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In re Consol. Meridian Funds

United States District Court, W.D. Washington

May 28, 2014

In re: CONSOLIDATED MERIDIAN FUNDS, a/k/a MERIDIAN INVESTORS TRUST, et al., Debtors. MARK CALVERT, as Liquidating Trustee, et al., Plaintiffs,
v.
FREDERICK DARREN BERG and MOSS ADAMS LLP, Defendants

Page 141

For Mark Calvert, as Liquidating Trustee of the Consolidated Meridan Funds aka Meridian Investors Trust, et al, Plaintiff/Appellant: Michael J Avenatti, LEAD ATTORNEY, PRO HAC VICE, EAGAN O'MALLEY & AVENATTI LLP, NEWPORT BEACH, CA; Simeon J. Osborn, LEAD ATTORNEY, OSBORN MACHLER, SEATTLE, WA.

Frederick Darren Berg, an individual, Defendant/Appellee, Pro se, LOMPOC, CA.

For Moss Adams LLP, Defendant/Appellee: Benjamin Ellison, Linda Coberly, LEAD ATTORNEY, PRO HAC VICE, WINSTON & STRAWN (IL), CHICAGO, IL; Kelly P Corr, Steven W Fogg, LEAD ATTORNEYS, CORR CRONIN MICHELSON BAUMGARDNER & PREECE, SEATTLE, WA.

Bankruptcy Appeals (SEA), Interested Party, Pro se, SEATTLE, WA.

Page 142

ORDER REVERSING BANKRUPTCY COURT'S ORDER GRANTING MOTION TO DISMISS

Robert S. Lasnik, United States District Judge.

I. INTRODUCTION

This matter comes before the Court on plaintiffs' appeal of an order by the United States Bankruptcy Court for the Western District of Washington granting defendants' motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1). The Court has reviewed the parties' submissions. For the reasons discussed below, the Court REVERSES the bankruptcy court's order granting defendants' motion to dismiss and REFERS the matter to the bankruptcy court for further proceedings consistent with this order.

II. DISCUSSION

A. Background

The bankruptcy proceedings underlying this adversary proceeding began in 2010 and 2011 when a group of investment funds controlled by defendant Frederick Darren Berg, known collectively as the " Meridian Funds," collapsed and entered into bankruptcy. The bankruptcy court consolidated the various bankruptcy proceedings connected with Berg and entered an order confirming a consensual Chapter 11 plan (the " Plan" ). Appendix II (Dkt. # 9-1) at 4-5. The Plan provides for the creation of a liquidating trust for the Meridian Funds and named Mark Calvert, one of the named plaintiffs in this adversarial proceeding, as the liquidating trustee. The trust holds all claims of the consolidated bankruptcy estate, including any claims the participating investors have against the auditors and accountants for Berg and his funds. Id. The Plan further provides that " the Bankruptcy Court shall retain and have exclusive jurisdiction after

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the Effective Date over any matter arising under the Bankruptcy Code, arising in or related to the Chapter 11 Cases or the Plan." Appendix I (Dkt. # 9) at 116.

The trustee and 700 individual investors filed this action seeking to recover damages from Berg and Moss Adams LLP, an auditor of the Meridian Funds. The trustee sued as the assignee of the investors who were allegedly injured by defendants' malfeasance. Plaintiffs allege three causes of action against defendants: (1) professional negligence; (2) negligent misrepresentation; and (3) fraud. Appendix II (Dkt. #9-1) at 4, 6.[1] Defendants moved to dismiss plaintiffs' First Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(1) and (6). Appendix II (Dkt. # 9-1) at 4. Applying the " close nexus" test, the Honorable Karen A. Overstreet, United States Bankruptcy Judge, found that this action was not sufficiently " related to" the Meridian ...


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