United States District Court, N.D. California
CHARLOTTE B. MILLINER, et al., Plaintiffs,
MUTUAL SECURITIES, INC., Defendant.
ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL
THELTON E. HENDERSON, United States District Judge
April 18, 2016, Plaintiffs filed a Motion for Partial Summary
Judgment Re: Existence of Contractual Duty to Determine
Suitability. Dkt. No. 30 (“Mot.”). Defendant
Mutual Securities Inc. (“MSI”) timely opposed the
motion, and Plaintiffs timely replied in support thereof.
Opp’n to Pls.’ Mot. for Partial Summ. J.
(“Opp’n”) (Dkt. No. 32); Reply in Supp. of
Mot. for Partial Summ. J. (“Reply”) (Dkt. No.
18, 2016, this Court requested clarification from the parties
on the breadth of Plaintiffs’ motion. Order Re: May 23,
2016 Hr’g (“Clarification Order”) (Dkt. No.
34). On the basis of Plaintiffs’ response to the
Clarification Order, the Court vacated oral argument on
Plaintiffs’ motion for partial summary judgment
pursuant to Civil L.R. 7-1(b). Id.; see
also Dkt. No. 36. Having carefully considered the
parties’ written arguments, the Court hereby GRANTS
Plaintiffs’ motion, for the reasons set forth below.
class action is related to another class action separately
filed in this Court: Milliner v. Bock Evans Financial
Counsel, Ltd., No. 15-cv-1763 TEH (the “Bock Evans
Class Action”). The Bock Evans Class Action was brought by
the same Plaintiffs as the present class action, to challenge
the “‘one size fits all’ investment
approach implemented by their investment advisor, Defendant
Bock Evans Financial Counsel, Ltd.
(‘BEFC’).” Mot. at 2. Plaintiffs brought
the present class action against Defendant MSI because of
MSI’s relationship with BEFC; namely, because
“BEFC required that clients hire Defendant MSI as their
custodial and supervising broker-dealer.” Id.
According to Plaintiffs, “[o]ne reason that BEFC
requires clients to use MSI is because [Thomas] Bock and
[Mary] Evans, the principal executive officers of BEFC, are
also licensed with and registered principals of MSI.”
Id. And Plaintiffs now allege that “the value
of the BEFC portfolios under MSI’s supervision have
gone from $60 million to $4.17 million in just a few years, a
drop of roughly $55.83 million, or 93%.” Id.
crux of Plaintiffs’ class action claims against MSI,
and the heart of the present motion, is a “Brokerage
Agreement” that MSI required Plaintiffs to enter into
as clients of BEFC. Plaintiffs explain:
MSI . . . requires that clients enter into a Brokerage
Agreement describing the “features and policies
associated with the account, ” and the “various
services” that MSI “agree[s] to provide.”
Through this Brokerage Agreement, MSI expressly promises
that: “As your broker/dealer, we will: determine the
suitability of any investment recommendations and
Id. Plaintiffs now move for partial summary judgment
regarding whether the quoted language from the Brokerage
Agreement (the “suitability clause”) created a
duty for MSI: “Plaintiffs seek a ruling from this Court
establishing that Defendant MSI owed Plaintiffs a contractual
duty to ‘determine the suitability of any
investment recommendations and advice, ’ in
accordance with the express terms of their Brokerage
Agreement.” Id. at 1 (emphasis in original).
Federal Rule of Civil Procedure (“Rule”) 56,
summary judgment is appropriate “if the movant shows
that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). Rule 56 provides for “partial
summary judgment” where the movant seeks resolution of
only portions of certain claims or defenses. Id.
Material facts are those that “might affect the outcome
of the suit.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A dispute as to a material fact is
genuine “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”
party seeking summary judgment bears the initial burden of
“informing the district court of the basis for its
motion, and identifying those portions of ‘the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
’ which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
reviewing the parties’ briefing, it was unclear to the
Court whether the issue to be decided is as narrow as
suggested by Plaintiffs’ motion. The motion requests a
very narrow ruling: “Plaintiffs seek a ruling from this
Court establishing that Defendant MSI owed Plaintiffs a
contractual duty to ‘determine the suitability of
any investment recommendations and advice, ’ in
accordance with the express terms of their Brokerage
Agreement.” Mot. at 1 (emphasis in original). But MSI
admits the veracity of this narrow statement, as it agrees
that “if MSI or one of its agents were to make
investment recommendations or give investment advice to the
Plaintiffs or the putative class members, then MSI and/or its
agents would have a duty to make suitability determinations
with respect to such recommendations or advice.”
Opp’n at 4-5.
the parties do dispute, however, is whether the contractual
duty created by the suitability clause extends to the
investment advice Plaintiffs received from BEFC. See
Reply at 1 (“MSI wants to exclude from its suitability
duty all recommendations and advice that it received from
MSI’s affiliated investment advisors.”);
id. at 8 (“There is no language that excludes
investment recommendations and advice from Thomas Bock, Mary
Evans, or [BEFC].”); Opp’n at 1
(“Plaintiffs have not alleged, nor can they allege,
that MSI actually made investment recommendations or gave
investment advice relating to the Plaintiffs’ or the
putative class members’ accounts.”); id.
at 2 (“MSI has ...