57 F. Supp. 3d 508
E.D.N.C.2014Background
- Patricia Webster and the William L. Thorp Revocable Trust sue Ameritas entities (AIC, UNIFI, AHC, ALIC) and Stewart King in federal court.
- Plaintiffs’ amended complaint asserts securities-fraud, NCIAA, and related tort claims arising from Webster’s October 15, 2008 purchase of four ALIC variable annuities through King.
- Court previously dismissed several claims and now grants summary judgment for defendants on remaining claims, and strikes plaintiffs’ errata.
- Key factual backdrop includes pre-purchase disclosures, GLWB rider details, and Webster’s reliance on King’s representations about a 5% guaranteed yield and rider terms.
- Huband (CPA) and Wilson (attorney) advised Webster; their knowledge is imputed to Webster; Webster retained control of accounts though King authored forms.
- UNIFI and AHC are dismissed as defendants; the court finds no evidence they exercised control or were mere instrumentalities in the questioned transactions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether UNIFI/AHC can be liable for King’s actions | UNIFI/AHC exercised control or were instruments of King’s conduct. | Parent entities lacked control; standard veil-piercing requires extraordinary showing. | Grant summary judgment; UNIFI/AHC dismissed. |
| Whether plaintiffs’ securities-fraud claims under Rule 10b-5 and NCIAA survive | King made misrepresentations about a guaranteed return and GLWB; reliance justified. | Misrepresentations not material; lack of scienter and reasonable reliance; pre-purchase docs undermine claims. | Claims 1 and 2 granted summary judgment for defendants. |
| Whether NCIAA claims 78C-8(a)/(b) survive | King’s conduct violated NCIAA by advising and misrepresenting to Webster. | No ‘investment adviser’ status; no direct advisory relationship for the claimed acts; misrepresentations not within scope. | Claim under NCIAA fails; 78C-8(b) also fails as misstatements not actionable. |
| Whether IAA claim under 15 U.S.C. § 80b-6 survives | King acted as an investment adviser; compensation was for advice. | Broker-dealer exemption applies; no special compensation for advice; advice incidental to brokerage; not an adviser. | Summary judgment for defendants; IAA claim fails. |
| Whether negligence and respondeat superior claims survive | Defendants negligently advised and monitored after purchase; King’s actions proximate to injury. | No duty breach; plaintiff had control; post-purchase conduct not causally linked to damages. | Negligence and respondeat superior claims granted summary judgment for defendants. |
Key Cases Cited
- United States v. Bestfoods, 524 U.S. 51 (U.S. 1998) (piercing corporate veil requires extraordinary circumstances)
- Janus Cap. Grp., Inc. v. First Derivative Traders, 131 S. Ct. 2296 (U.S. 2011) (corporate form not pierced absent control/identifiable 합)
- Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527 (4th Cir. 2013) (corporate liability requires extraordinary circumstances)
- Foremost Guar. Corp. v. Meritor Sav. Bank, 910 F.2d 118 (4th Cir. 1990) (Foremost factors for reasonable reliance in fraud cases)
- Teague v. Bakker, 35 F.3d 978 (4th Cir. 1994) (interpretation of North Carolina-analogous federal securities-law issues)
- Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309 (U.S. 2011) (materiality and circumstances of disclosure; reliance under 10b-5)
- Gasner v. Bd. of Supervisors, 103 F.3d 351 (4th Cir. 1996) (contextual materiality in misrepresentations)
- Stoneridge Investment Partners, LLC v. Scientific-Atlanta, 552 U.S. 148 (U.S. 2008) (reliance and fraud-on-the-market implications distinguished)
- Poth v. Russey, 99 Fed.Appx. 446 (4th Cir. 2004) (Foremost factors applied to determine reasonableness of reliance)