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Jones v. KPMG, LLP

United States District Court, S.D. Mississippi, Southern Division

October 16, 2018

KPMG LLP and TRANSAMERICA RETIREMENT SOLUTIONS CORP. DEFENDANTS and MARTHA EZELL LOWE, individually and on behalf of a class of similarly situated employees CONSOLIDATED PLAINTIFF



         BEFORE THE COURT is the [10] Motion to Dismiss filed by Defendant KPMG LLP. The plaintiff Martha Ezell Lowe has responded, and KMPG has replied. After due consideration of the issues presented and the relevant law, it is the Court's opinion that the plaintiff has stated a viable claim against KPMG. Accordingly, the Motion will be denied.


         This putative class action arose out of the alleged under-funding of the Singing River Health System Employees' Retirement Plan and Trust. Lowe has sued KPMG, the company that audited the annual financial statements of Singing River Health System (SRHS) and the Plan. Lowe alleges that KPMG was either aware of the fact that SRHS had stopped contributing to the Plan, or in the alternative, it recklessly disregarded the fact that SRHS had made no contribution to the pension plan since 2009. (Compl. 5, ECF No. 5.) Plaintiff alleges that despite this knowledge, KPMG's audit report for 2011 attributed SRHS's growing pension liability to “a downturn in investment returns and a change in actuarial assumptions” rather than SRHS's failure to make the required payments to the pension plan. (Id.) Lowe also alleges that KPMG provided consulting services related to the $70 million purchase of a new electronic record retention system that allegedly contributed to SRHS's inability to fund the Plan. (Id. at 6.) The sole claim against KPMG is that it “knowingly participated in and/or aided and abetted in a breach of fiduciary duty by the Individual Trustees” in its 2010 and 2011 audit reports by allowing or failing to correct misleading statements that attributed the Trust's under-funding to returns on investments and changed actuarial assumptions. (Id. at 14.)

         KPMG challenges the legal sufficiency of this claim, arguing that 1) no Mississippi court has ever recognized a claim of aiding and abetting breach of fiduciary duty; 2) even if there were such a claim, the plaintiff's allegations of KPMG's inaction do not rise to the level of aiding and abetting liability; and 3) in any event, the claim is barred by Mississippi's three-year statute of limitations.

         The plaintiff responds that her claim should be construed as an aiding and abetting breach of trust claim, which Mississippi common law recognizes. She further argues that the applicable limitations period for her claim is one year from her receipt in November 2014 of a memo sent to plan participants, as set out in the Mississippi Uniform Trust Code, Miss. Code Ann. § 91-8-1005(a).


         A. The Legal Standard

         When considering a motion to dismiss under Rule 12(b)(6), the Court must accept all well-pleaded facts as true and view those facts in the light most favorable to the plaintiff. Bustos v. Martini Club Inc., 599 F.3d 458, 461 (5th Cir. 2010). However, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Whether this standard has been met is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.

         B. Aiding and Abetting

         The parties agree that no Mississippi court has recognized a cause of action for aiding and abetting breach of fiduciary duty. However, a federal district court made an Erie guess that if presented with the question, Mississippi courts would find that a claim of aiding and abetting fraud exists. Dale v. Ala Acquisitions, Inc., 203 F.Supp.2d 694, 700-01 (S.D.Miss. 2002). The court reasoned that 1) Mississippi has held a right of action exists for civil conspiracy, which is a tort set out in the Restatement (Second) of Torts § 876; and 2) a majority of jurisdictions have recognized a claim for aiding and abetting under § 876(b). Following the Dale decision, another district court assumed without deciding that Mississippi would recognize the tort of aiding and abetting civil conspiracy under § 876(b). Fikes v. Wal-Mart Stores, Inc., 813 F.Supp.2d 815, 822 (N.D. Miss. 2011).

         The Restatement provision at issue, § 876(b), concerns giving substantial assistance or encouragement to another's breach of duty.[1] This describes the plaintiff's common law claim, whether it is called aiding and abetting breach of fiduciary duty or aiding and abetting breach of trust. Accordingly, the Court will assume, as in Dale, that Mississippi would recognize a cause of action for breach of fiduciary duty under the Restatement (Second) of Torts § 876(b).

         C. The Statute of Limitations

         KPMG argues that even if Mississippi would recognize plaintiff's cause of action for aiding and abetting, the claim was brought after the three-year statute of limitations expired.[2] The plaintiff filed her Complaint on February 18, 2015. (ECF No. 5.) The allegation against KPMG ...

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