1

GILMORE F. DIEKMANN
PATRICIA H. CULLISON
2
BRONSON, BRONSON & McKINNON
505 Montgomery street
3
San Francisco, California 94111-2514
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Telephone: (415) 986-4200

Attorneys for Plaintiff

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FEDERAL EXPRESS CORPORATION
6

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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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COMPLAINT FOR INJUNCTIVE
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DUTY, AND FOR BREACH OF
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DEMAND FOR JURy TRIAL
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21 1.. Plaintiff FEDERAL EXPRESS CORPORATION ("Federal
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23 virtue of the laws of the state of Delaware, and maintains its
24 principal place of business in Memphis, Tennessee.
25 2. Plaintiff is informed and believes and thereon alleges
26
that Defendant HAMILTON TAFT & COMPANY (IIHamilton Taft tl ) is a
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corporation organized and existing under and by virtue of the
28 laws of the State of California and maintains its principal place

COMPLAINT FOR INJUNCTIVE RELIEF

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of business in Texas.
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II.
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JURISDICTION AND VENUE
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3. This is an action for breach of contract, breach of
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fiduciary duty, and breach of agency relationship arising, inter
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alia, under the California Civil Code section 2322 et seg. The
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amount in controversy exceeds the sum or value of Fifty Thousand
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Dollars ($50,000) exclusive of interest and costs. The
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jurisdiction of this Court is invoked pursuant to 28 U.S.C.
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u.s.c. section 1391(a), in that the claims involved arose in this
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district.
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GENERAL ALLEGATIONS
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Count One
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(Breach of Contract)
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5. Plaintiff realleges and incorporates by reference as
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though fully set forth herein each and every allegation contained
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in paragraphs 1 through 4 of this Complaint.
24
6. In December of 1989 Federal Express entered into a
25
payroll tax service contract with Hamilton Taft. Pursuant to
26
this agreement, Federal Express would wire transfer its employee
27
payroll taxes to Hamilton Taft. Under the contract Hamilton Taft
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was then obligated to make disbursements to the appropriate

COMPLAINT FOR INJUNCTIVE RELIEF

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taxing authorities on behalf of Federal Express including the
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IRS, and state and local taxing agencies. As consideration for
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performing this service, Hamilton Taft had the use of Federal
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Express' money from the time of its receipt until the time of its
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disbursement to the appropriate taxing authority.
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7• Federal Express has performed all of its obligations
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under the contract by promptly delivering to Hamilton Taft all
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appropriate payroll tax summary reports and payroll tax funds.
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Plaintiff has fully performed all contractual obligations except
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where prevented by breach of defendant.
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8. Plaintiff is informed and belie~es and thereon alleges
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transferred for that purpose, the money would be held for an
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additional 30 to 90 days. Plaintiff is informed and believes and
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thereon alleges that in some cases defendant then used a
17 different client's incoming funds to pay Federal Express taxes
18 and any federal or state taxing agency penalties for late
19 payments.
20
9. Plaintiff is informed and believes that in other cases,
21
Federal Express taxes simply were not paid, and penalties may be
22
accruing.
23
10. Defendant has further breached the contract by not
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providing original tax receipts evidencing the tax payments as
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requested by plaintiff.
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11. As a result of defendant's breach of contract plaintiff
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has been damaged in excess of $50,000~ In order to discovery the
28
true extent of its damages plaintiff is in need of information

COMPLAINT FOR INJUNCTIVE RELIEF

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from the defendant regarding payroll taxes paid and money
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currently owed to the appropriate taxing authorities~ Such
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information is within the exclusive control of the defendant and
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has not been made available to the plaintiff as requested.
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count Two
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(Breach of Fiduciary Duty)
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12. Plaintiff realleges and incorporates by reference as
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though fully set forth herein each and every allegation contained
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in paragraphs 1 through 11 of this Complaint.
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the wages of its employee. Plaintiff, as trustee of these funds,
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duty to the plaintiff to transmit these funds to the appropriate
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had a fiduciary duty to invest these funds as a reasonably
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prudent investor investing his own money would have done so as
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not to jeopardize the principle. On information and belief
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plaintiff alleges that by investing in high risk non-liquid
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loans, defendant has breached this fiduciary duty.
24

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Count Three
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(Breach of Agency Relationship)
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15. Plaintiff hereby realleges and incorporates by
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reference as though fully set forth herein paragraphs 1 through

COMPLAINT FOR INJUNCTIVE RELIEF

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11 of this Complaint.
2
16. Pursuant to the written payroll tax service contract
3
entered into between the defendant and plaintiff, defendant
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became the agent of plaintiff.
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17. Defendant consented to the creation of this
6
relationship by agreeing to accept payroll tax money from the
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plaintiff and deposit such money on behalf of the plaintiff in
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the appropriate amounts and manner on or before the statutory
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deadlines as herein alleged.
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18. In consideration of i~s entering into an agency
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loyalty required defendant to pay the payroll tax funds owed by
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manner, and to refrain from administering the payroll tax funds
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in a manner harmful to the interest of the plaintiff, includIng
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imprudent investments, or investments which might expose the
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plaintiff to taxing authority liability.
23
20. Also pursuant to its agency relationship with the
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plaintiff, defendant owed a duty to disclose promptly upon demand
25
by the plaintiff all documents, including tax receipts, relating
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to the defendant's administration of the plaintiff's payroll
27
account.
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21. Defendant has breached its agency relationship by

COMPLAINT FOR INJUNCTIVE RELIEF

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failing and refusing to render to Federal Express, upon its
2 demand, an accounting of its fund.
3
22. Defendant·s breach of its agency relationship has
4
caused plaintiff damages in an amount to be specifically
5 ascertained at trial but which is presently alleged to be in
6 excess of $50,000.
7

8 Count Four
9
(Injunctive Relief)
10 23. Plaintiff hereby realleges and incorporates by
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injunctive relief herein from destroying or otherwise disposing
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19 defendant is ordered to immediately produce tax receipts and/or
20 other information regarding the transfer and use of funds,
21 plaintiff will suffer immediate and irreparable injury for which
22 there is no adequate remedy at law herein.
23 WHEREFORE, plaintiff prays for judgment against defendant as
24 follows:
25 1. For preliminary injunctive relief restraining or
26
otherwise preventing defendant from destroying tax receipts
27
and/or other information regarding the transfer of payment of
28
plaintiff's payroll taxes as alleged, pending trial;

COMPLAINT FOR INJUNCTIVE RELIEF

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2. For preliminary injunctive relief ordering defendant to
2
cease using plaintiff's payroll tax funds as part of a "ponzi
3
scheme", pending trial;
3. For a temporary restraining order enjoining defendant
5
from destroying tax receipts and/or other information regarding
6
plaintiff's payroll taxes; and
7
4. For an order mandating the production of tax receipts
8 and/or other information in control of the defendant regarding
9 the payment and transfer of plaintiff's payroll tax funds; and
10 4. For damages for the acts herein alleged in accordance
11 with proof ..
12

13
JURy DEMAND
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Plaintiff Federal Express Corporation hereby makes demand
15 for jury.
16

17 Dated: March 13, 1991

18
BRONSON, BRONSON & McKINNON

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19

20
PATRICIA H. CULLISON
21 Attorneys for Plaintiff
22

23

24

25

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44S9~J.Allen

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COMPLAINT FOR INJUNCTIVE RELIEF

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