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Milliner v. Mutual Securities, Inc.

United States District Court, N.D. California

June 15, 2017

CHARLOTTE B. MILLINER, et al., Plaintiffs,


          THELTON E. HENDERSON United States District Judge

         Presently before the Court are Defendant Mutual Securities, Inc.'s (“MSI”) motion to amend discovery responses (ECF No. 91) and motion for leave to file motion for partial reconsideration of the Court's March 18, 2017 Order (ECF No. 90). Plaintiffs timely opposed both motions. The Court heard oral arguments on MSI's motions on May 8, 2017. During oral arguments, the Court granted Plaintiffs request for an opportunity to respond to MSI's late filing of an exhibit[1] (ECF No. 97) in support of its motion. Plaintiff filed a supplemental brief (ECF No. 105), and MSI replied to the supplemental brief (ECF No. 111). After carefully considering the Parties' written and oral arguments the Court GRANTS both of MSI's motions.

         I. BACKGROUND As the parties are familiar with the factual background of this case, the Court provides only a brief summary of the facts.

         This 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”).[2] 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').” Compl. ¶ 1 (EFC No. 1). Plaintiffs brought the present class action against Defendant Mutual Securities, Inc. (“MSI”) because of MSI's relationship with BEFC. Specifically, BEFC required that clients hire MSI as their broker-dealer. Id. ¶ 9. Plaintiffs allege one reason BEFC required clients to use MSI is because Thomas Bock and Mary Evans, the principal executive officers of BEFC, were registered representatives of MSI. Id. ¶ 9. In other words, Bock and Evans were “dually registered as registered representatives and commissioned brokers of MSI and as investment advisors and principals of BEFC.” ECF No. 32 at 1:27-2:1. Plaintiffs allege BEFC “plac[ed] 100% or nearly 100% of their assets in high risk and highly speculative foreign mining stocks, including over-the counter and penny stocks” resulting in the value of BEFC's portfolios going “from $60 million to $4.17 million in just a few years, a drop of roughly $55.83 million, or 93%.” Compl. ¶¶ 1- 2.

         Through prior orders, the Court established “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, ” ECF No. 38, 4:27-5:3; that MSI had a duty to supervise the outside advisory investment activities of Thomas Bock and Mary Evans pursuant to FINRA rules, ECF No. 52 at 12; and that this duty to supervise includes a duty to determine suitability, ECF No. 87 at 4:8-9.

         Presently before the Court are two motions: (1) MSI's Motion to Amend its Discovery Responses, ECF No. 91, and (2) MSI's Motion for Leave to File Motion for Partial Reconsideration of Court's March 18, 2017 Order, ECF No. 90. In short, MSI argues it should be granted leave to amend its responses to its Requests for Admissions because at the time it made its admissions that it did not determine the suitability of trades conducted in Plaintiffs' accounts, MSI had the understanding that Bock and Evans' actions were not done on MSI's behalf. ECF No. 91 at 1:2-8. MSI argues this understanding was rejected by the Court in its March 18, 2017 order, therefore making its admissions no longer accurate. Id. at 1:18-21. MSI also argues that because these admissions were the sole basis for the Court's determination that MSI failed to determine suitability, MSI's amendment of its responses - should the Court decide to grant them - creates a material difference in law and fact that warrants reconsideration of the issue. See ECF No. 90.


         a. Motion to Withdraw or Amend Responses to Requests for Admission

         Under Federal Rule of Civil Procedure 36(b), the Court may permit withdrawal or amendment of an admission under Rule 36 “if it would promote the presentation of the merits of the action and if the court is not persuaded that it would prejudice the requesting party in maintaining or defending the action on the merits.” This rule allows the Court to exercise to its discretion to grant relief from an admission only when (1) “the presentation of the merits of the action will be subserved, ” and (2) “the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice that party in maintaining the action or defense on the merits.” Conlon v. United States, 474 F.3d at 621 (9th Cir. 2007).

         b. Motion for Reconsideration

         Civil Local Rule 7-9 establishes the entry of a final judgment, “any party may make a motion before a Judge requesting that the Judge grant the party leave to file a motion for reconsideration of any interlocutory order on the ground set forth in Civil L.R. 7-9(b). No party may notice a motion for reconsideration without first obtaining leave of Court to file the motion.” Additionally, Civil L.R. 7-9(b) requires that the party seeking leave to file a motion for reconsideration must show “reasonable diligence in bringing the motion, and one of the following:

(1) That at the time of the motion for leave, a material difference in fact or law exists from that which was presented to the Court before entry of the interlocutory order for which reconsideration is sought. The party also must show that in the exercise of reasonable diligence the party applying for reconsideration did not know such fact or law at the time of the interlocutory order; or
(2) The emergence of new material facts or a change of law occurring after the time of such order; or
(3) A manifest failure by the Court to consider material facts or dispositive legal arguments which were presented to the Court ...

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