Brakke

Plaintiffs James G. Brakke, Matthew F. Schafnitz, Kevin McWilliams, and Charles R. Fosdick are the principals of Dealer Management Group, Inc., a subchapter S corporation. Brakke also served as the trustee of the firm’s defined benefit pension plan. Plaintiffs sued defendants American General Life Insurance Company (American General), Economic Concepts, Inc. (ECI), and three other parties. The first amended complaint alleged defendants persuaded plaintiffs to establish the pension plan by representing contributions to the plan were tax deductible under the Internal Revenue Code. Subsequently, the Internal Revenue Service (IRS) determined the pension plan failed to qualify for favorable tax treatment, resulting in plaintiffs paying back taxes and penalties.

The amended complaint contained causes of action for fraud, negligent misrepresentation, breach of fiduciary duty, negligence, and a violation of California’s unfair competition law. American General filed a demurrer in which ECI joined. The trial court sustained the demurrer without leave to amend and dismissed the action as to these parties.

Plaintiffs appealed, but later settled with American General and dismissed…