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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1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 EASTERN DISTRICT OF CALIFORNIA 11 12 IN RE EDWARD D. JONES & CO., L.P. SECURITIES LITIGATION 13 14 No. 2:18-cv-00714-JAM-AC ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS 15 16 Before the Court is Edward D. Jones & Co., L.P., the Jones 17 Financial Companies, L.L.L.P., EDJ Holding Company, Inc., James 18 D. Weddle, and Vincent J. Ferrari’s (collectively “Defendants”) 19 renewed motion to dismiss. 20 Defendants seek to dismiss the remaining two counts in the second 21 amended complaint for violation of Missouri and California’s 22 fiduciary duty laws. 23 No. 47. 24 Defendants replied. 25 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 26 27 28 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. 1 1 1 I. 2 BACKGROUND The parties are intimately familiar with the factual 3 background of this case — it is set forth extensively in the 4 second amended complaint, the parties’ briefings, the Court’s 5 prior orders, and the Ninth Circuit’s March 4, 2021 Opinion. 6 e.g., USCA Opinion at 4-9, ECF No. 65. 7 not restate the factual allegations here. 8 9 See The Court therefore does The pertinent procedural background is as follows: on November 8, 2019, the Court granted Defendants’ second motion to 10 dismiss this action with prejudice. See generally Order Granting 11 Second Mot. to Dismiss (“Second Order”), ECF No. 60. 12 here, the Court dismissed Counts I and II – which respectively 13 allege breach of fiduciary duty claims under Missouri and 14 California law - pursuant to the jurisdictional bar in the 15 Securities Litigation Uniform Standards Act (“SLUSA”). 16 5. 17 30. 18 Plaintiff’s breach of fiduciary duty claims did not allege 19 conduct “material to” and thus “in connection with” the purchase 20 or sale of any covered securities. 21 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. 22 23 II. OPINION 24 A. Request for Judicial Notice 25 Defendants request the Court take judicial notice of 26 three exhibits, namely appellate briefing in this action. 27 Mot. at 2 n.2.; see also Exs. A-C to Mircheff Decl., ECF 28 Nos. 72-2, 72-3, 72-4. All three exhibits are matters of 2 1 public record and therefore proper subjects of judicial 2 notice. 3 (9th Cir. 2001); see also Sansone v. Charter Commc’ns, Inc., 4 Case No. 3:17-cv-01880-WQH-JLB, 2021 WL 5827107, at *3 n.1 5 (S.D. Cal. July 26, 2021) (taking judicial notice of several 6 briefs filed before the Ninth Circuit following appeal and 7 noting that “matters of public record include court 8 filings”). 9 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 10 judicial notice only of the existence of these documents and 11 declines to take judicial notice of their substance, 12 including any disputed facts within them. 13 at 690. 14 B. 15 A Rule 12(b)(6) motion challenges the complaint as not See Lee, 250 F.3d Legal Standard 16 alleging sufficient facts to state a claim for relief. Fed. R. 17 Civ. P. 12(b)(6). 18 12(b)(6)], a complaint must contain sufficient factual matter, 19 accepted as true, to state a claim for relief that is plausible 20 on its face.” 21 (internal quotation marks and citation omitted). 22 “detailed factual allegations” are unnecessary, the complaint 23 must allege more than “[t]hreadbare recitals of the elements of 24 a cause of action, supported by mere conclusory statements.” 25 Id. 26 claim, the court generally accepts as true the allegations in 27 the complaint and construes the pleading in the light most 28 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 3 1 F.3d 580, 588 (9th Cir. 2008). 2 survive a motion to dismiss, the non-conclusory ‘factual 3 content,’ and reasonable inferences from that content, must be 4 plausibly suggestive of a claim entitling the plaintiff to 5 relief.” 6 2009). 7 “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 8 standard of Rule 9(b). Fed. R. Civ. P. 9(b). 9 a party to “state with particularity the circumstances Id. Rule 9(b) requires 10 constituting fraud or mistake.” When a party averring 11 fraud fails to meet the heightened pleading standard of Rule 12 9(b), dismissal of the claim is proper. 13 Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). Vess v. Ciba-Geigy 14 C. Analysis 15 Defendants move to dismiss Plaintiffs’ remaining two breach 16 of fiduciary duty claims. 17 argue that because these claims sound in fraud, Rule 9(b)’s 18 heightened pleading standard applies, and Plaintiffs fail to 19 satisfy that heightened standard. 20 contend Plaintiffs fail to plausibly allege any breach, id. at 21 9-12, proximate causation of any damages, id. at 12-14, and 22 reliance, id. at 14-15. 23 See generally Mot. Id. at 8-9. First, Defendants Next, Defendants In opposition, however, Plaintiffs clarify that they are 24 not proceeding on these claims with a fraud-based theory: 25 “Plaintiffs’ fiduciary duty claims are based on a failure to 26 act, not fraud.” 27 Plaintiffs point to the Ninth Circuit’s recognition of such a 28 basis for their fiduciary duty claims: “Once Edward Jones Opp’n at 2 (emphasis added). 4 Further, 1 allegedly failed to conduct a suitability analysis, and made a 2 recommendation without that analysis, causing Plaintiffs to 3 switch accounts, the breach of fiduciary duty would be 4 complete.” 5 L.P., 990 F.3d 692, 707 (9th Cir. 2021), cert denied, 142 S.Ct. 6 745 (2022)). 7 Id. (quoting Anderson v. Edward D. Jones & Co., Defendants highlight numerous issues with Plaintiffs’ new 8 theory of fiduciary liability based on a failure to act, see 9 Reply at 2-5, not all of which the Court needs to reach to find 10 that dismissal is warranted. 11 that Plaintiffs’ claims must be dismissed because Plaintiff’s 12 new theory was not pled in the operative complaint - has merit. 13 Id. at 2. 14 Defendants’ leading argument - The theory Plaintiffs now advance is that Defendants would 15 have determined that fee-based accounts should not be offered as 16 an option to Plaintiffs had they done a suitability analysis 17 before speaking with Plaintiffs about transferring from a 18 commission-based account to a fee-based account. 19 Thus, Plaintiffs contend that a breach occurred at the first 20 mention of the fee-based account option since Defendants would 21 have concluded fee-based accounts “were not suitable for 22 Plaintiffs as buy-and-hold investors” had they conducted a 23 suitability analysis prior to discussing it with Plaintiffs. 24 Id. 25 complaint. 26 this theory ends the analysis as a complaint cannot be amended 27 through an opposition to a motion to dismiss. 28 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 5 See Schneider v. 1 Because Plaintiffs’ opposition proceeds on a theory not pled in 2 the operative complaint, the Court grants Defendants’ motion. 3 D. Leave to Amend 4 Courts dismissing claims under Federal Rule of Civil 5 Procedure 12(b)(6) have discretion to permit amendment, and 6 there is a strong presumption in favor of leave to amend. 7 Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th 8 Cir. 2003). 9 amend is not appropriate unless it is clear . . . that the “Dismissal with prejudice and without leave to 10 complaint could not be saved by amendment.” 11 (internal citation omitted). 12 Id. at 1052 Here, Plaintiffs request leave to amend. Opp’n at 14. The 13 Court grants that request, however, the leave granted is limited 14 to pleading the failure to act theory of breach set forth in 15 their opposition. 16 additional theories of breach without prior authorization from 17 the Court. Plaintiffs may not add new claims or any 18 19 20 III. ORDER For the reasons set forth above, the Court GRANTS 21 Defendants’ motion to dismiss. 22 their complaint, they shall file a Third Amended Complaint 23 within twenty days (20) of this order. 24 pleadings are due twenty days (20) thereafter. 25 26 If Plaintiffs elect to amend IT IS SO ORDERED. Dated: May 6, 2022 27 28 6 Defendants’ responsive

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