Anderson et al v. Edward D. Jones & Co., L.P. et al

Filing 81

ORDER signed by District Judge John A. Mendez on 5/6/2022 GRANTING Defendants' 72 Motion to Dismiss. If Plaintiffs elect to amend their complaint, they shall file a Third Amended Complaint within twenty days (20) of this order. Defendants' responsive pleadings are due twenty days (20) thereafter. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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IN RE EDWARD D. JONES & CO.,
L.P. SECURITIES LITIGATION

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No.

2:18-cv-00714-JAM-AC

ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

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Before the Court is Edward D. Jones & Co., L.P., the Jones

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Financial Companies, L.L.L.P., EDJ Holding Company, Inc., James

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D. Weddle, and Vincent J. Ferrari’s (collectively “Defendants”)

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renewed motion to dismiss.

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Defendants seek to dismiss the remaining two counts in the second

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amended complaint for violation of Missouri and California’s

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fiduciary duty laws.

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No. 47.

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Defendants replied.

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forth below, the Court grants Defendants’ motion.

Mot., ECF No. 72.1

Specifically,

See Sec. Am. Compl. (“SAC”) at 6-18, ECF

Plaintiffs opposed the motion.
Reply, ECF No. 76.

Opp’n, ECF No. 75.
For the reasons set

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for April 5, 2022.
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I.

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BACKGROUND

The parties are intimately familiar with the factual

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background of this case — it is set forth extensively in the

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second amended complaint, the parties’ briefings, the Court’s

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prior orders, and the Ninth Circuit’s March 4, 2021 Opinion.

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e.g., USCA Opinion at 4-9, ECF No. 65.

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not restate the factual allegations here.

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See

The Court therefore does

The pertinent procedural background is as follows: on
November 8, 2019, the Court granted Defendants’ second motion to

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dismiss this action with prejudice.

See generally Order Granting

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Second Mot. to Dismiss (“Second Order”), ECF No. 60.

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here, the Court dismissed Counts I and II – which respectively

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allege breach of fiduciary duty claims under Missouri and

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California law - pursuant to the jurisdictional bar in the

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Securities Litigation Uniform Standards Act (“SLUSA”).

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5.

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30.

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Plaintiff’s breach of fiduciary duty claims did not allege

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conduct “material to” and thus “in connection with” the purchase

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or sale of any covered securities.

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their motion to dismiss these claims.

The Ninth Circuit reversed that dismissal.

As relevant

Id. at 4-

USCA Opinion at

The Ninth Circuit reasoned that SLUSA did not apply because

Id.

Defendants now renew

See generally Mot.

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II.

OPINION

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A.

Request for Judicial Notice

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Defendants request the Court take judicial notice of

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three exhibits, namely appellate briefing in this action.

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Mot. at 2 n.2.; see also Exs. A-C to Mircheff Decl., ECF

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Nos. 72-2, 72-3, 72-4.

All three exhibits are matters of
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public record and therefore proper subjects of judicial

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notice.

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(9th Cir. 2001); see also Sansone v. Charter Commc’ns, Inc.,

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Case No. 3:17-cv-01880-WQH-JLB, 2021 WL 5827107, at *3 n.1

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(S.D. Cal. July 26, 2021) (taking judicial notice of several

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briefs filed before the Ninth Circuit following appeal and

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noting that “matters of public record include court

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filings”).

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request for judicial notice.

See Lee v. City of Los Angeles, 250 F.3d 668, 689

Accordingly, the Court grants Defendants’
However, the Court takes

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judicial notice only of the existence of these documents and

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declines to take judicial notice of their substance,

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including any disputed facts within them.

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at 690.

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B.

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A Rule 12(b)(6) motion challenges the complaint as not

See Lee, 250 F.3d

Legal Standard

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alleging sufficient facts to state a claim for relief.

Fed. R.

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Civ. P. 12(b)(6).

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12(b)(6)], a complaint must contain sufficient factual matter,

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accepted as true, to state a claim for relief that is plausible

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on its face.”

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(internal quotation marks and citation omitted).

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“detailed factual allegations” are unnecessary, the complaint

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must allege more than “[t]hreadbare recitals of the elements of

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a cause of action, supported by mere conclusory statements.”

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Id.

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claim, the court generally accepts as true the allegations in

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the complaint and construes the pleading in the light most

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favorable to the plaintiff.

“To survive a motion to dismiss [under

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
While

In considering a motion to dismiss for failure to state a

Lazy Y Ranch Ltd. v. Behrens, 546
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F.3d 580, 588 (9th Cir. 2008).

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survive a motion to dismiss, the non-conclusory ‘factual

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content,’ and reasonable inferences from that content, must be

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plausibly suggestive of a claim entitling the plaintiff to

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relief.”

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2009).

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“In sum, for a complaint to

Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.

Fraud-based claims are subject to the heightened pleading

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standard of Rule 9(b).

Fed. R. Civ. P. 9(b).

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a party to “state with particularity the circumstances
Id.

Rule 9(b) requires

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constituting fraud or mistake.”

When a party averring

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fraud fails to meet the heightened pleading standard of Rule

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9(b), dismissal of the claim is proper.

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Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003).

Vess v. Ciba-Geigy

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C.

Analysis

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Defendants move to dismiss Plaintiffs’ remaining two breach

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of fiduciary duty claims.

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argue that because these claims sound in fraud, Rule 9(b)’s

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heightened pleading standard applies, and Plaintiffs fail to

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satisfy that heightened standard.

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contend Plaintiffs fail to plausibly allege any breach, id. at

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9-12, proximate causation of any damages, id. at 12-14, and

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reliance, id. at 14-15.

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See generally Mot.

Id. at 8-9.

First, Defendants

Next, Defendants

In opposition, however, Plaintiffs clarify that they are

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not proceeding on these claims with a fraud-based theory:

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“Plaintiffs’ fiduciary duty claims are based on a failure to

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act, not fraud.”

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Plaintiffs point to the Ninth Circuit’s recognition of such a

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basis for their fiduciary duty claims: “Once Edward Jones

Opp’n at 2 (emphasis added).

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Further,

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allegedly failed to conduct a suitability analysis, and made a

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recommendation without that analysis, causing Plaintiffs to

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switch accounts, the breach of fiduciary duty would be

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complete.”

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L.P., 990 F.3d 692, 707 (9th Cir. 2021), cert denied, 142 S.Ct.

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745 (2022)).

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Id. (quoting Anderson v. Edward D. Jones & Co.,

Defendants highlight numerous issues with Plaintiffs’ new

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theory of fiduciary liability based on a failure to act, see

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Reply at 2-5, not all of which the Court needs to reach to find

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that dismissal is warranted.

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that Plaintiffs’ claims must be dismissed because Plaintiff’s

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new theory was not pled in the operative complaint - has merit.

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Id. at 2.

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Defendants’ leading argument -

The theory Plaintiffs now advance is that Defendants would

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have determined that fee-based accounts should not be offered as

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an option to Plaintiffs had they done a suitability analysis

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before speaking with Plaintiffs about transferring from a

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commission-based account to a fee-based account.

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Thus, Plaintiffs contend that a breach occurred at the first

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mention of the fee-based account option since Defendants would

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have concluded fee-based accounts “were not suitable for

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Plaintiffs as buy-and-hold investors” had they conducted a

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suitability analysis prior to discussing it with Plaintiffs.

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Id.

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complaint.

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this theory ends the analysis as a complaint cannot be amended

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through an opposition to a motion to dismiss.

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Cal. Dep’t of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998).

Opp’n at 3, 5.

Yet, this theory is not clearly set forth in the operative
See generally SAC.

Plaintiffs’ failure to plead

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See Schneider v.

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Because Plaintiffs’ opposition proceeds on a theory not pled in

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the operative complaint, the Court grants Defendants’ motion.

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D.

Leave to Amend

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Courts dismissing claims under Federal Rule of Civil

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Procedure 12(b)(6) have discretion to permit amendment, and

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there is a strong presumption in favor of leave to amend.

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Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th

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Cir. 2003).

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amend is not appropriate unless it is clear . . . that the

“Dismissal with prejudice and without leave to

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complaint could not be saved by amendment.”

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(internal citation omitted).

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Id. at 1052

Here, Plaintiffs request leave to amend.

Opp’n at 14.

The

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Court grants that request, however, the leave granted is limited

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to pleading the failure to act theory of breach set forth in

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their opposition.

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additional theories of breach without prior authorization from

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the Court.

Plaintiffs may not add new claims or any

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III.

ORDER

For the reasons set forth above, the Court GRANTS

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Defendants’ motion to dismiss.

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their complaint, they shall file a Third Amended Complaint

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within twenty days (20) of this order.

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pleadings are due twenty days (20) thereafter.

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If Plaintiffs elect to amend

IT IS SO ORDERED.
Dated: May 6, 2022

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Defendants’ responsive