Grant et al v. Houser et al

Filing 141

ORDER and REASONS denying 127 Motion to Dismiss. Signed by Judge Helen G. Berrigan on 2/15/2012. (Reference: 10-1919)(mm, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CHARLES GRANT, ET AL.

CIVIL ACTION

VERSUS

NO: 10-805 c/w 10-872 & 10-1919

KEVIN HOUSER, ET AL.

SECTION: “C” (3)
THIS ORDER APPLIES TO
CASE NO. 10-1919
ORDER AND REASONS

Before the Court is a Motion to Dismiss by the defendants Kevin Houser (“Houser”),
Securities America, Inc. (“SAI”), and American International Specialties Lines Insurance Co.
(“AISLIC”) (collectively, “Defendants”). (Rec. Doc. 127). In this portion of the litigation,
Defendants’ motion is directed at the Second Amended and Restated Complaint (“Complaint”)
of one of the plaintiffs, Mitch Berger. (Rec. Doc. 81). Plaintiff, Mitch Berger (“Berger”),
opposes the Motion. (Rec. Doc. 131). The motion before the Court is on the briefs without oral
argument. After reviewing the memoranda of counsel, the record, and the applicable law,
Defendants’ Motion to Dismiss is DENIED for the following reasons.

I. Background
Berger alleges claims for violations of (1) Sections 10(b) and 10b-5 of the Securities
Exchange Act of 1934; (2) the Louisiana Unfair Trade and Consumer Protections Act (LUTPA),
La. R.S. 51:1401, et seq.; (3) breach of contract; (4) breach of professional and fiduciary duties
along with alleging SAI is liable for Houser’s actions under the theory of respondeat superior;
(5) unfair and bad faith dealings under La. C.C. art. 1997; and (6) detrimental reliance under La.
C.C. art. 1967 and unjust enrichment.
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The dispute arises from a $250,000 investment that Berger made in Louisiana Film
Studios, LLC (“LFS”), at the alleged recommendation of Houser. (Rec. Doc. 81 at ¶¶ 11-12, 16).
Berger and Houser were both professional football players with the New Orleans Saints. (Id. at ¶
5). Houser, in addition to being a football player, was also a licensed securities broker and
financial advisor beginning in 2004. (Id. at ¶¶ 4, 6). Subsequently, Houser served as a financial
advisor to Berger since 2004 for an investment account Berger maintained at SAI. (Id. at ¶¶ 6-7).
In late 2008, Houser recommended that Berger invest in LFS for $250,000, which Houser
allegedly represented was protected and backed by Louisiana state tax credits and the land upon
which LFS’s studio was situated. (Id. at ¶¶ 12, 15). Houser also allegedly said that Berger would
make 2 to 3 percent on his investment per month and that Berger would be paid back the
principal of his investment within 3 to 6 months. (Id. at ¶ 13). Berger then delivered a $250,000
check to LFS per Houser’s instructions. (Id. at ¶ 16). Despite this delivery, Houser did not give
Berger any stock, membership units, promissory notes, receipts, or other documentation of
Berger’s $250,000 investment. (Id. at ¶¶ 18-19). However, Houser himself made a similar
$100,000 investment in LFS. (Id. at ¶ 27).
Berger further pleads that at the time the investment was made, Houser failed to disclose
that he was a creditor of LFS. (Id. at ¶¶ 21, 25). Houser was allegedly a partial owner of a
construction company, 47 Construction, LLC, which had a multi-million dollar construction
agreement with LFS to improve LFS’s film studio. (Id. at ¶¶ 22-23). Because of this relationship,
at the time Houser recommended Berger invest in LFS, LFS allegedly owed 47 Construction,
LLC, hundreds of thousands of dollars. (Id. at ¶¶ 23-24).

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Berger further contends that because the funds were not secured or monitored by Houser,
and were delivered to LFS without any protections, that the funds were wasted and lost by LFS
and/or others. (Id. at ¶¶ 26,30). Berger also alleges that Houser, in connection with the purchase
and sale of securities, utilized schemes and artifices to defraud and deceive Berger. (Id. at ¶¶ 3536).

II. Law and Analysis
A. Rule 12(b)(6) and Rule 9(b) Standard
Under Fed.R.Civ.P. 12(b)(6), a court may not dismiss a claim unless it appears certain
that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to
relief. In re Supreme Beef Processors, Inc., 468 F.3d 248, 251 (5th Cir. 2006). The complaint
must be liberally construed in the light most favorable to the plaintiff, accepting as true the wellpleaded material allegations and any reasonable inferences that can be made therefrom. See
Kaiser Aluminum & Chem. Sales v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.
1982).
As some of Berger’s claims are based on allegations of fraud, the complaint must also
satisfy the strict pleading requirements for fraud set forth in Fed.R.Civ.P. 9(b): “In all averments
of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with
particularity. Malice, intent, knowledge, and other conditions of mind of a person may be
averred generally.” See Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067–68 (5th
Cir.1994).
As stated above, for claims that are based upon allegations of fraud, the heightened
pleading requirement of Rule 9(b) applies. Indiana Elec. Workers’ Pension Trust Fund IBEW,
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537 F.3d at 533. Based on the Complaint, Berger’s claims that are not based on the Securities
Exchange Act of 1934 still sound in fraud. For example, “Houser, directly or indirectly, in
connection with the purchase and sale of securities . . . employed devices, schemes and artifices
to defraud . . . [and] engaged in acts, practices and courses of business which operate as fraud
and deceit upon Berger.” (Rec. Doc. 81 at ¶ 35). The Complaint continues that “[a]s a part of and
in furtherance of his fraud and deceit, Houser[,] directly and indirectly, breached a fiduciary duty
to Berger by his misrepresentations, failure [sic] to secure Berger’s ‘investment’, [sic] and
[brought about] his own unjust enrichment.” (Id. at ¶ 36).
In an effort to curb potential abuse of federal securities law by private plaintiffs,
Congress enacted the Private Securities Litigation Reform Act of 1995 (PSLRA). Nathenson v.
Zonagen, Inc., 267 F.3d 400, 406 (5th Cir. 2001). The PSLRA enhanced the Rule 9(b) threshold
in regards to the particularity requirement for allegations pertaining to misleading statements and
omissions: “[T]he complaint shall specify each statement alleged to have been misleading, the
reason or reasons why the statement is misleading, and, if an allegation regarding the statement
or omission is made on information and belief, the complaint shall state with particularity all
facts on which that belief is formed.” 15 U.S.C. § 78u–4(b)(1). The PSLRA also states that for
the required state of mind, “the complaint shall . . . state with particularity facts giving rise to a
strong inference that the defendant acted with the required state of mind.” § 78u-4(b)(2). As the
Supreme Court has explained, an “inference of scienter must be more than merely plausible or
reasonable–it must cogent and a least as compelling as any opposing inference of nonfraudulent
intent.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314 (2007). Particularity is
required so that the complaint provides defendants with fair notice of the plaintiffs' claims,

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protects defendants from harm to their reputation and goodwill, reduces the number of strike
suits, and prevents plaintiffs from filing baseless claims and then attempting to discover
unknown wrongs. Tuchman, 14 F.3d at 1067.
Dismissals for failure to plead fraud with particularity under either Rule 9(b) or the
PSLRA are treated as dismissals for failure to state a claim under Rule 12(b)(6). Lovelace v.
Software Spectrum Inc, 78 F.3d 1015, 1017 (5th Cir. 1996).
The Defendants aver generally that the Complaint “clearly fails to meet the heightened
standard required by Rule 9(b) and the PSLRA.” (Rec. Doc 127-1 at 5). This Court disagrees and
finds that Berger has pled with sufficient particularity given the heightened standard of Rule 9(b)
and the PSLRA as to all of his claims.

1. Cause of Action Under Section 10(b) and Rule 10b-5 of the Securities Exchange Act
As a threshold matter, this Court first considers if Berger’s Complaint should survive a
motion to dismiss where Berger has pled violations of the Securities Exchange Act of 1934 but
whether or not a security is involved is unknown. Berger’s Complaint pleads that the exact
nature of the investment at issue is unknown because of Houser’s vague remarks regarding the
$250,000 investment and because no documentation whatsoever was obtained or provided for
the investment. (Rec. Doc. 81 at ¶¶ 13, 18-19). Indeed, all Houser allegedly represented to
Berger was that the investment was “backed” by Louisiana state tax credits and that Berger
would earn two to three percent on his $250,000 investment per month with the principal paid
back in three to six months (Id. at ¶¶ 12-13).
With these considerations in mind, this Court need not determine whether a certain

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investment is a security based on what a plaintiff has stated in a complaint at this stage. If Berger
wishes to couch his Complaint in claims of securities fraud, the Complaint will be put to the
appropriate tests and standards of a securities fraud claim. This Court is satisfied that the
Complaint is well focused and withstands the frequent concern of frivolousness in securities
fraud cases. Specifically, Berger alleges that Houser acted as Berger’s financial advisor for some
years, managed an investment account for Berger at SAI, and Houser would recommend various
investments to Berger in an advisement capacity. (Id. at ¶¶ 6-10). This is coupled with the
Complaint’s allegation that $250,000 of Berger’s money went missing from an investment
recommended by Houser. (Id. at ¶¶ 16, 26).
Next, this Court permits Berger’s Complaint to proceed on the Securities Exchange Act
of 1934 claim given the malleable definition of what constitutes a “security.” The U.S. Supreme
Court, in Reves v. Ernst & Young, explained that “Congress' purpose in enacting the securities
laws was to regulate investments, in whatever form they are made and by whatever name they
are called.” 494 U.S. 56, 61 (1990). To this end, Congress enacted a broad definition of
“security,” sufficient “to encompass virtually any instrument that might be sold as an
investment.” Id. The Securities Exchanged Act of 1934 defines “security” to include
any note, stock, treasury stock, security future, bond, debenture, certificate of
interest or participation in any profit-sharing agreement or . . . transferable share,
investment contract . . . or in general, any instrument commonly known as a
“security”; or any certificate of interest or participation in, temporary or interim
certificate for, receipt for, or warrant or right to subscribe to or purchase, any of
the foregoing; but shall not include currency or any note, draft, bill of exchange,
or banker's acceptance which has a maturity at the time of issuance of not
exceeding nine months, exclusive of days of grace, or any renewal thereof the
maturity of which is likewise limited.

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15 U.S.C. § 78c(a)(10). Considering the breadth of items included in the definition of a
“security,” Berger should not be blocked from pleading under the Securities Exchange Act. This
is particularly true where someone acting in an advisement capacity could thereby shield
themselves from violations of the Securities Exchange Act by providing vague representations or
as little documentation as possible regarding the transaction at issue.
This Court also finds that Berger has pled with a sufficient level of particularity with
respect to the $250,000 investment to allow the Defendants to adequately respond to Berger’s
claims. It is clear from the Complaint that the investment at issue concerns representations
Houser made to Berger in late 2008 pertaining to a $250,000 investment in LFS that related to
Louisiana state tax credits, for which Berger delivered a check to Houser in the amount of
$250,000 on January 1, 2009.
Turning to a cause of action under the Securities Exchange Act, Section 10(b) prohibits
any person, directly or indirectly, by the use of any means or instrumentality of
interstate commerce or of the mails, or of any facility of any national securities
exchange . . . [t]o use or employ, in connection with the purchase or sale of any
security . . . any manipulative or deceptive device or contrivance in contravention
of such rules and regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
15 U.S.C. § 78j. The Security Exchange Commission, pursuant to this section, promulgated Rule
10b–5, which makes it unlawful
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material
fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person, in connection with the purchase or
sale of any security.

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17 C.F.R. § 240.10b–5. In an ordinary § 10(b) private action a plaintiff must prove (1) a
material misrepresentation or omission by the defendant; (2) scienter; (3) a connection
between the misrepresentation or omission and the purchase or sale of a security; (4)
reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss
causation. Affco Investments 2001, L.L.C. v. Proskauer Rose, L.L.P., 625 F.3d 185, 192
(5th Cir. 2010) (citing Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148,
157 (2008)).
To establish proper causation under Section 10(b) of the Securities Exchange Act of
1934, a plaintiff must allege both transaction causation and loss causation. Dura Pharm., Inc. v.
Broudo, 544 U.S. 336, 341-42 (2005). Transaction causation is the reliance element in the
transaction to purchase the security. Id. Loss causation is the “casual connection between the
material misrepresentation and the loss . . . .” Id.; see 15 U.S.C. § 78u-4(b)(4) (stating that the
plaintiff has “the burden of proving” that the defendant’s act or omission “caused the loss for
which plaintiff seeks to recover damages.”).
In their Memorandum in Support of Motion to Dismiss, Defendants assert that Berger’s
claims are not pled with the heightened specificity required by Fed.R.Civ.P. 9(b) pertaining to
securities fraud suits. (Rec. Doc. 127-1 at 4-5). Defendants argue that Berger failed to
sufficiently plead under Rule 9(b) or the PSLRA that Houser acted with the requisite scienter.
(Id. at 7-8). Defendants also contend that Berger failed to adequately plead loss causation, i.e.,
how any purported misrepresentation or omission by Houser actually caused Berger’s loss. (Id.
at 6). Berger contends in his Memorandum in Opposition to Motion to Dismiss that the
Complaint is “very detailed” in these matters. (Rec. Doc. 131 at 6).

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Here, Berger has sufficiently pled the time, place, and contents of the false
representations and who made those representations. As noted above, Berger has pled with
sufficient particularity to allow the Defendants to adequately respond to Berger’s claims.
Berger’s Complaint also properly pleads scienter. The Fifth Circuit defines scienter as an
“intent to deceive, manipulate, or defraud or that severe recklessness in which the danger of
misleading buyers or sellers is either known to the defendant or is so obvious that the defendant
must have been aware of it.” R2 Invs. LDC v. Phillips, 401 F.3d 638, 643 (5th Cir. 2005)
(citation and quotations omitted). Here, Berger alleges that at the time the investment was made,
Houser failed to disclose that he was a creditor of LFS; that Houser was allegedly a partial owner
of a construction company, 47 Construction, LLC, which had a multi-million dollar construction
agreement with LFS to improve LFS’s film studio; and, because of this relationship, at the time
Houser recommended Berger invest in LFS, LFS allegedly owed 47 Construction, LLC,
hundreds of thousands of dollars. In addition, once Berger had a $250,000 check delivered to
Houser, House obtained no documentation for the investment whatsoever. In line with R2
Investments LDC v. Phillips, this Court finds that Houser’s behavior amounts to “severe
recklessness in which the danger of misleading buyers . . . is either known to the defendant or is
so obvious that the defendant must have been aware of it.” Id. In accordance with Tellabs, this is
a plausible, reasonable inference, at least as compelling as opposing inferences of nonfraudulent
intent, such as, for example, the investment simply failed or Houser himself was misled by LFS.
Looking at the Complaint in light most favorable to the plaintiff, with the heightened
requirement of Rule 9(b) and the PSLRA in mind, this Court finds that Berger has sufficiently
pled that Houser acted with the requisite scienter under the Securities Exchange Act of 1934.

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Next, Berger has sufficiently pled transaction causation. The Complaint asserts that
Berger relied on Houser’s representations or omissions to invest in LFS and would not have
done so had Berger known the truth. See (Rec. Doc. 81 at ¶¶ 12-16). Indeed, the Defendants
concede in their Reply in Support of Motion to Dismiss that Berger “lists allegations which (if
taken as true) establish, at best, transaction causation.” (Rec. Doc. 134-2 at 3).
Lastly, Berger has also sufficiently pled loss causation. Berger asserts that his “funds
were not secured by Houser and were delivered to LFS without any protections which resulted in
the funds being wasted, converted and dissipated by LFS and/or others.” (Rec. Doc. 81 at ¶ 26).
The Complaint continues that “Houser failed to advise and counsel Berger [and that] Houser
failed to keep abreast of an monitor the “investment” in Berger’s portfolio.” (Id. at ¶ 30). Berger
further pleads that “Houser . . . failed to conduct an appropriate investigation or perform
appropriate ‘due diligence’ of LFS or LFS tax credits, sales [sic] resulting in damages to
Berger.” (Id. at ¶ 40). Moreover, Berger contends, “[d]espite repeated demands for information
and evidence of his ‘investment[,]’ Houser continued to represent to [Berger] that the
‘investment’ was ‘good.’” (Id. at ¶ 20). Furthermore, the Complaint states “Houser guaranteed
Berger that he would reimburse him in the event the investment because worthless.’ (Id. at ¶ 27).
This Court finds that Berger’s allegation that Houser’s failure to disclose that 47
Construction, LLC, was in fact a creditor of LFS; that the investment was supposedly backed by
Louisiana state tax credits; Houser’s statements about the investment’s potential performance at
two or three percent per month; that Houser would reimburse Berger if the investment became
worthless; and that Houser did not protect the investment all caused Berger’s $250,000 to be lost
or wasted are sufficient to show loss causation. Thus, Houser’s repeated statements that Berger’s

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investment was “good” and that Houser would repay Berger in the event the investment became
worthless misled–that is, caused–Berger to think that Houser would monitor, protect, and not
waste Berger’s $250,000 investment.

2. Claims Under the Louisiana Unfair Trade and Practices and Consumer Protection Law
The LUTPA, La. R.S. § 51:1401, et seq. excludes actions against “any licensee of the
Office of Financial Institutions, its subsidiaries, and affiliates or actions or transactions subject to
the jurisdiction of the Louisiana Public Service Commission or other public utility regulatory
body, the commissioner of financial institutions, the insurance commissioner, the financial
institutions and insurance regulators of other states.” La. R.S. § 51:1406(1).
Defendants argue that because Berger makes a claim under Section 10(b) of the
Securities and Exchange Act of 1943, Berger’s LUTPA claim cannot stand because LUTPA is
explicitly inapplicable to SAI and Houser, who are both licensees of the Louisiana Office of
Financial Institutions. (Rec. Doc. 127-1 at 3-4, n. 4). Further, Defendants assert that LUTPA
does not apply to securities transactions generally, which they base on the Fifth Circuit’s
reasoning in Stephenson v. Paine Webber Jackson & Curtis, Inc., 839 F.2d 1095 (5th Cir. 1988)
that if LUTPA did apply to securities transactions, this would be an improper functional overlap
with the state’s Blue Sky Law. (Id. at 3-4). In opposition, Berger contends that because it is not
clear whether the investment was indeed a security, it is too soon to dismiss the LUTPA claim on
this ground. (Rec. Doc. 131 at 5).
There is no evidence in the pleadings that Houser or SAI are licensees of the Louisiana
Office of Financial Institutions. Berger’s Complaint alleges that Houser “is a licensed securities

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broker/financial advisor” (Rec. Doc. 81 at ¶ 4), and that “Houser was a Registered
Representative of and/or agent and/or employee of Securities America acting within the course
and scope of his duties” (Id. at ¶ 34). Further, it is uncertain from the pleadings if the investment
at issue did or did not involve a securities transaction. To this end, Berger concedes in his
Opposition to Motion to Dismiss that if the investment at issue is indeed a security, then the
LUTPA may not be applicable. (Rec. Doc. 131 at 6). Berger is allowed to plead in the
alternative.
Taking Berger’s Complaint allegations as true, Berger should be allowed to proceed with
his claim under LUTPA.

3. Breach of Contract Claim
To state a claim for breach of contract, “the plaintiff must generally prove that the parties
consented to be bound through offer and acceptance . . . that the obligor failed to perform a
conventional obligation . . . and that the obligee incurred damages . . . .” Hendrickson v. Meeks
Disposal Co., No. 08-2744, 2008 WL 4657268, at *3 (E.D. La. Oct. 20, 2008) (citations
omitted). The contract need not be in writing. Water Craft Mgmt., L.L.C. v. Mercury Marine, 361
F.Supp. 2d 518, 549 (M.D. La. 2004).
This Court finds that all the elements for a breach of contract claim have been sufficiently
pled. Houser offered Berger an investment with a two to three percent return and any
commission that Houser himself would make off the deal. Berger accepted the offer by having a
$250,000 check delivered to Houser made out to LFS. The Complaint further alleges that Houser
failed to obtain any return or pay Berger any commission after Berger had his check delivered to

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Houser. Lastly, the Complaint alleges that the $250,000 was wasted and/or dissipated by LFS or
others, which Berger sustained damages thereby. Berger has sufficiently pled a breach of
contract claim and these allegations are particular enough to satisfy the heightened requirements
of Rule 9(b) and the PSLRA.

4. Breach of Professional and Fiduciary Duties Claim; Respondeat Superior Against SAI
A fiduciary is defined as a “partner, agent, officer of a corporation, public or private,
public officer, or any other persons acting in a fiduciary capacity for any person, trust or estate.”
La. Rev. Stat. Ann. § 9:3801(2). The Louisiana Supreme Court has explained that
The dominant characteristic of a fiduciary relationship is the confidence reposed
by one in the other and [a person] occupying such a relationship can not further
his own interests and enjoy the fruits of an advantage taken of such a relationship.
He must make a full disclosure of all material facts surrounding the transaction
that might affect the decision of his principals.
Plaquemines Parish Comm’n Council v. Delta Dev. Co., 502 So. 2d 1034, 1040 (La. 1987)
(citation omitted). Closer to the matter before this Court, “[t]he defining characteristic of a
fiduciary relationship . . . is the special relationship of confidence or trust imposed by one in
another who undertakes to act primarily for the benefit of the principal in a particular endeavor.”
Scheffler v. Adams and Reese, LLP, 950 So. 2d 641, 648 (La. 2007).
The Complaint alleges that Houser is a licensed securities broker and financial advisor
working as an agent of SAI and that for some years Houser managed Berger’s SAI investment
account. The advisement role Houser occupied for Berger falls within a “special relationship of
confidence or trust” as described in Scheffler. Further, in recommending investments, Houser
was supposed to be acting for the primary benefit of the principal, Berger, in making a return on

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those investments. As such, the Complaint properly alleges a cause of action for breach of
professional and fiduciary duties. Indeed, there is little additional information Berger could have
pled with respect to this claim and, as such, the Complaint also stands under the heightened
pleading requirements of Rule 9(b) and the PSLRA.
Accordingly, this court also finds that Berger has sufficiently pled a claim for respondeat
superior against SAI. For respondeat superior to exist there must be “an employer/employee
relationship; . . . a negligent tort or tortious act on the part of an employee; [and] the act
complained of must be committed in the course and scope of employment.” Price v. Williams,
No. Civ.A. 98-3826, 2000 WL 1168772, at *2 (E.D. La. Aug. 10, 2000); see La. C.C. art. 2320.
The Complaint alleges that Houser managed Berger’s investment account at SAI and that SAI
approved of Houser’s selling investments in SAI with an accompanying commission. At this
stage of the litigation, these allegations make out a sufficient claim for respondeat superior.

5. Unfair and Bad Faith Dealings Claim
To prove a claim of bad faith breach of contract under Louisiana Civil Code article 1997,
a party must demonstrate that the defendants “intentionally and maliciously fail[ed] to perform
[their] obligation[s].” La. C.C. art. 1997 cmt. b. The Louisiana courts have generally
distinguished bad faith as being “more than mere bad judgment or negligence, it implies the
conscious doing of a wrong for dishonest or morally questionable motives.” MKR Services,
L.L.C. v. Dean Hart Const., L.L.C., 16 So. 3d 562, 566 (La. Ct. App. 2009).
Here, this Court finds that Berger has sufficiently pled under the heightened 9(b) standard
and PSLRA for unfair and bad faith dealings such that Houser allegedly recommended Berger

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invest $250,000 in LFS without obtaining any documentation whatsoever when LFS was
significantly indebted to a company that Houser co-owned.

6. Detrimental Reliance and Unjust Enrichment Claims
Detrimental reliance is such that a “party may be obligated by a promise when he knew
or should have known that the promise would induce the other party to rely on it to his detriment
and the other party was reasonable in so relying.” La. C.C. art. 1967. Notably, a written contract
is not required for a detrimental reliance claim and the claim can be brought against oral
promises. See Dugas v. Guillory, 719 So. 2d 719. 724-25 (La. Ct. App. 1998).
Here, the Complaint alleges that Houser promised that Berger’s $250,000 investment
would perform at two to three percent per month with principal repaid in three to six months. It
is also alleges that Houser was making commission on the sale of the investment and that Houser
would pay Berger the commission he earned on selling the investment. After these promises,
Berger had a check made out to LFS delivered to Houser in the amount of $250,000. Moreover,
after Berger’s investment had already been made, Houser guaranteed that he would repay Berger
in the event Berger’s investment became worthless. Houser at least should have known that such
promises and guarantees would induce Berger to rely on them. Further, it was reasonable for
Berger to rely on Houser’s statements because Houser had acted as Berger’s financial advisor in
the past. Lastly, any commission received by Houser on Berger’s investment would be unjust
enrichment to Houser.
Based on these allegations in the Complaint, this Court finds that Berger has made out a
proper claim for detrimental reliance and unjust enrichment under the heightened pleading

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standard of Rule 9(b) and the PSLRA.

III. Conclusion
It is ORDERED that Defendants’ Motion to Dismiss is DENIED.

New Orleans, this 15th day of February, 2012.

_____________________________
District Judge Helen G. Berrigan

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