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Dyck v. Blake

United States District Court, D. Arizona

May 16, 2014

Stanley Dyck, Plaintiff,
Michael J. Blake, et al., Defendants.


DAVID G. CAMPBELL, District Judge.

Defendant Ameritas Investment Corp. has filed a motion to dismiss under Rule 12(b)(6). Doc. 24. The motion has been fully briefed. For the reasons set forth below, the motion will be denied.[1]

I. Background.

Plaintiff, who resides in New Mexico, alleges that he opened a personal retirement account and retirement accounts for his employees with Defendant Michael Blake, a securities representative and alleged agent of Defendant Ameritas Investment Corp. ("Ameritas"). Doc. 1. Plaintiff executed a written statement that he was a conservative investor, with minimal tolerance for risk. Id., ¶¶ 21-22. Plaintiff gave Blake discretion over the Ameritas accounts, allowing him to buy and sell without Plaintiff's prior approval, which Blake did. Ameritas sent annual summaries of the account activities to Plaintiff. Id., ¶¶ 20, 23-24. Blake allegedly represented to Plaintiff in writing that all investment advice rendered by Blake was through Defendant. ¶ 26.

Blake eventually moved to Arizona, at which time he informed Plaintiff that he was doing business as "Olympus Financial Advisors, LLC" and "Olympus Financial Advisors Peak, " and began using the email address for communications with Plaintiff. Id. ¶¶ 27-30. Plaintiff alleges that these emails contained a statement that securities were being offered solely through Ameritas. Id. ¶ 32.

In July 2008, Blake contacted Plaintiff by telephone and convinced him to invest $100, 000 in a bridge loan for an office building in the Chicago area, advising Plaintiff that the developers were successful and profitable, the investment was safe, and the loan would generate a 25% annual return. Id. ¶¶ 39-44. Blake instructed Plaintiff to make his $100, 000 check payable to "Longest Drive LLC, " which Plaintiff alleges was wholly owned by Blake and his wife. Id., ¶¶ 34, 44. Plaintiff does not allege that Ameritas was involved in the bridge loan or knew Blake was offering it to Plaintiff, but that "based on the broker-dealer relationship with Ameritas, [Blake] ostensibly represented that this was investment advice being provided by Ameritas and thus this was an Ameritas investment transactions, [sic] the same as plaintiff's other Ameritas investments." Id., ¶ 48.

Plaintiff claims that he was defrauded in connection with the $100, 000 investment. Id., ¶¶ 50-63. Plaintiff asserts that Blake concealed key facts about the transaction, including the property address, that there was no collateral, and that the project was in financial trouble. Id. at 64. Plaintiff has sued Blake for fiduciary misconduct and fraud, and Ameritas for breach of fiduciary duty. Id.

II. Legal Standard.

When analyzing a complaint for failure to state a claim to relief under Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the complaint must plead enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard "is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged B but it has not show[n]' B that the pleader is entitled to relief.'" Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

III. Analysis.

Ameritas argues that Plaintiff has failed to support his allegation that Ameritas had a fiduciary duty to Plaintiff, and, even if such a duty existed, that Ameritas breached the duty. Id. at 9-12.

A. Duty.

Plaintiff asserts that Ameritas had a fiduciary relationship with Plaintiff because the company held $700, 000 of his investment funds. Id., ¶ 67. Plaintiff argues that Ameritas had a duty to oversee the dealings that its agent Blake had with Plaintiff, "including auditing and reviewing incoming and outgoing e-mails regarding all matters, " overseeing Blake's management of customers' investments, and ascertaining whether or not Blake was selling unregistered securities by "monitor[ing] his activities, examin[ing] his emails, incoming and outgoing, sent through the address." Id., ¶¶ 73-75.

Ameritas admits that Blake had a fiduciary duty to his customers under the Investment Advisor's Act ("IAA"), but argues that broker-dealers like Ameritas do not. Doc. 24 at 11. Ameritas argues that it had no discretion or control over Plaintiff's investment accounts or decisions regarding those accounts, and therefore was required to comply only with the federal "suitability standards" promulgated under Conduct Rule 2111 of ...

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