Van Wagner v. Court of Master Sommeliers, Americas

Background

Gregory Van Wagner, Daniel Pilkey, and Peter Bothwell sued the Court of Master Sommeliers, Americas (CMS), a California nonprofit mutual benefit corporation, and fifteen individuals who were formerly members of CMS’s Board of Directors. The plaintiffs alleged that they passed CMS’s September 2018 Master Sommelier examination and became CMS members. CMS later learned that confidential information about the tasting portion had allegedly been disclosed to selected candidates. CMS concluded that it could not determine who had received or spread the information and invalidated all results from the 2018 examination.

The plaintiffs alleged that CMS’s investigation was not fair or independent. Among other things, they alleged that the investigation did not interview the successful tasting-exam candidates, did not request their communications or phone records, and did not interview Narito or review his work emails. They also alleged that the investigation was shortened to avoid exposing earlier cheating and inappropriate sexual relationships involving CMS members and board members. The plaintiffs asserted claims against CMS including breach of contract, and asserted breach-of-fiduciary-duty claims against the individual defendants and Narito.

Motions and legal standard

The court considered two motions: one by all individual defendants other than Narito and one by Narito. The main issue was whether the plaintiffs adequately pleaded breach of fiduciary duty. Under Rule 12(b)(6), a claim may be dismissed if the complaint does not allege enough facts to make liability reasonably plausible. At this stage, the court accepts the complaint’s factual allegations as true and views them favorably to the plaintiffs, but allegations that merely recite legal elements are insufficient.

Individual defendants’ motion

The individual defendants argued that the plaintiffs’ proposed investigation was not plausibly reasonable and that it was not plausible that a proper investigation would have uncovered the alleged past misconduct. The court rejected the first argument, explaining that what would have been a reasonable investigation was a factual question and that a jury could find the investigation inadequate because it was completed quickly and did not interview Narito or the test takers.

The court did not need to resolve the second argument because motive may not be an essential element of a breach-of-fiduciary-duty claim. The court stated that the defendants could potentially have breached their duty by failing to conduct a full and fair investigation even without an improper motive, although motive could matter to punitive damages and possibly causation.

The court agreed with one other argument: the plaintiffs had not adequately alleged causation. They did not allege that a full and fair investigation would have produced a different result, such as avoiding a blanket invalidation of the tasting-exam results or preserving the plaintiffs’ results. Because multiple test takers may have had access to the information, the board might have reached the same decision even after a proper investigation.

The court therefore held that the breach-of-fiduciary-duty claim against the individual defendants was inadequately pleaded. It granted the individual defendants’ motion to dismiss that claim but gave the plaintiffs leave to amend because this particular deficiency had not been the basis of the earlier dismissal. The court denied the individual defendants’ motion to strike as moot and noted that a request to strike punitive damages is generally treated as a dismissal issue rather than a Rule 12(f) motion to strike. The court also stated that, if the plaintiffs pursue an intentional breach theory, they must explain what each individual defendant allegedly did rather than grouping the defendants together.

Narito’s motion

Narito argued that the plaintiffs were not CMS members when they took the examination, so he had no fiduciary relationship with them at that time. The court explained that whether a fiduciary relationship exists depends on the circumstances and is ordinarily a fact question. It held that a reasonable jury could find that the plaintiffs placed trust and confidence in Narito as the examination proctor and that he accepted that position of trust.

The court therefore denied Narito’s motion to dismiss.

Disposition

Judge Edward M. Chen granted the other individual defendants’ motion to dismiss, denied their motion to strike as moot, and denied Narito’s motion to dismiss. The plaintiffs were given four weeks to amend the breach-of-fiduciary-duty claim against the other individual defendants in good faith and to address the causation deficiency.