Blanchard et al v. Lee et al

Filing 179

ORDER AND REASONS granting 144 MOTION to Dismiss for Failure to State a Claim filed by E TradeSecurities, LLC; all remaining claims against E TradeSecurities, LLC are DISMISSED WITH PREJUDICE. Signed by Judge Lance M Africk on 10/18/2013.(blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DENNIS BLANCHARD ET AL.

CIVIL ACTION

VERSUS

No. 13-220

SALVADOR LEE ET AL.

SECTION I
ORDER AND REASONS

Before the Court is a motion to dismiss1 filed by defendant, E*TRADE Securities, LLC
(“E*TRADE”). Plaintiffs, Dennis Blanchard et al, have filed an opposition,2 to which E*TRADE
has replied.3 For the following reasons, the motion is GRANTED.
The Court assumes familiarity with the background and analysis initially set forth in its prior
Order and Reasons granting motions to dismiss filed by other defendants.4 E*TRADE previously
filed a motion to dismiss, which the Court granted in part.5 The Court permitted plaintiffs to provide
a more definite statement as to the claims that were not dismissed.6 After they did so, E*TRADE
filed the instant motion.

1

R. Doc. No. 144.
R. Doc. No. 156.
3
R. Doc. No. 163.
4
R. Doc. No. 119.
5
R. Doc. No. 90.
6
R. Doc. No. 120.
2

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LAW AND ANALYSIS
I. Federal Rule of Civil Procedure 12(b)(6)
A district court may dismiss a complaint, or any part of it, for failure to state a claim upon
which relief can be granted if the plaintiff has not set forth a factual allegation in support of his claim
that would entitle him to relief. Fed. R. Civ. Proc. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544
(2007); Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007). As the U.S. Court of Appeals for the
Fifth Circuit explained in Gonzalez v. Kay:
“Factual allegations must be enough to raise a right to relief above
the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555,
127 S.Ct. 1955, 167 L. Ed.2d 929 (2007). The Supreme Court
recently expounded upon the Twombly standard, explaining that “[t]o
survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, ---U.S. ----, 129 S.Ct. 1937,
1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570,
127 S.Ct. 1955, 167 L.Ed.2d 929). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. It follows that “where the well-pleaded facts
do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that
the pleader is entitled to relief.’” Id. at 1950 (quoting Fed. R. Civ. P.
8(a)(2)).
577 F.3d 600, 603 (5th Cir. 2009).
This Court will not look beyond the factual allegations in the pleadings to determine whether
relief should be granted. See Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999); Baker v.
Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In assessing the complaint, a court must accept all wellpleaded facts as true and liberally construe all factual allegations in the light most favorable to the
plaintiff. Spivey, 197 F.3d at 774; Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir.
1997). Further, in Iqbal, the Supreme Court stated that, “a pleading that offers labels and conclusions
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or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint
suffice if it tenders naked assertions devoid of further factual enhancement.” 556 U.S. at 678 (citing
Twombly, 550 U.S. 544, 555 (2007)).
I. Negligence, Negligent Misrepresentation, and Fiduciary Duty Claims
E*TRADE argues that dismissal of plaintiffs’ negligence and negligent misrepresentation
claims is appropriate because (1) plaintiffs have failed to provide a sufficiently definite statement;
(2) E*TRADE owes no duty to plaintiffs pursuant to Louisiana caselaw; and (3) E*TRADE owes
no duty to plaintiffs pursuant to La. Rev. Stat. 6:1124.7 Even assuming plaintiffs’ statement is
sufficiently definite, E*TRADE is entitled to dismissal of these claims.
Plaintiffs do not satisfactorily address E*TRADE’s legal argument that a broker has no duty
to an investor where there is no customer-broker relationship. Plaintiffs rely solely on Beckstrom
v. Parnell, 714 So. 2d 188 (La. Ct. App. 1st Cir. 1998), quoting it for the proposition that “a broker
has a duty to give a full and fair disclosure to a securities investor.”8 They do not quote the next line
of Beckstrom: “However, depending on the customer-broker relationship, the nature of the
transaction, and the sophistication of the customer, the duty can change.” Beckstrom v. Parnell, 730
So. 2d 942, 948 (La. App. 1st Cir. 1998).9 While, as plaintiffs note, Beckstrom states that “the nature
of the fiduciary duty owed will vary, depending on the relationship between the broker and the
investor,” Beckstrom is replete with language reiterating that the “relationship” discussed in that
case existed between a broker and its customer-investor. Plaintiffs have failed to present authority

7

R. Doc. No. 119.
R. Doc. No. 156, at 2.
9
The case to which plaintiffs cite was reheard and a new opinion was released. The Court relies
on the newer opinion, which, in any event, contains the statement quoted by plaintiffs.
8

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for the proposition that Beckstrom extends to cases where there is no alleged customer-broker
relationship between a plaintiff and defendant.
When addressing E*TRADE’s previous motion to dismiss, the Court noted that plaintiffs
seemed to assume that E*TRADE should be treated as a financial institution subject to the
protections of La. Rev. Stat. § 6:1124.10 Nonetheless, the Court refrained from ruling on the issue,
even though plaintiffs did not appear to offer any opposition in their briefing. E*TRADE has once
again raised this argument, and plaintiffs have once again failed to address it.
Accordingly, given that plaintiffs have failed to rebut E*TRADE’s legal arguments by citing
to appropriate legal authority, the motion to dismiss is GRANTED relative to the negligence,
negligent misrepresentation, and fiduciary duty claims.
II. Louisiana Securities Law Claim
The Court previously ordered plaintiffs to provide a more definite statement as to their
Louisiana Securities Law claim, explaining that the Court could simply not discern the claim’s
factual basis.11 In their more definite statement, plaintiffs assert that “E*Trade sold securities to the
Plaintiffs . . . by means of untrue statements of material facts and/or omissions of material facts,
which made their statements misleading in light of circumstances in which they were made.”12 In
a subsequent sentence, plaintiffs suggest that the material fact allegedly omitted was that Richard
and Lori Reynolds were using plaintiffs’ funds in a manner contrary to plaintiffs’ intent.13

10

R. Doc. No. 120, at 4-5.
R. Doc. No. 120, at 10-11.
12
R. Doc. No. 128, at 3-4.
13
R. Doc. No. 128, at 4.
11

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In its motion for dismissal, E*TRADE argues that plaintiffs have failed to allege that
E*TRADE sold them securities.14 In their opposition, plaintiffs concede this point, admitting that
“although Plaintiffs were not sold securities directly from E*Trade, E*Trade actively participated
in the sale of securities . . . . E*Trade was indirectly involved in a course of business that operates
as a deceit upon the Plaintiffs. Thus, the Plaintiffs have properly alleged a plausible cause of action
under [the] Louisiana Blue Sky law.”15
In its motion, E*TRADE additionally notes plaintiffs’ failure to “specify which provision
of the Louisiana Securities Law” they rely on, but “assumes that Plaintiffs would allege a violation
of La. Rev. Stat. Ann 51:712(A)(2) – the only sub-section for which a private right of action
exists.”16 Rather than address defendant’s arguments for dismissal of any § 51:712(A)(2) claim,
however, plaintiffs’ opposition to dismissal relies solely on the assertion that their claim is brought
pursuant to § 51:712(D). Accordingly, defendant’s motion as to the dismissal of any § 51:712(A)(2)
claim is GRANTED without opposition.
Louisiana law does not support the § 51:712(D) claim relied on by plaintiffs in their
opposition. “La. R.S. 51:714, which provides for civil liability arising from the sale of securities,
makes no provision for liability based on a violation of La. R.S. 51:712(D). Rather, civil liability
is based on the fraudulent sale of securities under La. R.S. 51:714(A).” Solow v. Heard McElroy &
Vestal, L.L.P., 7 So. 3d 1269, 1282 (La. Ct. App. 2d Cir. 2009) writ denied, 17 So. 3d 961 (La.
2009). Defendant’s motion is GRANTED as to this claim.

14

R. Doc. No. 144-1, at 16.
R. Doc. No. 156, at 4-5.
16
R. Doc. No. 144-1, at 15.
15

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CONCLUSION
For the foregoing reasons, E*TRADE’s motion is GRANTED and all remaining claims
against E*TRADE are DISMISSED WITH PREJUDICE.

New Orleans, Louisiana, October 18, 2013.
__________________________________
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE

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