William A. Curry v. TD Ameritrade, Inc.
662 F. App'x 769
| 11th Cir. | 2016Background
- Plaintiffs invested in private, nonpublic securities sold by Angelo A. Alleca, which were later revealed to be a Ponzi scheme; Alleca pled guilty to securities fraud.
- Plaintiffs used TD Ameritrade (TDA) as the custodian/clearing platform to execute and hold their purchases; Schwab had previously hosted some transactions.
- Plaintiffs allege TDA: executed transactions on its platform, custodied the securities, reported valuations on account statements (using Alleca-provided values), and listed the securities as approved on its platform after document reviews.
- Plaintiffs claim they relied on TDA’s market position and marketing to trust the investments, and allege TDA materially aided/participated in, and controlled, Alleca’s fraud.
- The district court dismissed the amended complaint for failure to plead facts showing TDA materially participated or exercised control; the plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Control-person liability under § 20(a) / Georgia analogs | TDA’s platform role and involvement in transactions and marketing meant it controlled Alleca or could influence policies causing the fraud | TDA did not direct Alleca’s general business or specific policies; allegations show only ordinary custodial/clearing functions | Affirmed dismissal — plaintiffs failed to allege facts showing the level of control required for liability |
| Secondary liability under Georgia securities law (material aid/participation) | TDA’s custodial acts, valuation reporting, platform approvals, and marketing materially aided Alleca and created a market for the securities | TDA’s activities were routine contractual custodial/clearing functions; Uniform Act commentary says such functions alone are not "material aid" | Affirmed dismissal — custodial/clearing duties without more are not material aid; plaintiffs pleaded no additional conduct making TDA’s role culpable |
| Reliance on out-of-state decisions to define "material" | Plaintiff cites Oregon/Kansas cases holding professional judgment can make assistance "material" | TDA argues those cases are distinguishable; Georgia law and Uniform Act commentary do not impose an affirmative investigatory duty on custodians | Court found those authorities distinguishable and relied on Uniform Act commentary to reject expansive reading |
| Marketing / promotional conduct as basis for liability | Plaintiff contends TDA’s marketing that featured Alleca amounted to facilitating or validating the offerings | TDA says marketing aimed to solicit RIA clients, did not cause plaintiffs to invest, and did not relate to the sales process | Court held marketing allegations irrelevant to material aid for the specific fraudulent sales; dismissal affirmed |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual matter must plausibly state a claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard; no mere labels and conclusions)
- Mizzaro v. Home Depot, Inc., 544 F.3d 1230 (11th Cir. 2008) (elements of §20(a) control-person liability)
- Brown v. Enstar Grp., Inc., 84 F.3d 393 (11th Cir. 1996) (control liability requires directing specific policy causing fraud)
- Kizzire v. Baptist Health Sys., Inc., 441 F.3d 1306 (11th Cir. 2006) (de novo review of Rule 12(b)(6) dismissal)
- Klein v. Oppenheimer & Co., 130 P.3d 569 (Kan. 2006) (clearing broker services held material where professional judgment was exercised)
- Prince v. Brydon, 764 P.2d 1370 (Or. 1988) (lawyer’s drafting and judgment in PPM made assistance material)