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Stephen Foos v. Wells Fargo Bank

December 16, 2010


The opinion of the court was delivered by: Craig M. Kellison United States Magistrate Judge


Plaintiff, proceeding pro se, states he brings this action under the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as the Rules of the Security and Exchange Commission, and the National Stock Exchange, Inc. Pending before the court is defendant's motion to dismiss (Doc. 7). A hearing on the motion was held on November 18, 2010, before the undersigned in Redding, California. Defense counsel Jonathan Fink appeared telephonically; Plaintiff appeared in person.

I. Background

This is a pro se civil case involving plaintiff's mortgage. While plaintiff refers to the subject matter in the complaint as securities, he clarified at the hearing that he was in fact challenging his home mortgage. While no related case order has been requested or issued, the court notes that plaintiff filed a separate action also challenging his home mortgage, Foos v. Wells Fargo, 10cv2201-FCD-CMK.*fn1

Plaintiff alleges the defendant had control over his brokerage account, had a fiduciary duty and standard of care to plaintiff at all times, and had the duty "to operate Plaintiff's brokerage account in a fashion that would not cause an excessive trading or selling or purchasing securities without regard to Plaintiff's situation and instructions." He further alleges the defendant had the duty to only recommend to plaintiff those actions which they had reasonable grounds for believing were suitable for plaintiff and his financial situation and needs.

Plaintiff's complaint states that he obtained a line of credit from the defendant on January 29, 2007. It states that his claims include securities fraud under 15 U.S.C. § 77q, securities fraud under Securities Exchange Act of 1934 §§ 10(b), and 12(a), and civil conspiracy under 18 U.S.C. § 374. The line of credit, for which he alleges he was sold shares of stock, he clarified is his home mortgage. He alleges multiple separate transactions in violation of the express conditions given at the time the account was opened. While somewhat unclear, it appears Plaintiff is referring to the sale/transfer of his mortgage, which he refers to as a security.

Under 15 U.S.C. § 77q, he alleges defendant sold his securities and charged him a brokerage commission. He also appears to be claiming that it was sold to an unidentified insider. His claim under the Securities Exchange Act § 10(b) is that due to defendant's deception, he has been deprived of the specific securities he wished to retain. Under § 12(a), he claims he did not consent to the purchase of the securities, which has declined in price since the purchase by defendants. Plaintiff then claims civil conspiracy under 18 U.S.C. § 371 based on factual misrepresentation by defendant.

II. Motion to Dismiss

A. Motion

Defendant brings this motion to dismiss the complaint on the grounds that it fails to state a claim and the case is barred by the statute of limitations. Specifically, defendant argues there is no private right of action under 15 U.S.C. § 77q or 18 U.S.C. § 371. Plaintiff fails to identify any specific use of interstate commerce under § 77q. His complaint also lacks specificity as to who made the agreement for sale of the security, and the identity of the alleged "insider." However, that is immaterial as there is no private right of action to enforce § 77q. Similarly, Plaintiff's claim under 18 U.S.C. § 371 lacks specificity as to who was involved in the alleged conspiracy with defendant, but also fails as private citizens do not have standing to bring a claim under this criminal statute.

Defendant also argues plaintiff's claims under the Securities Exchange Act of 1934, §§ 10(b), 12(a) are deficient and barred by the statute of limitations. First, the complaint fails to meet the pleading requirements of Rule 9(b) in order to state a claim under § 10(b). In addition, the statute of limitations for claims arising from § 10(b) is two years from the date when the Plaintiff discovered or should have discovered the facts constituting the violation, or five years from the date of violation. Here, the clock should have started as of the date of the contract, January 29, 2007. There is nothing in the complaint which leads to a different start date. Therefore, such claim is time barred having not been brought until after three years had past. Similarly, it does not appear that a claim under § 12(a) can be brought by a private citizen. Rather, enforcement seems to be vested in the FDIC pursuant to 15 U.S.C. § 78l(i). Regardless, it is unclear from Plaintiff's allegation that there was any transaction to any unregistered security by anyone.

Defendant has also requested the court take judicial notice of two documents:

1. The complaint filed in the second case, 10cv2201; and

2. The Deed of Trust, recorded February 9, 2007 in the Shasta County Recorder's office.*fn2

In opposition, plaintiff states that he "is a victim of a predatory lending and securitization scheme whereby he was fraudulently induced to enter into an agreement that has led to this pending foreclosure of his home - by unrelated third parties to the loan transaction at bar, using California's non-judicial foreclosure scheme to convert the home." He states the loan is a non disclosed securitization transaction and that various federal and state violations have occurred at or since the closing. In addition, he alleges he has sent several qualified written requests (QWRs) which have gone unanswered. He requests the motion be denied or that he be given leave to amend his complaint and consolidate these proceedings with his other pending action. Plaintiff also claims he "has pled more than sufficient facts to allege the nature and extent of the wrongful conduct committed by Defendants in his complaint."

Plaintiff opposes defendant's request for judicial notice, stating the court can only take judicial notice of the existence of those matters of public record but not the truth of the facts within the documents. Nor may a court take judicial notice of one party's opinion of how a matter of public record should be interpreted. To the extent that defendant has asked the court to accept their interpretation of the documents and ...

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