Hill v. Vanderbilt Capital Advisors, LLC (834 F. Supp. 2d 1228, 2011)

MEMORANDUM OPINION AND ORDER

JAMES 0. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) the Vanderbilt Defendants’ Motion to Dismiss Complaint, filed August 31, 2010 (Doc. 36); (ii) the Individual State Defendants’ Motion to Dismiss Plaintiffs’ Claims, filed August 31, 2010 (Doc. 41); and (iii) the Motion of the Educational Retirement Fund to Dismiss Plaintiffs’ Claims Under Rule 12(b)(6), Federal Rules of Civil Procedure, filed September 7, 2010 (Doc. 48). The Court held a hearing on October 29, 2010. The primary issues are: (i) whether the Plaintiffs have standing to sue under Article III of the United States Constitution; (ii) whether a first-to-file provision in the New Mexico Fraud Against Taxpayers’ Act, N.M.S.A.1978, §§ 44-9-1 to 14 (2007)(the “FATA”), precludes this lawsuit based on the state court action in Foy v. Vanderbilt Capital Advisors, LLC, No. D-101-CV-2008-1895 (1st Jud. Dist. Ct., N.M., filed July 14, 2008); (iii) whether the Plaintiffs may properly bring any of these causes of actions derivatively; (iv) if determined to be proper under statutory or common-law trust principles, whether the Plaintiffs are subject to a demand requirement before filing suit and, if so, whether the Plaintiffs satisfied the requirement or plead facts sufficient to excuse demand as futile; (v) whether any of the ERB Defendants are entitled to immunity on the Plaintiffs’ claims for Breach of Fiduciary Duty (Count I), Fourteenth Amendment violation (Count II), Unjust Enrichment (Count XVII), or Constructive Trust (Count XVII); and (vi) whether the Plaintiffs have pled facts sufficient to state a claim upon which relief may be granted for Counts II-VI and XII-XVIII. Because the Court finds that the Plaintiffs’ lack constitutional standing to assert them claims, the Court will grant the Individual State Defendants’ Motion to Dismiss Plaintiffs’ Claims for lack of subject-matter jurisdiction pursuant to rule 12(b)(1) and will remand the case to New Mexico state court. Because the Court does not have subject-matter jurisdiction and it is remanding to state court, the Court will not decide the merits of any of the Defendants’ motions to dismiss pursuant to rule 12(b)(6).

FACTUAL BACKGROUND

The Plaintiffs are members of the Educational Retirement Fund (the “Fund”), a public pension plan that the New Mexico Education Retirement Act, N.M.S.A.1978, § 22-11-11 (the “ERA”), established for the benefit of employees in New Mexico’s public schools, colleges, and universities. See Amended Complaint ¶ 1, at 1, filed June 30, 2010 (Doc. 30).

The New Mexico Constitution mandates that “all funds ... paid into or held by ... an educational retirement system ... shall be held ... [i]n a trust fund to be administered and invested ... [f]or the sole and exclusive benefit of the members, retirees and other beneficiaries of that system.” N.M. Const. Art. XX § 22(A). The ERB is “the trustee[] for [its] system [] and ha[s] the sole and exclusive fiduciary duty and responsibility for administration and investment of the trust fund held by ... [the] system[].” N.M. Const. Art. XX § 22(B). The Fund holds approximately $8.5 billion in assets and has approximately 95,000 current members and participants. See Am. Compl. ¶¶ 26,109-10, at 8, 34. During the national economic crisis in 2007 and 2008, the Fund lost approximately $40 million on certain private equity investments. See Am. Compl. ¶ 4(b), at 2. The Plaintiffs allege injury from the Defendants’ improper investment actions in the form of increased employee contributions, reduced services, tax increases, and increased risk that the Fund will have insufficient assets to satisfy its obligations in the future. See Am. Compl. ¶¶ 1, 10, at 1, 3.

In passing the Prudent Investor Act of 2005, N.M.S.A § 45-7-601, the New Mexico Legislature for the first time authorized the ERB to make “prudent” investments in alternative or non-traditional investments. Gaining access to funds newly available for alternative investments was allegedly competitive, and those marketing investments to the ERB hired third parties known as “placement agents” to facilitate access to investment decision-makers. Am. Compl. ¶ 7, at 3. At times, placement agents were retained primarily because of their political connections. The Plaintiffs contend that Defendant Marc Correrá was hired to market the Vanderbilt Financial Trust (‘VFT”) to the ERB, because he was well-connected politically in New Mexico and could “[sell] access to public money, including [] the Fund.” Am. Compl. ¶ 25, at 7.

In early 2006, the Vanderbilt Defendants devised an alternative investment vehicle, the Vanderbilt Trust Offering (“VTO”), for the specific purpose of marketing the VFT investment to the ERB and the New Mexico State Investment Council (“SIC”). See Am Compl. ¶45, at 13. The VTO consisted of a private placement of the shares in the VFT, a statutory trust created specifically to own the membership interests in Vanderbilt Financial. See Am. Compl. ¶ 45, at 13. Vanderbilt Financial served as a holding company that would acquire alternative investments and its portfolio was ultimately comprised principally of heavily leveraged, equity tranche positions in certain collateralized debt obligations (“CDOs”). See Am. Compl. ¶ 46, at 13. By design, a substantial portion of the underlying assets were allegedly subprime, AINA or A-minus mortgages, having been extended to borrowers who provided little to no verification of assets or proof of ability to repay, and who did not meet minimal lending standards. See Am. Compl. ¶ 46, at 13-14. Vanderbilt Financial’s portfolio also included synthetic CDOs, which were not backed by any assets but instead amounted to wagers on whether other “reference CDOs” would succeed or fail. See Am. Compl. ¶ 47, at 14.

In May 2006, the ERB elected to cause the Fund to invest in the VFT. The ERB Investment Committee, which recommends investments to the full ERB, met to consider the Vanderbilt Trust Offering at 11:25 a.m. on May 12, 2006. Defendant Patrick Livney, Chief Executive Officer and a director of the now defunct Vanderbilt Financial, LLC (“Vanderbilt Financial”), presented the Vanderbilt Financial Trust (“VFT”) investment to the Investment Committee and, according to the Investment Committee’s minutes, Livney represented the VFT investment to be “a state of the art, top of the food chain investment vehicle.” Am. Compl. ¶ 56, at 16. The Plaintiffs contend that Livney made these statements knowing they were false and misleading, or in reckless disregard for their truth, to induce the ERB to authorize the VFT investment where Livney “knew that the portfolio of Vanderbilt Financial consisted of toxic waste, liar’s loans, and exceptional loans, and [that the investment] was highly speculative, risky, and leveraged, and virtually worthless from the outset.” Am. Compl. ¶ 56, at 16. When presenting to the ERB Investment Committee, Livney also allegedly “concealed the material fact that Correrá would receive inflated and unjustifiable fees as placement agent in connection with the transaction.” Am. Compl. ¶ 58, at 17. Livney also allegedly misrepresented to the ERB that the VFT investment was backed by “fixed income underlying assets,” and that the CDOs consisted of “a pool of assets/bonds that is financed by AAA, AA, and BBB rated bonds and they re-engineer cash flow.” Am. Compl. ¶ 59, at 17. Throughout the meeting, Livney continued to use the allegedly false and misleading phrase “fixed income securities” to refer to the CDOs investment. Am. Compl. ¶ 60, at 17. Additionally, Livney allegedly falsely stated that Vanderbilt Financial “re-underwrites everything to our specs” and that no part of the investment contained synthetic CDOs. Am. Compl. ¶ 63, at 17.

While fielding questions about the dangers of the investment, Livney responded with the purportedly misleading statement that “historically the default rate of Vanderbilt since 1999 is zero.” Am. Compl. ¶ 72, at 22. The Plaintiffs allege that Livney knew that statement’s potential to mislead because of the nature of the underlying investments. See Am. Compl. ¶ 72, at 22. Livney allegedly misleadingly implied that the risk of default was accounted for, stating that, “[t]here is an assumption of recovery and default in every deal, [which] is priced up front.” Am. Compl. ¶ 73, at 23. The Plaintiffs further allege that the CDO primer provided to the ERB Investment Committee was filled with misleading information. The primer presentation is purportedly mathematically incorrect and internally flawed, and the VFT could not perform as presented. See Am. Compl. ¶¶ 64-65, at 19.

During the course of the meeting, several members of the ERB asked questions. The Plaintiffs allege that exchanges prompted by Dr. Pauline Turner’s questions raised red flags and demonstrated a need for further investigation. See Am. Compl. ¶¶ 62, 66, at 18, 20. Disagreement between the ERB members existed whether the ERB could rely on the SIC’s vetting process as a basis for their vote. See Am. Compl. ¶ 68, at 20. Turner questioned Livney’s characterization that the equity holder receives the most return and Livney conceded that the Fund’s equity tranche would place the Fund in the lowest position. See Am. Compl. ¶ 66, at 20. When asked how Vanderbilt Financial came before the ERB, Livney allegedly concealed the truth and responded that it was through prior investments by the SIC, rather than admitting it was through purported “pay-for-play” payments to M. Correrá. Am. Compl. ¶ 71, at 22.

A Special Meeting of the ERB convened at 12:30 p.m. on the same day, immediately following the 11:30 a.m. Investment Committee meeting. See Am. Compl. ¶ 55, at 16. The Special Meeting was called to seek the ERB’s approval of the Investment Committee’s recommendation to invest in the VFT. See Am. Compl. ¶ 55, at 16. By 1:00 p.m. on May 12, 2006, the ERB had considered and approved a forty-million dollar alternative investment for the Fund in VFT shares. See Am Compl. ¶ 55, at 16. Defendants Bruce Malott, Gary Bland, Veronica Garcia, and Douglas Brown each voted in favor of the investment when the ERB approved it four votes to two. See Am. Compl. ¶ 84, at 26.

Malott has served on the ERB since 1999, was Chairman of the ERB from 2004 to 2010, and also served as Chairman of the ERB’s Investment Committee. See Am. Compl. ¶ 17, at 5. The Plaintiffs contend that Malott is a close personal “ally” of then-Governor Bill Richardson, and that Malott and others associated with Malott’s accounting firm served on Richardson’s campaign committee, as well as serving as accountants for the former Governor’s political action committee and charitable foundation. See Am. Compl. ¶ 17, at 5-6. The Plaintiffs allege that Malott’s accounting firm “garnered millions of dollars of additional state contracts at the time he served on the ERB.” Am. Compl. ¶ 17, at 5-6.

Defendant Bland was an ERB member when the VFT investment was chosen, served as New Mexico’s State Investment Officer during the relevant time period, and was a member of the SIC until his resignation in October 2009. See Am. Compl. ¶ 18, at 6. Garcia began serving on the ERB attendant to her appointment as Secretary of the New Mexico Public Education Department in 2006. See Am. Compl. ¶ 19, at 6. Brown served as an ERB member from 2005 through the relevant period in 2006 by virtue of his position as interim Treasurer of the State of New Mexico. See Am. Compl. ¶ 20, at 6. Because he was the interim State Treasurer, Brown was also the Custodian of the Fund at the time of the VFT investment. See Am. Compl. ¶ 20, at 6.

Livney was the Chief Executive Officer and a director of the now-defunct Vanderbilt Financial. See Am. .Compl. ¶ 13, at 4. VFT owned equity interests in a portfolio of CDOs, and the Fund lost its entire forty million dollar VFT investment when mortgage-backed securities defaulted at an exceedingly high rate. See Am. Compl. ¶ 95, at 31.

After the Fund’s shares in the VFT lost all value and were written off, it was disclosed that Vanderbilt Capital had paid millions of dollars in “placement agent” fees to M. Correrá, son of Anthony Correrá, a close advisor to then-Governor Bill Richardson, for his role in causing the ERB and the SIC to invest in Vanderbilt securities. See Am. Compl. ¶¶ 16, 51, at 5, 15. The Plaintiffs contend that after M. Correrá was successful in his role, “Vanderbilt, its employees, and their families contributed, directly and indirectly, to the Governor’s presidential campaign, including the maximum contribution allowed by law from both Livney and his wife.” Am. Compl. ¶ 51, at 15. Defendant Malott recently disclosed that he received a $350,000.00 loan from M. Correrá in August 2006, when the Fund transmitted forty million dollars to Vanderbilt Capital. See Plaintiffs’ Memorandum of Law in Opposition to Motions to Dismiss at 3, filed October 1, 2010 (Doc. 69)(“Response”). Plaintiffs allege that the loan was secured with a mortgage in favor of an acquaintance of M. Correra’s for purposes of concealment. See Response at 3.

The Plaintiffs contend that the four ERB Defendants breached their duty as trustees of the Fund by failing to perform due diligence in considering the investment and voting in favor of the investment to further political aspirations, to repay political favors, and to accede to political pressures. See Am. Compl. ¶¶ 88-93, at 28-30.

The Plaintiffs allege that, in causing the Fund to invest in the VFT, the Vanderbilt Defendants committed common-law fraud; violated the New Mexico Uniform Securities Act, N.M.S.A.1978 § 58-13C-509; violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and rule 10b-5 of the Securities and Exchange Commission, 17 C.F.R. § 240.10b-5; negligently misrepresented the VFT investment to the ERB; aided and abetted breach of fiduciary duty and breach of contract; and were unjustly enriched. The Plaintiffs contend that the Vanderbilt Defendants knew their interests conflicted with those of the ERB, of the Fund, and of the Fund beneficiaries. The Vanderbilt Defendants intended to profit from selling the defective mortgages that were difficult to unload, knowing but not disclosing that even a modest percentage of defaults among the mortgagers would render the VFT worthless and that a high default rate on the loáns underlying the investment was likely given the nature of the underwriting. See Am. Comply 48, at 14. In marketing the VFT to the ERB and to the SIC, the Vanderbilt Defendants made misrepresentations and omissions of material fact concerning the performance projections for the VFT. See Am. Compl. ¶ 53, at 15-16. The Plaintiffs’ Amended Complaint references an electronic mail transmission sent from Kurt Florian, Jr., Chief Operating Officer and Counsel for Vanderbilt Financial, to Malott, stating: “We are targeting an annual dividend yield of approximately 10% for the Vanderbilt Trust.” Am. Compl. ¶ 53, at 15-16. The Plaintiffs characterize this statement as knowingly or recklessly false and misleading, asserting that the Vanderbilt Defendants had no basis in fact for such projection. See Am. Compl. ¶ 53, at 15-16.

PROCEDURAL BACKGROUND

On February 12, 2010, Plaintiff Donna J. Hill filed her Complaint in the First Judicial District, County of Santa Fe, New Mexico. See Doc. 1-1. The same day, Garcia, with the consent of all served Defendants, removed this case pursuant to 28 U.S.C. §§ 1441, 1443, 1453(b) and 1446. The Court has jurisdiction over the Complaint, which includes constitutional claims, pursuant to 28 U.S.C. § 1331, and where the Complaint was filed as a class action, pursuant to 28 U.S.C. § 1332(d)(2).

The Fund is a nominal defendant. The Plaintiffs bring this suit to recover damages for the Fund, asserting a variety of theories which they contend comprise “two branches of standing.” Hearing Transcript at 15:10-16 (October 29, 2010)(Cu-neo, Court). First, the Plaintiffs identify them strongest theory as a hybrid of “trust and derivative under the same rubric of asserting claims on behalf of the Fund.” Tr. at 16:3-5 (Cuneo). Second, the Plaintiffs assert claims under “direct theories” of liability sounding in contract and civil rights. See Tr. at 16:18-20 (Cuneo). The Plaintiffs maintain that, regardless of the theory under which their claims would proceed, any and all recovery would inure to the Fund’s. See Am. Compl. ¶ 11, at 3; Tr. at 89:21-23.

On June 30, 2010, the Plaintiffs filed their Amended Complaint, asserting eighteen counts based on the circumstances surrounding the ERB’s decision to purchase an interest in the VFT for the Fund. See Doc. 30. In June 2010, the Court entered its Stipulation Regarding Certain Vanderbilb-Related Defendants, dismissing Vanderbilt Financial Trust and Vanderbilt Financial, LLC without prejudice because those entities were dissolved and unsuable, and also dismissing without prejudice individual Defendants Osbert M. Hood, Stephen C. Bernhardt, Kurt W. Florian, Anthony J. Koenig, Jr., Mark E. Bradley, Ron D. Kessinger, Robert P. Nault, and James R. Stern. See Stipulation (Doc. 31). The Court also added M. Correrá as a defendant in June 2010. In early October 2010, the Court entered its Stipulation of Dismissal, dismissing Defendants New England Pension Consultants and Aldus Equity, LLC without prejudice. See Docs. 68, 71.

Following the dismissals, the remaining claims in Plaintiffs’ Amended Complaint are: Count I for breach of fiduciary duty against the ERB Defendants; Count II for breach of contract against the ERB Defendants; Count III for impairment of vested property rights against the ERB Defendants; Count IV for aiding and abetting breach of fiduciary duty against the Vanderbilt Defendants and M. Correrá; Count V for aiding and abetting breach of contract against the Vanderbilt Defendants and M. Correrá; Count VI for aiding and abetting impairment of vested property rights against the Vanderbilt Defendants and M. Correrá; Count XII for common-law fraud against the Vanderbilt Defendants; Count XIII for violation of New Mexico Uniform Securities Act, N.M.S.A. § 58-13C-509, against the Vanderbilt Defendants; Count XIV for violation of New Mexico Uniform Securities Act, N.M.S.A. § 58-13C-509, aiding and abetting against Livney, the ERB Defendants, and M. Corerra; Count XV for negligent misrepresentation against the Vanderbilt Defendants; Count XVI for violation of Section 10(b) of the Exchange Act and SEC rule 10b-5 against the Vanderbilt Defendants; Count XVII for unjust enrichment and constructive trust against all remaining Defendants; and Count XVIII for unjust enrichment and constructive trust to remedy breach of fiduciary duties and violation of the Constitution of the State of New Mexico against the ERB Defendants.

In July, 2008, the ERB’s former Chief Investment Officer Frank Foy brought a qui tam action under the FATA, asserting, inter alia, claims related to investments that the ERB made. See Foy v. Vanderbilt Capital Advisors, LLC No. D-101CV-2008-1895, Complaint (1st Jud. Dist. Ct., N.M., filed July 14, 2008TFoy /”). In April, 2010, the state district court dismissed all of Foy’s claims that were based on conduct occurring before the FATA’s enactment in 2007. Subsequently, the New Mexico Attorney General intervened in Foy I, taking over prosecution of certain of Foy’s claims, but making it clear in the process that his office seeks no order concerning Foy I’s claims pertaining to the investment that the ERB made with Vanderbilt Capital, which forms the basis of the claims asserted in this lawsuit. See Letter from Andrew Schultz to the Court at ¶ 2 (dated August, 26, 2011)(Doe. 100). The Foy plaintiffs amended their complaint to allege some post-enactment conduct, and the Foy action has not been dismissed in its entirety, but is proceeding in some fashion. See Foy Docket Sheet, Notice of Filing Concerning Violations of Section 44-9-3(A)(9) After July 1, 2007, filed October 18, 2010; Order Permitting Plaintiffs to Proceed on Remaining Claims, filed February 7, 2011.

On August 31, 2010, the Vanderbilt Defendants filed the Vanderbilt Defendants’ Motion to Dismiss Complaint, seeking dismissal on multiple grounds. The Vanderbilt Defendants contend that there is no statutory authority under which these Plaintiffs may bring a derivative action on behalf of the ERB, a state agency. See Vanderbilt Def.s’ Mot. to Dismiss at 3. The Vanderbilt Defendants further argue that even if the Court treated the ERB like a corporation, the Plaintiffs failed to make a demand upon the ERB to pursue these claims in the first instance or, alternatively, to sufficiently plead the futility of such a demand. See Vanderbilt Def.s’ Mot. to Dismiss at 4-5. The Vanderbilt Defendants also contend that the claims against them fail as direct, derivative, or class action claims, because the Plaintiffs do not allege they interacted directly with the Vanderbilt Defendants, heard, or read any misrepresentations from the Vanderbilt Defendants, or relied on anything the Vanderbilt Defendants said or omitted in connection with the sale of the VFT shares. See Vanderbilt Def.s’ Mot. to Dismiss at 6-7. The Vanderbilt Defendants contend that, whether the claims are direct or derivative, the Plaintiffs’ claims fail, not only because they allege no facts indicating that the ERB relied on any misrepresentations, but in some instances, fail even to plead facts suggesting that the representations were false. See Vanderbilt Def.s’ Mot. to Dismiss at 11-12. The Vanderbilt Defendants also direct the Court to an audio recording of the relevant ERB meeting and contend it disproves Plaintiffs’ allegations against them as a matter of law. See Vanderbilt Def.s’ Mot. to Dismiss at 2, 9. The Vanderbilt Defendants assert that the Plaintiffs’ causes of action for “aiding and abetting breach of contract,” and “aiding and abetting impairment of vested property rights,” do not exist under New Mexico law, and that the Plaintiffs’ unjust enrichment claim is similarly flawed. See Vanderbilt Def.s’ Mot. to Dismiss at 25-26. Finally, the Vanderbilt Defendants state that the underlying facts forming the basis for the Plaintiffs’ claims mirror the facts underlying a first-filed FATA action and, accordingly, the FATA’s provisions preclude the suit. See Vanderbilt Def.s’ Mot. to Dismiss at 26-27.

Also on August 31, 2010, the ERB Defendants filed the Individual State Defendants’ Motion to Dismiss Plaintiffs Claims. The ERB Defendants assert that the Court should dismiss all claims against them on grounds that the Plaintiffs have demonstrated no statutory authority for the derivative claim; that only the Attorney General’s office may properly bring an action to remedy the asserted damage to the Fund or to enforce the Fund’s asserted claims; that the Plaintiffs have failed to establish that the demand requirement is excused; that the Court should dismiss the Plaintiffs’ claims for lack of standing; and the ERB Defendants are immune from liability for the tort claims asserted. See Individual State Defendants’ Memorandum in Support of Their Motion to Dismiss at 5, 13, 14, 15, 25, filed August 31, 2010 (Doc. 42). The ERB Defendants also contend that the Plaintiffs have failed to state a cause of action under either the state or federal constitutions, and that no implied contract between the ERB Defendants and the Fund Members exists under New Mexican law. See Individual State Def.s’ Mem. Mot. to Dismiss at 18, 21. The ERB Defendants further assert that the Court should dismiss the Plaintiffs’ unjust enrichment and constructive trust claims for failure to state a claim. See Individual State Def.s’ Mem. Mot. to Dismiss at 28-30.

On September 7, 2010, the Fund filed its Motion of the Educational Retirement Fund to Dismiss Plaintiffs’ Claims Under Rule 12(b)(6), Federal Rules of Civil Procedure. See Doc. 48. In addition to adopting many of the arguments presented in the Individual State Defendants’ Motion to Dismiss, the Fund moves to dismiss all of the Plaintiffs’ claims against it, because the Plaintiffs state that they “do not seek any damages from the Fund,” Am. Compl. ¶ 11, at 3, and because, although the prayer for relief purports to seek an unspecified injunction against the Fund, the Fund is not the object of any count in the Amended Complaint, nor is there any legal or factual basis for relief against the Fund based upon the allegations in the Amended Complaint, see Am. Compl. ¶ 11, at 3.

On October 1, 2010, the Plaintiffs filed the Plaintiffs’ Memorandum of Law in Opposition to Motions to Dismiss (“Response”). See Doc. 69. The Plaintiffs assert standing to bring claims to recover losses for the Fund under fundamental principles of trust law, because the Fund is a trust, the ERB members are its trustees, and the Plaintiffs are its beneficiaries. See Response at 6. Alternatively, the Plaintiffs argue, they enjoy standing to bring a derivative action on behalf of the Fund as “stakeholders” akin to “shareholders” for purposes of an action under rule 23.1 of the Federal Rule of Civil Procedure 23.1. Response at 7-10. On October 25, the Vanderbilt Defendants filed the Vanderbilt Defendants’ Reply Memorandum in Support of Motion to Dismiss Complaint (“Vanderbilt Def.s’ Reply”)(Doc. 77) and the ERB Defendants filed the Individual State Defendants’ Reply in Support of Motion to Dismiss (“Individual State Def.s’ Reply”)(Doc. 78). The Defendants reasserted the basis of their motions to dismiss and addressed the Plaintiffs’ Response. See Vanderbilt Def.s’ Reply at 1-2; Individual State Def.s’ Reply at 1-2. Finally, the ERB Defendants argue that the Court should dismiss Count XIV as abandoned and refers the Court to Plaintiffs’ Response, which states: “Plaintiffs concur with the analysis of Trustee Defendants, and do not oppose the dismissal of Count XIV as against the Trustee Defendants.” See Individual State Def.s’ Reply at 36 (citing Response at 27, n. 37).

After the briefing on these motions was completed, the Plaintiffs notified the Court that they had made demand on the ERB to substitute itself as plaintiff in this action and to prosecute the case on behalf of the Educational Retirement Fund. See Letter to the Court from Shane C. Youtz ¶ 2, at 1 (dated November 24, 2010) filed November 24, 2010 (Doc. 84). On July 1, 2011, the Court was notified that on January 14, 2011, the ERB voted to reject the Plaintiffs’ demand. See Letter to the Court from Shane Youtz (dated July 1, 2011), filed July 1, 2011 (Doc. 99); Letter to the Court from Joseph Goldberg ¶ 8, at 3 (dated July 20, 2011), filed July 20, 2011 (Doc. 96, Ex. B)(containing the January 14, 2011 Minutes of the New Mexico Education Retirement Board Regular Meeting).

LEGAL STANDARD FOR MOTIONS TO DISMISS UNDER RULE 12(b)(1)

“Federal courts are courts of limited jurisdiction; they are empowered to hear only those cases authorized and defined in the Constitution which have been entrusted to them under a jurisdictional grant by Congress.” Henry v. Office of Thrift Supervision, 43 F.3d 507, 511 (10th Cir.1994) (citations omitted). A plaintiff generally bears the burden of demonstrating the court’s jurisdiction to hear his or her claims. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 104, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)(“[T]he party invoking federal jurisdiction bears the burden of establishing its existence.”). Rule 12(b)(1) of the Federal Rules of Civil Procedure allows a party to raise the defense of the court’s “lack of jurisdiction over the subject matter” by motion. Fed.R.Civ.P. 12(b)(1). The United States Court of Appeals for the Tenth Circuit has held that motions to dismiss for lack of subject-matter jurisdiction “generally take one of two forms: (1) a facial attack on the sufficiency of the complaint’s allegations as to subject-matter jurisdiction; or (2) a challenge to the actual facts upon which subject-matter jurisdiction is based.” Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir. 2002). As the Court explained in Alto Eldorado Partners v. City of Santa Fe, No. 08-0175, 2009 WL 1312856 (D.N.M. Mar. 11, 2009)(Browning, J.):

On a facial attack, a plaintiff is afforded safeguards similar to those provided in opposing a rule 12(b)(6) motion: the court must consider the complaint’s allegations to be true. See Ruiz v. McDonnell, 299 F.3d at 1180; Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir.1981). But when the attack is aimed at the jurisdictional facts themselves, a district court may not presume the truthfulness of those allegations. A court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1). In such instances, a court’s reference to evidence outside the pleadings does not convert the motion to a Rule 56 [summary-judgment] motion.

Alto Eldorado Partners v. City of Santa Fe, 2009 WL 1312856, at *8-9 (citations omitted). As the United States Court of Appeals for the Fifth Circuit has stated:

[T]he trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56. Because at issue in a factual 12(b)(1) motion is the trial court’s jurisdiction— its very power to hear the case — there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiffs allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.

Williamson v. Tucker, 645 F.2d 404, 412-13 (5th Cir.1981)(quoting Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir.1977)).

When making a rule 12(b)(1) motion, a party may go beyond the allegations in the complaint to challenge the facts upon which jurisdiction depends, and may do so by relying on affidavits or other evidence properly before the court. See New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495, 1499 (10th Cir.1995); Holt v. United States, 46 F.3d 1000, 1003 (10th Cir.1995). In those instances, a court’s reference to evidence outside the pleadings does not necessarily convert the motion to a rule 56 motion for summary judgment. See Holt v. United States, 46 F.3d at 1003 (citing Wheeler v. Hurdman, 825 F.2d 257, 259 n. 5 (10th Cir.1987)). Where, however, the court determines that jurisdictional issues raised in rule 12(b)(1) motion are intertwined with the case’s merits, the court should resolve the motion either under rule 12(b)(6) or under rule 56. See Franklin Sav. Corp. v. United States, 180 F.3d 1124, 1129 (10th Cir.1999); Tippett v. United States, 108 F.3d 1194, 1196 (10th Cir.1997). “When deciding whether jurisdiction is intertwined with the merits of a particular dispute, ‘the underlying issue is whether resolution of the jurisdictional question requires resolution of an aspect of the substantive claim.’” Davis ex rel. Davis v. United States, 343 F.3d 1282, 1296 (10th Cir.2003)(quoting Sizova v. Nat’l Inst. of Standards & Tech., 282 F.3d 1320, 1324 (10th Cir.2002)).

LAW REGARDING THE FATA

In 2007, the New Mexico Legislature passed the FATA, a false claims act with a qui tarn provision. See N.M.S.A.1978, §§ 44-9-1 to -14 (2007). The FATA contains a first-to-file provision, stating: “When a person brings an action pursuant to this section, no person other than the attorney general on behalf of the state may intervene or bring a related action based on the facts underlying the pending action.” N.M.S.A.1978, § 44-9-5E. The FATA also contains the following non-exclusivity clause: “The remedies provided for in the Fraud Against Taxpayers Act are not exclusive and shall be in addition to any other remedies provided for in any other law or available under common law.” N.M.S.A.1978, § 44-9-14.

The federal analog to the FATA is the False Claims Act, 31 U.S.C. §§ 3729-3733 (“FCA”), which has as its purpose “encourag[ing] ‘whistleblowers to act as private attorneys-general’ in bringing suits for the common good.” Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970 (6th Cir.2005)(quoting United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032, 1041-42 (6th Cir.1994)). It acts as a “jurisdictional limit on the court’s power to hear certain duplicative qui tarn suits.” United States ex rel. Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276 (10th Cir.2004). The FCA also recognizes the need “to discourage opportunistic plaintiffs from bringing parasitic lawsuits whereby would-be relators merely feed off a previous disclosure of fraud.” Walburn v. Lockheed Martin Corp., 431 F.3d at 970. See United States ex rel. Grynberg, 390 F.3d at 1278 (“The False Claims Act’s qui tam provisions are designed to encourage private citizens to expose fraud but to avoid actions by opportunists seeking to capitalize on public information.”). The FATA allows for recovery of three times the actual losses that the State suffered. See N.M.S.A.1978, § 44-9-3C.

RELEVANT NEW MEXICO LAW REGARDING TRUSTS

The Restatement (Third) of Trusts sets forth a definition of trusts:

A trust, as that term is used in this Restatement when not qualified by the word “resulting” or “constructive,” is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.

Restatement (Third) of Trusts § 2 (2003). A trustee shall administer a trust “in good faith, in accordance with its terms and purposes and the interests of the beneficiaries.” N.M.S.A.1978, § 46A-8-801. A trustee’s duties include protection and management of trust property “to provide returns or other benefits to the trust.” State ex rel. King v. Lyons, 149 N.M. 330, 248 P.3d 878, 906 (2011) (citing Restatement (Third) of Trusts § 86, cmt. B. (2007)). Moreover, “[a] trust relationship imposes stringent and high standards of conduct upon the trustee.” Pino v. Budwine, 90 N.M. 750, 752, 568 P.2d 586, 588 (1977) (citing Iriart v. Johnson, 75 N.M. 745, 411 P.2d 226 (1965)).

1. Beneñciaries of a Trust May Bring Claims on Behalf of the Trust Against the Trustees and Responsible Third Parties.

The beneficiaries of a trust may sue the trustees to assert claims of damages to the res of the trust that the breach caused. The Restatement (Second) of Trusts provides that:

If the trustee commits a breach of trust, he is chargeable with (a) any loss or depreciation in value of the trust estate resulting from the breach of trust; or (b) any profit made by him through the breach of trust; or (c) any profit which would have accrued to the trust estate if there had been no breach of trust.”

Restatement (Second) of Trusts § 205 (1959). The beneficiaries of a trust may also sue responsible third parties; a beneficiary may bring an action against a third-party where “the trustee improperly refuses or neglects to bring an action.” Restatement (Second) of Trusts § 282. The Supreme Court of New Mexico has recognized this principle. In Iriart v. Johnson, 75 N.M. 745, 411 P.2d 226 (1966), the beneficiaries of a trust filed suit against a real estate agent for violating his fiduciary duties while selling trust property. Notwithstanding the beneficiaries’ lack of possession of the trust property’s legal title and the lack of statutory authorization, the Supreme Court of New Mexico held in Iriart v. Johnson that the trust beneficiaries were the “real party in interest” with proper standing commensurate with beneficiaries enjoying a right of action under principles of contract law. 75 N.M. at 750, 411 P.2d at 229.

The New Mexico Uniform Trust Code (“NMUTC”) also expresses this principle. The NMUTC provides that a trust beneficiary can bring a proceeding against a trustee for breach of trust, and against a third-party who participates in or benefits from the trustee’s breach of trust. See N.M.S.A.1978, § 46A-10-1001 (stating that “a violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust” and listing remedies for this misconduct).

New Mexico’s law is in accord with the law of other jurisdictions. See, e.g., Bowen v. United States Postal Serv., 459 U.S. 212, 243, 103 S.Ct. 588, 74 L.Ed.2d 402 (1983)(citing Restatement § 282 rule that a trust beneficiary may assert a claim belonging to the trust if the trustee improperly refuses or neglects to bring an action against a third person); Estate of Bowles, 169 Cal.App.4th 684, 691-92, 87 Cal.Rptr.3d 122 (2008)(finding that beneficiary’s cause of action was independent and not derivative through the trustee, lest the cause of action be barred by delay in enforcement by a wrongdoing trustee). In Hamedy v. Whitty, 110 Cal.App.4th 1333, 2 Cal.Rptr.3d 798 (2003), the California Court of Appeals stated:

When the claim being asserted rests in whole or in part on alleged breaches of duty by the trustee, a beneficiary has standing to pursue such a claim against either (1) the trustees directly, (2) the trustee and third parties participating in or benefitting from his, her, or its breach of trust, or (3) such third parties alone.

110 Cal.App.4th at 1341 — 42, 2 Cal.Rptr.3d 798. See Booth v. Security Mut. Life Ins. Co., 155 F.Supp. 755, 761 (D.N.J.1957)(holding that, where a trustee transfers property in breach of trust involving a third-party, the beneficiary has a direct right of action against the third party); Anderson v. Dean Witter Reynolds, Inc., 841 P.2d 742, 745 (Utah Ct.App.1992)(“Although Utah substantive law is especially sparse in this area, it appears the beneficiary has the right to bring an action against a third party when the beneficiary’s interests are hostile to those of the trustee.” (citations omitted.)).

While the New Mexico state courts do not appear to have addressed the specific question whether the law of trusts applies to the ERB, the New Mexico Court of Appeals has applied the law of trusts to other state pension funds. See State ex rel. Pub. Emps’ Ret. Assoc. v. Longacre, 131 N.M. 156, 33 P.3d 906 (Ct.App.2001)(finding that trustee of the fund is a fiduciary to the Public Employees Retirement Act [ (“PERA”) ] members, and “following the principles of trust law,” the PERA Board has a duty to collect overpayments for the trust) (emphasis added)(citing N.M. Const, art. XX, § 22; 2 N.M.A.C. § 80.800.8.1; and Restatement (Second) of Trusts § 254, at 637-38 (1959)), reversed on other grounds by State ex rel. Pub. Emps. Ret. Assoc. v. Longacre, 133 N.M. 20, 59 P.3d 500 (2002). New Mexico is not alone in applying the law of trusts to public pension funds; courts in numerous jurisdictions have made the same determination. See Petition of Barney, 142 N.H. 798, 710 A.2d 408, 409 (1998)(holding, under common-law of trusts, the board of trustees of the New Hampshire Retirement System owe members and beneficiaries a fiduciary duty to manage the system for the benefit of the members and beneficiaries); City of Sacramento v. Pub. Emps. Ret. Sys., 229 Cal.App.3d 1470, 1494, 280 Cal.Rptr. 847 (1991)(holding that, under “well-established rules of the law of trusts,” the trustee of the pension system owed undivided loyalty to the beneficiaries).

2. When Trust Beneficiaries Sue on Behalf of a Trust, the Common Law of Trusts Requires Demand on the Trustees

A demand requirement exists in the private trust realm and is even said to predate the demand requirement for shareholder derivatives. See C.E. Rounds, Jr. and A. Dehio, Publicly-Traded Open End Mutual Funds in Common Law and Civil Law Jurisdictions: A Comparison of Legal Structures, 3 N.Y.U. J.L. & Bus. 473, 494 (2007)(“The common law of trusts has a comparable demand requirement which predates its corporate counterpart: If a trust suffers harm at the hands of a third party, e.g., the trustee’s investment agent, the trust beneficiaries first must make a demand on the trustees to correct the problem.” (citing G.G. Bogert & G.T. Bogert, The Law of Trusts and Trustees § 869, at 199 n. 35 and accompanying text (rev. 2d ed., repl. vol. 1995)). In the private trust context, the demand requirement is rooted in the Restatements. See Restatement (Second) of Trusts, § 282 (“Suit in Equity by Beneficiary”); Bankers Nat. Corp. v. Barr, 7 F.R.D. 305, 308 (S.D.N.Y.1945) (“Furthermore, under Delaware law, stockholder’s derivative suits are equitable and the usual rules of equity that demand first be made on the trustee to sue, and demand refused, or reason shown why such demand would be useless ... would seem applicable.”) (citing Bogert on Trusts and Trustees, § 870, at 2553 (vol. 4); Restatement of Trusts, § 282)). That said, there is no New Mexico case that the parties or the Court have found that imposes a demand requirement in the private trust context.

LAW REGARDING DERIVATIVE ACTIONS

Federal law and New Mexico law both allow derivative actions. Rule 23.1 of the Federal Rules of Civil Procedure states the federal derivative suit pleading requirements. New Mexico law states the requirements for bringing a derivative suit in N.M.S.A.1978, § 53-11-47.

1. Rule 23.1 of the Federal Rules of Civil Procedure Requires that Plaintiffs Plead Demand or Demand Futility.

Rule 23.1(b) sets forth pleading requirements for derivative actions. See Fed. R.Civ.P. 23.1(b). The complaint must (i) allege that the plaintiff was a shareholder or member at the time of the transaction complained of; (ii) allege that the action is not a collusive one to confer jurisdiction that the court would otherwise lack; and (iii) state with particularity: (A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and (B) the reasons for not obtaining the action or not making the effort. See Fed.R.Civ.P. 23.1(b). A derivative action may not be maintained if a plaintiff cannot fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right. See Fed.R.Civ.P. 23.1(a).

The Supreme Court of the United States has determined that rule 23.1 does not contain a substantive demand requirement. In Kamen v. Kemper Fin. Servs., 500 U.S. 90, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991), the Supreme Court ruled that, while rule 23.1 clearly contemplates both the demand requirement and the possibility that demand may be excused, “it does not create a demand requirement of any particular dimension. On its face, rule 23.1 speaks only to the adequacy of the shareholder representative’s pleadings.” 500 U.S. at 108-09, 111 S.Ct. 1711. Because rule 23.1 is a procedural requirement, whether it has been satisfied is governed by federal law, although federal courts look to the law of the state of incorporation as the source of federal common law in determining whether demand is met. See Cadle v. Hicks, 272 Fed.Appx. 676, 678 (10th Cir.2008)(looking to state law to interpret rule 23.1)(“The Supreme Court has held in analogous circumstances that the law of the state of incorporation is an appropriate source of federal common law.” (citing Kamen v. Kemper Fin. Servs., 500 U.S. at 96, 108, 111 S.Ct. 1711)). The Supreme Court has looked to state law to supply the contours of any demand requirement because the presumption that state law should be incorporated into federal common law “is particularly strong where parties have entered into legal relationships with the expectation that their rights and obligations would be governed by state-law standards.” Kamen v. Kemper Fin. Servs., 500 U.S. at 98, 111 S.Ct. 1711. New Mexico has recognized the general rule that a pre-suit demand or sufficiently pled facts showing futility is necessary to a shareholder derivative action. See White ex rel. Banes Co. Derivative Action v. Banes Co., 116 N.M. 611, 614, 866 P.2d 339, 342 (1993)(“A shareholder derivative action is a procedure by which the shareholder can assert a right of action on behalf of the corporation when the corporation has refused a properly made demand to enforce the corporation’s rights.” (emphasis added)(citing Koster v. Lumbermens Mut. Cas. Co., 330 U.S. 518, 522, 67 S.Ct. 828, 91 L.Ed. 1067 (1947))).

2. N.M.S.A.1978, § 53-11-47 Permits Derivative Suits and Requires that Plaintiffs Plead Demand or Demand Futility.

New Mexico’s statute relating to derivative actions focuses solely on suits brought by shareholders. See N.M.S.A.1978, § 53-11 — 47 (“Provisions relating to derivative actions by shareholders”). The Supreme Court of New Mexico extended the scope of derivative suits beyond the corporate context in First Nat’l Bank v. Sanchez, 112 N.M. 317, 815 P.2d 613 (1991), and allowed a partner’s derivative suit on behalf of a general partnership. See First Nat’l Bank v. Sanchez, 112 N.M. at 325, 815 P.2d at 621 (“[A] cause of action accruing to the partnership ... belongs to the partnership rather than to the individual partners.”); Fate v. Owens, 130 N.M. 503, 509, 27 P.3d 990, 996 (Ct.App.2001)(“It is well settled in New Mexico that shareholders of a corporation may bring a derivative action on behalf of a corporation.... Similarly, our Supreme court has state the same principle in the context of a general partnership”). The Court of Appeals of New Mexico explained that “[d]erivative actions work effectively when the partnership has been damaged by a third party and the general partners refuse to enforce the partnership’s rights.” Fate v. Owens, 130 N.M. at 510, 27 P.3d at 997. The court went on to explain that “a breach of fiduciary duty can be either individual or derivative, depending on the nature of the duty and who suffers the injury.” Fate v. Owens, 130 N.M. at 510, 27 P.3d at 997. Additionally, the Court of Appeals has twice considered cases relating to other derivative actions, and both times declined to decide whether the plaintiff could bring a derivative suit. See In the Matter of Norwest Bank of New Mexico, 134 N.M. 516, 520, 80 P.3d 98, 102 (Ct.App.2003) (“New Mexico law is silent on whether a beneficiary of a testamentary trust may bring a derivative action. Accordingly, we assume, without deciding, that such a derivative action is permissible.”); Saylor v. Valles, 133 N.M. 432, 436, 63 P.3d 1152, 1156 (Ct.App.2002) (“Whether members of a nonprofit corporation have standing to bring derivative actions is a question that we decline to answer in this case because Plaintiffs’ pleadings are deficient in at least two respects.”).

New Mexico shareholder derivative suits can proceed only where a plaintiff alleges with particularity “the efforts, if any, by the plaintiff to obtain the actions he desires from the directors” and “the reasons for his failure to obtain the action or for not making the effort.” N.M.S.A. 1978, § 53-ll-47(A)(3). The Supreme Court of New Mexico has stated that “the demand requirement is crucial to the derivative action.” White ex rel. Banes Co. Derivative Action v. Banes Co., 116 N.M. at 614, 616, 866 P.2d at 342, 344. Demand may be excused as futile, but only where a plaintiff can establish that “the circumstances are such as to clearly show that it would be a mere useless form.” Porter v. Mesilla Valley Cotton Prods. Co., 42 N.M. 217, 220, 76 P.2d 937, 939 (N.M.1937). Accord Saylor v. Valles, 133 N.M. 432, 63 P.3d 1152 (Ct.App.2002)(dismissing derivative claim on behalf of nonprofit organization because there were no allegations that plaintiffs made the requisite demand to the organization’s directors or officers, or adequately explained why such demand would be futile). It can be said that, within the corporate structure, the demand requirement allows “the board of directors or majority shareholders [to] set the corporation’s business policy, including whether to pursue a lawsuit.” Harhen v. Brown, 431 Mass. 838, 845, 730 N.E.2d 859, 865 (Mass. 2000).

LAW REGARDING 12(B)(6) MOTIONS TO DISMISS

Under rule 12(b)(6) of the Federal Rules of Civil Procedure, a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir.1994). It is settled, however, that when entertaining a motion to dismiss, a court is permitted “to take judicial notice of its own files and records, as well as facts which are a matter of public record.” Van Woudenberg v. Gibson, 211 F.3d 560, 568 (10th Cir.2000), abrogated on other grounds by McGregor v. Gibson, 248 F.3d 946, 955 (10th Cir. 2001). A court may also consider any documents referred to which the complaint refers, provided the documents are central to the plaintiff’s claim and the parties do not dispute their authenticity. See Jacobsen v. Deseret Book Co., 287 F.3d 936, 941-42 (10th Cir.2002). If a document is not attached to the complaint, but is both referenced in the complaint and found to be central to the plaintiffs claim, a defendant may submit an “indisputably authentic copy to the court to be considered on a motion to dismiss.” GFF Corp. v. Assoc. Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.1997). See 5A C. Wright & A. Miller, Federal Practice & Procedure § 1327, at 439 (3d ed. 2004)(“[W]hen the plaintiff fails to introduce a pertinent document as part of her pleading ... the defendant may introduce the document as an exhibit to a motion attacking the sufficiency of the pleading.”).

The sufficiency of a complaint is a question of law, and when considering and addressing a rule 12(b)(6) motion, a court must accept as true all well-pleaded factual allegations in the complaint, view those allegations in the light most favorable to the non-moving party, and draw all reasonable inferences in the plaintiffs favor. See Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.2006); Hous. Auth. of Kaw Tribe v. City of Ponca City, 952 F.2d 1183, 1187 (10th Cir.1991). A complaint challenged by a rule 12(b)(6) motion to dismiss does not require detailed factual allegations, but a plaintiffs obligation to set forth the grounds of entitlement to relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level ____” Bell Atlantic v. Twombly, 550 U.S. at 565, 127 S.Ct. 1955 (internal citation omitted). “[T]he Supreme Court [has recently] ... prescribed a new inquiry for [courts] to use in reviewing a dismissal: whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.’ ” Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir.2007)(quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “The [Supreme] Court explained that a plaintiff must ‘nudge his claims across the line from conceivable to plausible’ in order to survive a motion to dismiss.” Ridge at Red Hawk, LLC v. Schneider, 493 F.3d at 1177 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

LAW REGARDING SOVEREIGN IMMUNITY

After the Supreme Court of New Mexico abolished common-law sovereign immunity in Hicks v. State, 88 N.M. 588, 544 P.2d 1153 (1976), the New Mexico Legislature enacted the New Mexico Tort Claims Act (“NMTCA”), which provides, in pertinent part, that “governmental entities and public employees shall only be liable within the limitations of the Tort Claims Act and in accordance with the principles established in that act.” N.M.S.A.1978, § 41-4-2A (1976). State governmental entities and public employees acting within the scope of duty are, therefore, immune from liability for any tort except as waived by the Act. N.M.S.A.1978, § 41-4-4A. The NMTCA defines a “governmental entity” as “the state or any local public body.” N.M.S.A.1978, § 41-4-3B. The NMTCA defines “public employees” as an “officer, employee or servant of a governmental entity” and includes “elected or appointed officials” as well as “persons acting on behalf or in service of a governmental entity in any official capacity.” N.M.S.A.1978, § 41-4-3F(l)-(16).

LAW REGARDING FRAUD AND MISREPRESENTATION

To establish a claim for common-law fraud under New Mexico law, a plaintiff must show that (i) the defendant knowingly or recklessly made a false representation of fact with intent to deceive; (ii) the plaintiff suffered damages and (iii) those damages were proximately caused by (iv) the plaintiffs justifiable reliance on the defendant’s false representation. See Cain v. Champion Window Co. of Albuquerque, LLC, 142 N.M. 209, 216, 164 P.3d 90, 97 (Ct.App.2007). Similarly, to state a claim for negligent misrepresentation in New Mexico, a plaintiff must plead facts supporting the existence of a misrepresentation and pecuniary loss caused by justifiable reliance thereon. See, e.g., Garcia v. Rodey, Dickason, Sloan, Akin & Robb, P.A., 106 N.M. 757, 761, 750 P.2d 118, 122 (1988).

ANALYSIS

In their motions, the ERB Defendants urge the Court to dismiss the Plaintiffs’ Amended Complaint for a lack of constitutional standing, because the Plaintiffs have not alleged a “cognizable injury.” The Court agrees that the Plaintiffs fail to satisfy the requirements of Article III that there be a “case or controversy.” The Plaintiffs do not satisfy the constitutional minimum for a ease or controversy, because they fail to allege an injury in fact fairly traceable to the Defendants, which the Court can redress. The Plaintiffs did not offer to plead any jurisdictional facts and the Court believes that it is futile to allow the Plaintiffs to amend this flaw because the Plaintiffs cannot remedy the lack of causation or redressability. The Court will, therefore, remand the case to New Mexico state court.

I. THE PLAINTIFFS LACK CONSTITUTIONAL STANDING TO BRING THIS ACTION IN FEDERAL COURT.

The ERB Defendants move to dismiss the Plaintiffs’ claims for lack of subject-matter jurisdiction under rule 12(b)(1) of the Federal Rules of Civil Procedure, asserting that the Plaintiffs lack constitutional standing to sue directly, or on behalf of the Fund, because they have not demonstrated a concrete injury-in-fact or causal connection between the VFT investment and their alleged injuries. See Individual State Def.s’ Mem. Mot. to Dismiss at 5 (Doc. 42); Individual State Def.s’ Reply at 5. The Plaintiffs contend that, as trust beneficiaries, they have standing to assert their claims directly against the Defendants or, alternatively, to bring the suit on the Fund’s behalf. See Am. Compl. ¶ 118, at 38. The Court concludes that, because the Amended Complaint does not sufficiently allege any injury-in-fact fairly traceable to the Defendants’ conduct or redressable by the Court, the Plaintiffs’ claims fail to meet the requirements of Article III standing.

Where standing is placed at issue, the proper inquiry is “whether the person whose standing is challenged is a proper party to request an adjudication of a particular issue, and not whether the issue itself is justiciable.” Flast v. Cohen, 392 U.S. 83, 100, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). The burden is on the plaintiff to clearly “allege facts demonstrating that [they are] a proper party to invoke judicial resolution of the dispute.” United States v. Hays, 515 U.S. 737, 743, 115 S.Ct. 2431, 132 L.Ed.2d 635 (1995) (citations omitted). The Supreme Court of the United States has established the minimal constitutional requirements for standing, which include three essential elements. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). First, the plaintiff must have suffered an “injury in fact.” Lujan v. Defenders of Wildlife, 504 U.S. at 560, 112 S.Ct. 2130. An “injury in fact” is an invasion of a legally protected interest which is (i) concrete and particularized, Allen v. Wright, 468 U.S. 737, 756, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984); Warth v. Seldin, 422 U.S. 490, 508, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); Sierra Club v. Morton, 405 U.S. 727, 740-741, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972); and (ii) “actual or imminent, not ‘conjectural’ or ‘hypothetical,’ ” Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990) (quoting Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983)). Next, “there must be a causal connection between the injury and the conduct complained of — the injury has to be ‘fairly ... trace[able] to the challenged action of the defendant, and not ... the result [of] the independent action of some third party not before the court.’ ” Lujan v. Defenders of Wildlife, 504 U.S. at 560, 112 S.Ct. 2130 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 41-42, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976)). Finally, it must be “likely,” and not merely “speculative,” that the alleged injury will be “redressed by a favorable decision.” Simon v. E. Ky. Welfare Rights Org., 426 U.S. at 38, 43, 96 S.Ct. 1917.

To bring a suit on the Fund’s behalf in a representative capacity, the Plaintiffs must establish the same Article III requirements that they would if suing as individuals. See Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 608-09 (6th Cir.2007)(applying Article III standing requirements to a party suing on behalf of an ERISA plan); Glanton v. AdvancePCS Inc., 465 F.3d 1123, 1127 (9th Cir.2006)(“We have no quarrel with this proposition [that Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (“ERISA”), beneficiaries sue on behalf of the plan]-so long as plaintiffs otherwise meet the requirements for Article III standing.”). Even if suing on the Fund’s behalf, Article Ill’s case and controversy requirement demands that the plaintiffs make an independent showing of an injury in fact, causation, and redressability. See Harley v. Minn. Mining & Mfg. Co., 284 F.3d 901, 908 (8th Cir. 2002)(“Thus, the limits on judicial power imposed by Article III counsel against permitting participants or beneficiaries who have suffered no injury in fact from suing to enforce ERISA fiduciary duties on behalf of the Plan.”).

The injury-in-fact requirement is satisfied differently depending on whether the plaintiff seeks retrospective or prospective relief. See City of LA. v. Lyons, 461 U.S. 95, 101-02, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983). A plaintiff seeking retrospective relief satisfies the injury-in-fact requirement if she suffered a past injury that is concrete and particularized. See Adarand Constructors Inc. v. Pena, 515 U.S. 200, 210-11, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995). To seek prospective relief, a plaintiff must be suffering from a continuing injury or be under a real and immediate threat of being injured in the future. See City of L.A. v. Lyons, 461 U.S. at 101-02, 103 S.Ct. 1660. The threatened injury must be “certainly impending.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 190, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000). The Plaintiffs seek both retrospective and prospective relief. See Am. Compl. at 60, 61.

A. THE PLAINTIFFS DO NOT HAVE STANDING TO SUE FOR RETROSPECTIVE RELIEF.

To bring a claim on behalf of themselves, as individuals, the Plaintiffs must establish that they have suffered an injury-in-fact. See Lujan v. Defenders of Wildlife, 504 U.S. at 560, 112 S.Ct. 2130 (stating that standing requires an injury-in-fact). To bring a claim on the Fund’s behalf the Plaintiffs must also establish that the minimum Article III constitutional standing requirements are met. See In re Novak, 92 Fed.Appx. at 683 (citing Powers v. O