MH Prevails in Broker/Dealer Case

MH attorneys Jason Richardson and Kate Easterling obtained post-verdict judgment as a matter of law in favor of securities broker/dealer on claims of fraud involving the sale of variable annuities to early retirees.

After a week-long jury trial and various post-verdict motions, United States District Court Judge Lee Rosenthal granted the broker/dealer’s motion to set aside the verdict based on clear evidence demonstrating that the plaintiffs’ claims were time-barred. All claims were dismissed with prejudice as a result. Judge Rosenthal’s opinion can be found here.

The case was originally brought in FINRA arbitration proceedings, but dismissed as ineligible after the arbitrators determined that the claims were time-barred. At the trial court level, Judge Rosenthal made several favorable ruling establishing precedent that (1) there is no private right of action for violation of FINRA rules; (2) a customer lacks standing as a third party beneficiary to enforce a member firm’s agreement with FINRA; (3) a branch office manager or supervisor cannot be personally liable to customers for actions taken in the course and scope of his employment absent an independent legal duty to the customers; (4) variable annuities are not “securities” under Texas law; (5) absent discretionary trading authority, broker/dealers and associated persons do not owe fiduciary duties to customers; and (6) an investor is on inquiry notice of her claims, as a matter of law, when she receives account statements that contain information that conflicts with misrepresentations made to her at the time of purchase.

The case was styled Cause No. H-14-888; Gallier v. Woodbury Financial Services; In the United States District Court for the Southern District of Texas – Houston Division.