solicit, induce, entice or attempt to solicit any customer of Employer or solicit any person who is employed by Employer to leave employment with Employer or to work for any other person or company.

5. Disputes . The rights and obligations under this Agreement shall in all respects be governed by the laws of the state of Oregon, as applicable, without regard to the choice of law rules. Venue in any legal action shall exist exclusively in state or federal courts in Oregon. The prevailing party in any such litigation will be entitled to recover all reasonable attorneys' fees and other expenses, including attorneys' fees and expenses in connection with any trial, appeal, or petition for review.

6. Injunctive Relief . It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Agreement by me and that Employer shall be entitled to specific performance and injunctive relief as remedies for any such breach. I understand that such remedies shall not be deemed to be the exclusive remedies in the event of my breach of this Agreement, but shall be in addition to all other remedies available at law or in equity to Employer.

7. Severability . If any provision of this Agreement is or becomes unenforceable, all remaining provisions shall remain valid and enforceable. _______________ 11/27/01 Ty P. Daul Date Sign and return this Agreement to: Lauren Tweedale PacifiCorp Human Resources 825 NE Multnomah, Suite 1800 Portland, OR 97232

CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION AGREEMENT

In consideration of my employment and the pay and benefits provided to me pursuant to the offer dated March 13, 2002 (the "[Letter Agreement]"). I agree to the following terms:

1. Confidentiality . I acknowledge that in the course of my employment I have or will have access to proprietary information, trade secrets, and other information treated by PacifiCorp Power Marketing ("PPM"), an Oregon corporation, and its parent company and affiliates (collectively referred to as "Employer") as confidential, that such information is a valuable asset of Employer and that its disclosure or unauthorized use will cause Employer irreparable harm. As used in this Agreement, the term "Confidential Information" includes, without limitation,: (a) proprietary information of Employer; (b) information marked or designated by Employer as confidential; (c) information that is known to me to be treated by Employer as confidential; (d) information provided to Employer by third parties which Employer is obligated to keep confidential and (e) information that derives or maintains value because it is not publicly known. Confidential Information also includes, without limitation, trade secrets as defined under the Uniform Trade Secrets Act, information relating to Employer's business strategies, pricing, customers, technology, products, costs, employee compensation, marketing plans, computer programs or systems, inventions and developments of every kind and character. I agree that I will not disclose any Confidential Information to any person, agency or court unless compelled to do so pursuant to legal process (e.g., a summons or subpoena or as otherwise expressly required by law) and then only after providing the Employer with prior notice and a copy of the legal process, nor will I use such Confidential Information for my own benefit or that of any other person, corporation, government or other entity except as is required by law. I agree that upon my separation from employment as an employee and completion of my service as a consultant (or earlier if requested by Employer), I will return to Employer all originals and copies of documents and other materials relating to Employer or containing or derived from Confidential Information that are in my possession or control, accompanied, if requested, by written certification signed by me and satisfactory to Employer to the effect that all such documents and materials have been returned.

2. Agreement Not to Discuss PPM Matters . I acknowledge and understand that my knowledge of Employer's business, its relationships or prospective relationships with other businesses or entities, and information about Employer's business strategies could benefit others and harm Employer. Consequently, I agree not to discuss nor provide information to any third party or unauthorized person about PPM's business strategies, its executives or board of directors, and their thinking about business strategies, without the express written consent of the President of PPM.

3. Noncompetition . In order for Employer to protect its interests in the competitive use of any Confidential Information, I agree that for a period of one (1) year after my employment with Employer terminates I will not, directly or indirectly, whether as officer, director, employee, stockholder, agent, partner, consultant, paid or unpaid advisor, work for, engage in, or have any interest in or connection with any business (including, without limitation, utilities, power producers, power marketers or power traders), agency, cooperative, governmental entity or publicly-owned energy provider within North America, which directly or indirectly competes with Employer's businesses or planned future businesses. This noncompetition restriction is not applicable to ownership of not more than five percent of the stock of any publicly traded corporation. I acknowledge and agree that the terms of this noncompetition provision are reasonable in Employer's competitive and specialized business. If a court of competent jurisdiction holds that any portion of this paragraph is unenforceable, the maximum restrictions of time, scope of activities, and geographic area reasonable under the circumstances will be substituted for any such restrictions held unenforceable.

4. Non-Solcitation . I agree that for a period of (2) two years after my employment with Employer terminates I will not directly or indirectly, call on or solicit, induce, entice or attempt to solicit any customer of Employer or solicit any person who is employed by Employer to leave employment with Employer or to work for any other person or company.

5. Disputes . The rights and obligations under this Agreement shall in all respects be governed by the laws of the state of Oregon, as applicable, without regard to the choice of law rules. Venue in any legal action shall exist exclusively in state or federal courts in Oregon. The prevailing party in any such litigation will be entitled to recover all reasonable attorneys' fees and other expenses, including attorneys' fees and expenses in connection with any trial, appeal, or petition for review.

6. Injunetive Relief . It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Agreement by me and that Employer shall be entitled to specific performance and injunetive relief as remedies for any such breach. I understand that such remedies shall not be deemed to be the exclusive remedies in the event of my breach of this Agreement, but shall be in addition to all other remedies available at law or in equity to Employer.

7. Severability . If any provision of this Agreement is or becomes unenforceable, all remaining provisions shall remain valid and enforceable. Raimund Grube 3/17/02 Raimund Grube Date Sign and return this Agreement to: Leiann Stephenson PacifiCorp Human Resources 825 NE Multnomah, Suite 1800 Portland, OR 97232

event class action plaintiffs from circumventing the heightened pleading requirements under the PSLRA through artful pleading. Ring v. AXA Fin., Inc., 483 F.3d 95, 97-98 (2d Cir. 2007) (describing history of PSLRA and SLUSA). By raising the bar for securities fraud lawsuits, the PSLRA had the unintended consequence of steering plaintiffs to state court, where they sought to avoid the PSLRA by reformulating their allegations as state common law claims. Id. SLUSA was intended to reverse that trend by forbidding plaintiffs from filing certain types of class actions in state court. Barron v. Igolnikov, 09 Civ. 4471 (TPG), 2010 WL 882890, at *3 (S.D.N.Y. Mar. 10, 2010).

15 U.S.C. §§ 78bb(f)(1), 77p(b). SLUSA reads, in pertinent part:

No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging —

(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or

(B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.

SLUSA preemption has essentially four components: (1) the suit must be a "covered class action"; (2) the action must be based on state or local law; (3) the action must concern a "covered security"; and (4) the defendant must have misrepresented or omitted a material fact or employed a manipulative device or contrivance "in connection with the purchase or sale" of that security. Barron, 2010 WL 882890, at *4 (citing Felton v. Morgan Stanley Dean Witter Co., 429 F. Supp. 2d 684, 690-91 (S.D.N.Y. 2006)). If an action satisfies these criteria, the defendant may remove it to federal district court, which must dismiss the action. 15 U.S.C. § 78bb(f)(1); Ring, 483 F.3d at 98.

A covered class action is a lawsuit in which damages are sought on behalf of more than 50 prospective class members and common questions of law or fact predominate over questions affecting only individual members of the class. 15 U.S.C. § 78bb(f)(5)(B)(i)(I).

SLUSA does not actually pre-empt any state cause of action, but denies plaintiffs the right to use the class action device to vindicate certain claims. Merrill Lynch, Pierce, Fenner Smith, Inc. v. Dabit, 547 U.S. 71, 87 (2006) ("The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist.").

It is undisputed that the class action here is "covered" and that Plaintiffs assert state law claims. Likewise, Plaintiffs do not dispute that they allege misrepresentations and omissions. Instead they argue that SLUSA preemption does not apply because these representations were made in connection with LLC interests, which they assert are not "covered securities."

Plaintiffs' complaint states they "believe that Class members number in the hundreds, if not thousands." SCAC ¶ 147(a).

A "covered security" includes any security that is listed or authorized for listing on the New York Stock Exchange or another national exchange, as well as securities issued by investment companies registered with the SEC. See 15 U.S.C. §§ 77r(b). Defendants do not rebut Plaintiffs' assertion that LLC interests are not covered securities under the act. Instead, they assert that the misrepresentations alleged are "in connection with" a different set of covered securities — those purportedly purchased and sold by Madoff.

The "in connection with" requirement is given broad construction. In Merrill Lynch, Pierce, Fenner Smith, Inc. v. Dabit, the Supreme Court held that "it is enough that the fraud alleged `coincide' with a securities transaction — whether by the plaintiff or by someone else." 547 U.S. 71, 85-86 (2006) (noting "presumption that Congress envisioned a broad construction follows not only from ordinary principles of statutory construction but also from the particular concerns that culminated in SLUSA's enactment").

There is "no question that Madoff's Ponzi scheme was `in connection with' the purchase and sale of securities." Levinson, 2009 WL 5184363, at *9. Madoff told investors that he would purchase and sell securities in the Standard Poor's 100 Index, and he used prices from the public markets on the trade documentation he sent to customers. Barron, 2010 WL 882890, at *5. That the trades never took place does not preclude finding a connection. See id.; see also Schnorr v. Schubert, No. 05 Civ. 303, 2005 WL 2019878, at *5 (W.D. Okla. Aug. 18, 2005) (preempting claims under SLUSA where defendant engaged in Ponzi scheme by promising to invest putative class's money in nationally listed and traded securities but never actually executed any trades). At issue here is whether Defendants' misrepresentations, which had the effect of facilitating Madoff's fraud, were made "in connection with" the purchase and sale of securities.

Other courts to consider this issue in the context of the Madoff affair found that Defendant's misrepresentations did so coincide. In a well-reasoned decision, the District Court for Connecticut considered the "nature of the parties' relationship, and whether it necessarily involved the purchase and sale of securities." Levinson, 2009 WL 5184363, at *11 (citing Rowinski v. Salomon Smith Barney, Inc., 398 F.3d 294, 302 (3d Cir. 2005)). In the case at bar, Plaintiffs allege misrepresentations in the OMs regarding "the investment strategies and objectives of the Beacon Fund." Although the shares of the Beacon Fund are not covered securities, the objective of the fund was to manage Plaintiffs' investment using a strategy that inevitably included the purchase and sale of covered securities. Furthermore, Plaintiffs allege false and misleading statements and omissions regarding "Defendants' due diligence and monitoring of Madoff and BMIS," including "the performance and feasibility of Madoff's purported trading strategy" utilizing indisputably covered securities. These allegations are sufficient to meet SLUSA's broad requirement of a misrepresentation or omission in connection with the purchase or sale of a covered security. See Dommert v. Raymond James Fin. Servs., Inc., No. 06 Civ. 102, 2007 WL 1018234, at *11 (E.D. Tex. Mar. 29, 2007) (finding in connection requirement met where purpose of investment agreements was to "utilize [the plaintiff's] assets and expand upon those assets, presumably with the purchase and sale of securities"). The aforementioned state law claims are dismissed.

Plaintiffs request leave to replead their state law claims to avoid SLUSA preemption. While leave to replead should be "freely given when justice so requires," Fed.R.Civ.P. 15(a), it may be denied if repleading would be futile. Acito v. IMCERA Grp., Inc., 47 F.3d 47, 55 (2d Cir. 1995). Here, Plaintiffs' state law claims are based on the same underlying transactions alleged under a theory of securities fraud, which the Court has allowed to proceed. Because it would inevitably rest on the same or similar allegations as contained in the SCAC, repleading would be futile, and Plaintiffs' request is denied.

ii. Martin Act Preemption

Defendants contend that the majority of Plaintiffs' remaining state law claims are preempted by New York's Martin Act. See N.Y. Gen. Bus. L. § 352 et seq. These claims include breach of fiduciary duty (Counts XVI and XXIV), aiding and abetting breach of fiduciary duty (Counts XXI, XXII, XXIX, and XXX), negligent misrepresentation (Counts XVIII and XXVI), gross negligence (Counts XIX and XXVII), unjust enrichment (Counts XX and XXVIII), and breach of contract (Counts XVII and XXV).

The Court has already held that Counts IX, for common law fraud, and Counts, XI, XII, XIII, XIV, and XV are preempted by SLUSA. The Martin Act, however, offers broader preemption because the claims need not be class claims to be preempted.

The Martin Act prohibits:

(a) Any fraud, deception, concealment, suppression, false pretense or fictitious or pretended purchase or sale;

(b) Any promise or representation as to the future which is beyond reasonable expectation or unwarranted by existing circumstances;

(c) Any representation or statement which is false, where the person who made such representation or statement: (i) knew the truth; or (ii) with reasonable effort could have known the truth; or (iii) made no reasonable effort to ascertain the truth; or (iv) did not have knowledge concerning the representation or statement made.

N.Y. Gen. Bus. L. § 352-c(1). The Act gives the New York Attorney General the exclusive authority to enforce its provisions and grants him investigatory, regulatory, and remedial powers aimed at preventing and prosecuting fraudulent securities practices. See N.Y. Gen. Bus. L. § 353; Kerusa Co. LLC v. W10Z/515 Real Estate Ltd. P'ship, 906 N.E.2d 1049, 1054 (N.Y. 2009); Kralik v. 239 E. 79th St. Owners Corp., 5 N.Y.3d 54, 58-59 (N.Y. 2005); CPC Intl. v. McKesson Corp., 70 N.Y.2d 268, 277 (N.Y. 1987). It is well settled that there is no private right of action under the Martin Act. McKesson, 70 N.Y.2d at 276-77. However, there has been some disagreement as to whether the Martin Act also preempts common law claims falling within its purview.

The New York Court of Appeals has not explicitly addressed preemption of non-fraud common law claims that fall within the scope of the Martin Act. However, the overwhelming majority of courts to consider the issue have found that such claims are preempted. See Stephenson, 700 F. Supp. 2d at 613-16 (discussing history of preemption); In re Bayou Hedge Fund Litig., 534 F. Supp. 2d 405, 421 (S.D.N.Y. 2007) ("The vast majority of state and federal courts have found that causes of action related to a plaintiff's securities fraud claim that do not include scienter as an essential element are typically preempted by the Martin Act."), aff'd sub nom, South Cherry St., LLC v. Hennessee Grp. LLC, 573 F.3d 98 (2d Cir. 2009); Pro Bono Invs., Inc. v. Gerry, No. 03 Civ. 4347 (JGK), 2005 WL 2429787, at *16 (S.D.N.Y. Sept. 30, 2005) (noting New York courts and federal courts "almost without exception" have held Martin Act precludes common law claims). In its only case to address the subject, the Court of Appeals for the Second Circuit recognized Martin Act preemption of common law claims involving securities, citing "principles of federalism and respect for state courts' interpretation of their own laws." Castellano v. Young Rubicam, Inc., 257 F.3d 171, 190 (2d Cir. 2001) (dismissing breach of fiduciary duty claim as preempted by Martin Act).

The question of preemption has been raised and decided in multiple cases arising in the fallout of the Madoff affair. These suits were brought by investors seeking relief from investment funds, their managers, and auditors for losses suffered when Madoff's Ponzi scheme collapsed. As in the case at bar, many plaintiffs claimed there were "red flags" raised by Madoff's transactions that should have prompted further investigation by defendants and warnings to investors. In all but one of these Madoff-related cases, Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 0118 (VM), 2010 WL 3022848 (S.D.N.Y July 29, 2009), the courts dismissed the common law claims as preempted by the Martin Act. See Stephenson, 700 F. Supp. 2d at 613-16 (dismissing breach of fiduciary duty, negligence, gross negligence, and aiding and abetting breach of fiduciary duty claims as preempted) (Holwell, J.); Barron, 2010 WL 882890, at *6 (dismissing claims of breach of fiduciary duty, aiding and abetting breach of fiduciary duty, gross negligence, and unjust enrichment) (Griesa, J.); In Re Tremont, 703 F. Supp. 2d at 373 (dismissing breach of fiduciary duty, negligent misrepresentation, and aiding and abetting breach of fiduciary duty claims as preempted) (Griesa, J.); Meridian Horizon Fund LP v. Tremont Grp. Holdings, Inc., No. 09 Civ. 3708 (TPG), 2010 WL 1257567, at *9 (S.D.N.Y. Mar. 31, 2010) (dismissing common law claims for negligence as preempted) (Griesa, J.).

The recent Anwar decision argued that axioms of statutory interpretation, legislative history, and sound policy speak against preemption. Anwar, 2010 WL 3022848, at *3-4, 12. The New York Attorney General made similar arguments in amicus briefs submitted in two cases currently pending in New York's First Department. See Brief for the Attorney General of the State of New York as Amicus Curiae, CMMF, LLC v. J.P. Morgan Inv. Mgmt., Inc., No. 601924/09 (N.Y. App. Div. 2010) (arguing Martin Act does not preempt independent common law causes of action in area of investment securities); Brief for the Attorney General of the State of New York as Amicus Curiae, Assured Guaranty (UK) Ltd. v. J.P. Morgan Inv. Mgmt., Inc., No. 603755/08 (N.Y. App. Div. 2010) (same).

Both cases were argued May 26, 2010, but have not yet been decided.

Opinions of the Attorney General on issues of state law are "entitled to careful consideration by courts, and quite generally regarded as highly persuasive." Harris County Comm'rs Court v. Moore, 420 U.S. 77, 87 (1975) (quoting Jones v. Williams, 45 S.W.2d 130, 131 (Tex. 1931)). But they are not dispositive. Id.; see also Cedar Shake Shingle Bureau v. City of Los Angeles, 997 F.2d 620, 625 (9th Cir. 1993) ("That the

Attorney General has issued a reasonable opinion on the question, however, is not dispositive."). In Nanopierce, this Court reviewed the history of Martin Act preemption and found that New York precedent on the issue heavily favored preemption. Nanopierce Techs., Inc. v. Southridge Capital Mgmt. LLC, No. 02 Civ. 0767 (LBS), 2003 WL 22052894 *1-4 (S.D.N.Y. Sept. 2, 2003) (discussing history of preemption under Martin Act). The New York and federal courts have rested on the decision of the New York Court of Appeals in McKesson, which found no private right of action under the Martin Act. According to the New York courts upholding preemption, to sustain a cause of action for common law claims covered by the Martin Act "would be, in effect, to recognize a private right of action under the Martin Act contrary to [ McKesson]." Horn v. 440 E. 57^th Co., 151 A.D.2d 112, 120 (N.Y. App. Div. 1989); see also Rego Park Gardens Owners, Inc. v. Rego Park Gardens Assocs., 595 N.Y.S.2d 492, 494 (N.Y. App. Div. 1993) (dismissing negligent misrepresentation claim "because this cause of action sought, in essence, to pursue a private cause of action under the Martin Act"). Very little has changed in the landscape of New York courts' rulings since Nanopierce. Indeed, the same policy arguments set out in the NY AG's briefs were considered and rejected. See Nanopierce, 2003 WL 22052894, at *3-4 (considering arguments raised in Cromer Fin. Ltd. v. Berger, No. 00 Civ. 2498, 2001 WL 1112548, at *3-4 (S.D.N.Y. Sept. 19, 2001)).

Plaintiffs suggest the New York Court of Appeals tacitly rejected Martin Act preemption of common law claims in the recent Kerusa case. Kerusa, 906 N.E.2d 1049. Their reliance on Kerusa is misplaced. In Kerusa, the court held that common law fraud claims, traditionally excluded from preemption, are preempted where they are based solely on nondisclosures or violations of requirements created by the Martin Act itself. Kerusa, 906 N.E.2d at 1055. "Nothing in the opinion suggests that the Court of Appeals, in expanding Martin Act preemption into the fraud realm, intended to diminish it with respect to other types of claims." Stephenson, 700 F. Supp. 2d at 614-15.

Although the NY AG's brief sheds light on potential uncertainty in this area of law, the weight of opposing authority, including Second Circuit Court of Appeals precedent, compels this Court to reaffirm its recognition of Martin Act preemption.

The Martin Act preempts common law securities claims sounding in fraud or deception that do not require pleading or proof of intent, and that are based on conduct that is "within or from" New York. Barron, 2010 WL 882890, at *5 (citing Owens v. Gaffken Barringer Fund, LLC, No. 08 Civ. 8484 (PKC), 2009 WL 3073338, at *12 (S.D.N.Y. Sept. 21, 2009)). Here, Plaintiffs' common law claims arise from their ownership of limited partnership interests in the Beacon Fund. Because limited partnership interests are considered securities for the purposes of the Martin Act, these claims meet the first prong. N.Y. Gen. Bus. Law § 352(1); Barron, 2010 WL 882890, at *5; Mayer v. Oil Field Sys. Corp., 721 F.2d 59, 65 (2d Cir. 1993).

To satisfy the Martin Act's geographic prong, the acts must be "within or from" New York, meaning that a substantial portion of the events giving rise to the claim must have occurred in New York. N.Y. Gen. Bus. Law § 352-c(1); See Barron, 2010 WL 882890, at *5 (citing Sedona Corp v. Ladenburg Thalmann Co. Inc., No. 03 Civ. 3120 (LTS) (THK), 2005 WL 1902780, at *22 (S.D.N.Y. Aug. 9, 2005); Heller v. Goldin Restructuring Fund, L.P., 590 F. Supp. 2d 603, 611 n. 9 (S.D.N.Y. 2008). The nexus with New York in the instant case is clear. As Plaintiffs note in the SCAC, "[s]ubstantial acts in furtherance of the alleged fraud and other wrongdoing and/or their effects" took place in New York. SCAC ¶ 29. The individual and corporate Defendants maintain their primary offices in New York, and they administered Plaintiffs' investments here.

Further, the Madoff scheme, through which Plaintiffs' investments were lost, was also centered in New York.

Finally, Plaintiffs' claims sound in fraud or deception and do not require pleading or proof of intent. "A claim sounds in fraud when, although not an essential element of the claim, the plaintiff alleges fraud as an integral part of the conduct giving rise to the claim." Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F. Supp. 2d 258, 269 (S.D.N.Y. 2004). Each claim arises from alleged misrepresentations and omissions by the Defendants with respect to their performance of due diligence and other supervisory services. The claims are rooted in the same actions from which the securities law fraud claims arise, but do not require proof of scienter. They are therefore exactly of the kind routinely dismissed as preempted. See Stephenson, 700 F. Supp. 2d at 613-14 (distinguishing breach of fiduciary duty and negligent misrepresentation claims from common law fraud and finding they "mimic" claims under the Martin Act); see also In re Bayou, 534 F. Supp. 2d at 421 (dismissing breach of fiduciary duty claim against investment advisor for allegedly conducting inadequate due diligence before recommending investment in hedge fund that turned out to be Ponzi scheme); Owens v. Gaffken Barriger Fund, LLC, No. 08 Civ. 8414 (PKC), 2009 WL 3073338, at *13 (S.D.N.Y. Sept. 21, 2009) (dismissing unjust enrichment and conversion claims arising out of plaintiff's investment where "[a]ccording to the complaint, the Fund's investment strategy was not in accord with the plaintiff's expectations, and the Fund's losses have led to the plaintiff's initial investment being unreturned").

Because Plaintiffs' common law claims of breach of fiduciary duty, aiding and abetting breach of fiduciary duty, negligent misrepresentation, gross negligence, and unjust enrichment fall within the purview of the Martin Act, they are dismissed.

Plaintiffs' breach of contract claims share the same fate. Although breach of contract claims have been brought alongside other common law claims in many of the aforementioned Martin Act cases, the courts have not analyzed the claims for preemption. Breach of contract claims have been discussed separately from breach of fiduciary duty, negligence, and unjust enrichment claims, which are typically discussed together under a single Martin Act heading. See, e.g., Stephenson, 700 F. Supp. 2d at 611-12 (dismissing breach of contract claims as derivative but not addressing Martin Act preemption); Sabella v. Scantek Med., Inc., No. 08 Civ. 453 (CM) (HBP), 2009 WL 3233703, at *31 (S.D.N.Y. Sept. 25, 2009) (allowing breach of contract claims to go forward without addressing preemption); Abu Dhabi Commercial Bank v. Morgan Stanley Co. Inc., 651 F. Supp. 2d 155, 183 (S.D.N.Y. 2009); In re Bayou, 534 F. Supp. 2d at 418.

Defendants overstate the authority on this issue. They rely on In re Tremont and Kassover, neither of which actually involved a breach of contract claim. In re Tremont, 2010 WL 1257580, at *8 (stating Plaintiffs' line of cases has been repeatedly rejected); Kassover v. UBS AG, 619 F. Supp. 2d 28, 39 (S.D.N.Y. 2008). The Kassover court stated in dicta that it "does not share its reasoning for concluding that breach of contract claims should be treated like common law fraud claims and not be preempted by the Act" because unlike fraud, breach of contract does not require proof of scienter. Kassover, 619 F. Supp. 2d at 39. But, as the court acknowledged, the issue was moot because the plaintiffs did not raise the claim. The Kassover court cites In re Bayou, 534 F. Supp. 2d at 421, for its proposition that "causes of action related to a plaintiff's securities fraud claim that do not include scienter as an essential element are typically preempted by the Martin Act." Kassover, 619 F. Supp. 2d at 39. However, In re Bayou itself analyzes the breach of contract claims separately from the breach of fiduciary duty claim, which it found preempted under the Martin Act. In re Bayou, 534 F. Supp. 2d at 418, 422 (finding contract void under statute of frauds but not discussing it under preemption).

The question is whether the Plaintiffs' particular breach of contract claim is within the purview of the Martin Act, meaning a securities claim "within or from" New York sounding in fraud or deception that does not require pleading or proof of intent. A breach of contract claim may sound in fraud where, "when the promise is made, the defendant secretly intended not to perform or knew that he could not perform." Guary v. Winehouse, 190 F.3d 37, 44 (2d Cir. 1999) (quoting Mills, 12 F.3d at 1176); see also Felton v. Morgan Stanley Dean Witter, 429 F. Supp. 2d 684, 693 (S.D.N.Y. 2006) (holding common law breach of contract claim sounded in fraud where it was also "a quintessential example of a fraudulent omission of a material fact under the federal securities laws").

Here, Plaintiffs' breach of contract claims stem from the representations in the Beacon Fund's Operating Agreement and OMs, as well as in the agreement between Beacon and Ivy, that oblige the Defendants to perform due diligence and monitor the fund's investments. Plaintiffs allege Defendants knew or should have known the statements were false at the time they were made, and that Defendants "intended to deceive Plaintiffs and other members of the Investor Class by making such statements and representations." SCAC ¶ 549. Plaintiffs also allege Defendants knew or should have known they could not perform, as "no control or supervision was possible due to Madoff's policy of nondisclosure." Id. at ¶ 551. Plaintiffs' allegations demonstrate that fraud is an inextricable part of the claims as alleged in the SCAC. As such, they are dismissed.

iii. Remaining State Law Claims

Two derivative claims against Defendant Friedburg remain: malpractice (Count XXXI) and breach of contract (Count XXXII). Friedburg urges the Court to decline to exercise jurisdiction over these claims. In deciding whether to exercise jurisdiction over supplemental state-law claims, district courts should balance the values of judicial economy, convenience, fairness, and comity. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988); Marcus v. AT T Corp., 138 F.3d 46, 57 (2d Cir. 1998) ("In reviewing such a decision to retain jurisdiction we consider factors such as judicial economy, convenience, fairness, and comity." (citing Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1191 (2d Cir. 1996))). "In general, where the federal claims are dismissed before trial, the state claims should be dismissed as well." Marcus v. AT T Corp., 138 F.3d at 57 (citing Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir. 1994)).

Friedburg does not assert that the claims are preempted by the Martin Act. As such, the Court expresses no opinion with regard to this issue.

Plaintiffs suggest that the Court has original jurisdiction over their state law claims under the Class Action Fairness Act ("CAFA"). 28 U.S.C. § 1332. CAFA vests the federal courts with jurisdiction over certain class actions alleging state law claims. Id. Because Counts XXXI and XXXII are brought in a derivative, rather than class, capacity, CAFA is not implicated.

While federal claims remain as to other Defendants, and supplemental jurisdiction is permissible, there are a number of compelling reasons to decline jurisdiction as to these claims even while deciding other state law claims on the merits. See 28 U.S.C. § 1367(c)(4) (permitting courts to decline supplemental jurisdiction where there are "compelling reasons for declining jurisdiction"). The remaining claims against Friedberg involve compliance with GAAS standards that apply exclusively to auditors and differ greatly from the allegations of securities fraud and ERISA violations common to the remaining Defendants. While the Plaintiffs remain constant, the Defendants and claims differ significantly. See Nathel v. Siegal, 592 F. Supp. 2d 452, 474 (S.D.N.Y. 2008) (finding federal securities law claims against co-defendants did not provide federal question jurisdiction over malpractice claim where accountant did not participate in the alleged fraud). "[I]t would not serve the ends of judicial efficiency for the . . .

Defendants to continue as co-defendants in the securities fraud that forms the core of Plaintiffs' grievances." Id. Moreover, the dismissal is unlikely to prejudice the parties as the litigation is still in its early stages. Graham v. Barriger, 699 F. Supp. 2d 612, 637 (S.D.N.Y. 2009) (finding dismissal appropriate "particularly considering that discovery has not commenced and that the federal claims have been dismissed at the pleading stage").

Thus, the Court declines to exercise supplemental jurisdiction, and these claims are dismissed without prejudice.

IV. Conclusion

For the reasons set forth herein, the Court rules as follows: Complaint Defendant Count Holding Location Securities Law Claims Section 10(b) Ivy I Dismissal Denied pp. 21-33 Simon Wohl I Dismissal Denied p. 33 BAMC II Dismissal Denied pp. 35-41 JPJA III Dismissal Denied pp. 41-42 Friedberg IV Dismissal Granted pp. 42-45 Section 20(a) Danziger Markhoff V Dismissal Denied p. 41 Jeanneret VI Dismissal Denied p. 42 Perry VI Dismissal Granted p. 42 Simon, Wohl, Geiger Sloan VII Dismissal Denied pp. 34-35 Other Indiv. Ivy Defendants VII Dismissal Granted pp. 34-35 BONY VII Dismissal Granted p. 35 IAA Rescission JPJA XXIII Dismissal Denied p. 42 ERISA Claims ERISA Breach of Duty Beacon Defendants VIII Dismissal Denied p. 49 of Prudence and Ivy VIII Dismissal Denied pp. 62-64 Loyalty Simon, Wohl, Geiger Sloan VIII Dismissal Denied p. 65 Other Indiv. Ivy Defendants VIII Dismissal Granted p. 65 BONY Defendants VIII Dismissal Granted pp. 65-66 Jeanneret Defendants VIII Dismissal Denied pp. 47-49 ERISA Failure to Beacon Defendants IX, X Dismissal Granted pp. 49-53 Comply with Plan Ivy IX, X Dismissal Granted pp. 62-64 Documents Simon, Wohl, Geiger Sloan IX, X Dismissal Granted p. 65 Other Indiv. Ivy Defendants IX, X Dismissal Granted p. 65 BONY Defendants IX, X Dismissal Granted pp. 65-66 Jeanneret Defendants IX, X Dismissal Granted pp. 49-52 ERISA Duty to Ivy XI Dismissal Denied pp. 62-64 Disclose Simon, Wohl, Geiger Sloan XI Dismissal Denied p. 65 Other Indiv. Ivy Defendants XI Dismissal Granted p. 65 BONY Defendants XI Dismissal Granted pp. 65-66 Beacon Defendants XI Dismissal Denied p. 47 Jeanneret Defendants XI Dismissal Denied p. 47 ERISA Co-fiduciary Beacon Defendants XII Dismissal Denied pp. 53-55 Liability Ivy XII Dismissal Denied pp. 53-55 Simon, Wohl, Geiger Sloan XII Dismissal Denied p. 65 Other Indiv. Ivy Defendants XII Dismissal Granted p. 65 Jeanneret Defendants XII Dismissal Denied pp. 53-55 BONY XII Dismissal Granted pp. 53-55 ERISA Disgorgement Ivy XIII Dismissal Denied p. 62 of Profits BONY Defendants XIII Dismissal Granted pp. 65-66 Direct State Law Claims Common Law Fraud Ivy 10b-5 Defendants XIV Dismissal Granted pp. 66-70 Beacon Defendants XIV Dismissal Granted pp. 66-70 Jeanneret Defendants XIV Dismissal Granted pp. 66-70 Friedburg XIV Dismissal Granted pp. 66-70 Aiding Abetting Ivy XV Dismissal Granted pp. 66-70 Common Law Fraud BONY XV Dismissal Granted pp. 66-70 Breach of Fiduciary Ivy 10b-5 Defendants XVI Dismissal Granted pp. 66-70 Duty Beacon Defendants XVI Dismissal Granted pp. 66-70 Jeanneret Defendants XVI Dismissal Granted pp. 66-70 Friedburg XVI Dismissal Granted pp. 66-70 Breach of Contract Beacon Defendants XVII Dismissal Granted pp. 66-70 Jeanneret Defendants XVII Dismissal Granted pp. 66-70 Negligent Beacon Defendants XVIII Dismissal Granted pp. 66-70 Misrepresentation Ivy Defendants XVIII Dismissal Granted pp. 66-70 Jeanneret Defendants XVIII Dismissal Granted pp. 66-70 Friedburg XVIII Dismissal Granted pp. 66-70 Gross Negligence Beacon Defendants XIX Dismissal Granted pp. 66-70 Ivy Defendants XIX Dismissal Granted pp. 66-70 Jeanneret Defendants XIX Dismissal Granted pp. 66-70 Unjust Enrichment Beacon Defendants XX Dismissal Granted pp. 66-70 Ivy Defendants XX Dismissal Granted pp. 66-70 Jeanneret Defendants XX Dismissal Granted pp. 66-70 Friedburg XX Dismissal Granted pp. 66-70 BONY XX Dismissal Granted pp. 66-70 Aiding Abetting Ivy XXI Dismissal Granted pp. 66-70 Breach of Fiduciary BONY XXI Dismissal Granted pp. 66-70 Duty Friedburg XXII Dismissal Granted pp. 66-70 Derivative State Law Claims Breach of Fiduciary Beacon Defendants XXIV Dismissal Granted pp. 70-78 Duty Ivy XXIV Dismissal Granted pp. 70-78 Friedburg XXIV Dismissal Granted pp. 70-78 Breach of Contract Ivy XXV Dismissal Granted pp. 70-78 Friedburg XXXII Dismissal Granted pp. 78-80 Negligent Ivy XXVI Dismissal Granted pp. 70-78 Misrepresentation Friedburg XXVI Dismissal Granted pp. 70-78 Beacon Defendants XXVI Dismissal Granted pp. 70-78 Gross Negligence Ivy XXVII Dismissal Granted pp. 70-78 Beacon Defendants XXVII Dismissal Granted pp. 70-78 Unjust Enrichment Ivy XXVIII Dismissal Granted pp. 70-78 Friedburg XXVIII Dismissal Granted pp. 70-78 Beacon Defendants XXVIII Dismissal Granted pp. 70-78 BONY XXVIII Dismissal Granted pp. 70-78 Aiding Abetting Ivy XXIX Dismissal Granted pp. 70-78 Breach of Fiduciary BONY XXIX Dismissal Granted pp. 70-78 Duty Friedburg XXX Dismissal Granted pp. 70-78 Malpractice Friedburg XXXI Dismissal Granted pp. 78-80 SO ORDERED.

The Court has considered all of the parties' other arguments and found them to be moot or without merit.

Dated: October 5, 2010 New York, NY