ORDER
On Nоvember 10, 2011, Patricia B. Webster (“Webster”) and the William L. Thorp Revocable Trust (“Trust”) (collectively, “plaintiffs”) sued Ameritas Investment Corporation (“AIC”), Unifi Mutual Holding Company (“UNIFI”), Ameritas Holding Company (“AHC”), Ameritas Life Insurance Corporation (“ALIC”), and Stewart S. King (“King”) (collectively, “defendants”). See Compl. [D.E. 1] ¶¶ 1-7. On December 9, 2011, plaintiffs filed a verified amended complaint with twelve claims. See Am. Compl. [D.E. 19] ¶¶ 64-157. On September 19, 2012, this court dismissed three claims completely and two claims in part, allowing plaintiffs to proceed with nine claims. See [D.E. 31] 20.
On February 3, 2014, defendants moved for summary judgment on the remaining claims [D.E. 51]. Plaintiffs responded in opposition [D.E. 59], and defendants replied [D.E. 63], As explained below, the court grants defendants’ motion for summary judgment [D.E. 51], grants defendants’ motion to strike plaintiffs’ errata sheet [D.E. 60], and dismisses as moot plaintiffs’ and defendants’ motions to strike expert testimony and defendants’ motion to compel [D.E. 64, 66, 74],
I.
Webster and King met in June 2008. King Dep. [D.E. 59-2, 63-6] 166. King was an independent life insurance and annuities sales agent for AIC, where he started working in 2005. Id. at 90-91; Sherffius Dep. [D.E. 59-11] 83. King had not sold annuities before 2005. King Dep. 91-92. In June 2008, King held the Series 6 and 63 licenses but did not have a Series 7 license. Id. at 18. When Webster and King first met, Webster and the Trust each held investments with a managed account at Fidelity. Webster Dep. [D.E. 51-16, 59-3, 63-1] 29. Webster had lost between $600,000 and $800,000 in 2008 with her Fidelity account and was looking to invest elsewhere. Id. at 22-23. Mutual friends of Webster and King suggested to Webster that she meet with King. Id. at 72.
At their initial meeting, Webster told King about the recent decrease in the balance in her Fidelity account. King Dep. 169. King told Webster that he had a track record of earning annual returns of 10% to 12% for his clients, that he could help her “stop the bleeding,” and that he had products with investment floors to “make sure that there was no lessening of the investment.” Id. at 168-69; see also Webster Dep. 89. King explained one such product as a “variable annuity” with “a guaranteed floor as an option, which would prevent [one’s] amounts to be reduced.” Id. at 169-70. Webster also asserts that King described one particular annuity as having a “guaranteed five percent yield.” Webster Dep. 88.
Sometime after the initial June meeting between King and Webster, Webster called her CPA, Jane Huband, and her tax attorney, Thomas Wilson, to arrange a meeting with all four of them. See Web
On September 8, 2008, Webster emailed King in preparation for this upcoming meeting. Webster referenced King’s “plan for [Webster’s] portfolio, including ... the guaranteed 5% yield.” [D.E. 59^1] PW 614. King’s reply, one day later, did not mention the 5% yield. See id. PW 615.
On September 10, 2008, Webster and King met with Huband and Wilson. See [D.E. 51-1] Ameritas 33-34. According to Huband’s notes from the meeting, Webster was considering using King as “her ‘investment’ person,” but King discussed life insurance and annuities rather than investment products. [D.E. 51-1] Ameritas 33-34. Shortly after the meeting, King sent Huband and Wilson documents explaining the annuities. See [D.E. 51-1] Ameritas 5, 64-161; [D.E. 51-2] Ameritas 193-279; Webster Dep. 179-80; Huband Dep. 101-02. The documents included information on the Guaranteed Lifetime Withdrawal Benefit (“GLWB”), an optional rider on an ALIC variable annuity. See [D.E. 51-1] Ameritas 144-52; [D.E. 51-2] Ameritas 25-61. These documents describe the GLWB rider as an option that creates a shadow account used for determining the annuitant’s lifetime withdrawal benefit. See [D.E. 51-1] Ameritas 144-52. This shadow account assumes a 5% increase in the market value of the investment regardless of the actual change in value, and the annuitant receives the greater of the two values when withdrawal benefits are calculаted. Id. The annuitant must activate and pay for the GLWB rider to receive these benefits and, in September 2008, the rider’s annual cost was 0.60% of the investment value. Id. The documents also con- • tain a notice that the rider does not apply “to the investment performance or account value of the underlying variable portfolios” and that “[v]ariable annuities are suitable for long-term investing and are subject to investment risk, including possible loss of principal.” Id. Ameritas 152.
Defendants claim that Huband and Webster discussed Huband’s analysis of the documents King provided. See Hu-band Dep. 100; [D.E. 51-1] Ameritas 30 (noting the “[guaranteed life income options” as a benefit of the annuity). Webster, however, testified that neither Hu-band nor Wilson ever explained to her how the GLWB rider worked. See Webster Dep. 195.
On September 21, 2008, King provided Webster, Huband, and Wilson with the contact information of two other Ameritas employees who could have explained the annuities to her in full. See [D.E. 51-14] PW 636. The record does not reflect that any of the three ever called.
On October 1, 2008, in anticipation of a second meeting, Webster sent another email to King in which she asked King to explain “if we go with the annuity аlone, why I will be better than with Fidelity (eg. 5% guaranteed, no withdrawal penalty, tax advantages, etc.).” See [D.E. 59-5] Ameri-tas 627. On October 2, 2008, the parties met again. See [D.E. 51-2] Ameritas 280. At the meeting, the parties discussed the annuities, although Webster and defendants present different views of that discussion. Webster testified that King “opened [a] brochure from Ameritas [and] talked about the guaranteed five percent.” Webster Dep. 258. She further testified that “the part I remember is guaranteed five percent yield,” id. at 189, and that the GLWB rider was not discussed at the meeting. Id. at 189-90. Webster also testified that underlining in the GLWB
King, on the other hand, testified that he never told Webster she was guaranteed a 5% return on her investment, and that Webster never told him she understood the annuities to include such a guarantee. King Dep. 198. King also acknowledged, however, that he “probably” explained that the GLWB rider “allowed you to have a five percent growth ... or the market, whichever is ... greater for that year. And if the market reduced below where it entered ... your funds would stay at that level. They wouldn’t follow the market down.” Id. at 132,171.
Webster testified that her two “experts,” Wilson and Huband, gave conflicting advice regarding the annuities: Wilson approved purchasing the annuities, but Hu-band was concerned about the transaction. Webster Dep. 276; Huband Dep. 102. Both Huband and Wilson suggested that Webster consider options other than King’s offered products. Webster Dep. 231.
On October 15, 2008, Webster opened four AIC accounts, three on her behalf and one, acting as trustee, on behalf of the Trust. See [D.E. 51-5] Ameritas 1700-01, 1734-35, 1766-67, 3546-47. Contemporaneously, she purchased four ALIC variable annuities with initial investments of $60,819.50, $313,939.60, $500,000.00, and $688,932.84. See [D.E. 51-8] Ameritas 2845-50; Am. Compl. ¶¶ 29-30. King completed the forms on Webster’s behalf, but Webster reviewed the forms, signed them, and checked a box stating that no one except her would have trading authority. King Dep. 293-95; [D.E. 51-8] Ameri-tas 2848; see Webster Dep. 306-07. The forms stated that Webster had a “high risk” tolerance and that her top two investment objectives were “tax-advantaged”’ and “aggressive growth” and the lowest was “income.” See, e.g., [D.E. 51-5] Am-eritas 1700-01.
Webster and King communicated throughout 2009. In January 2009, Webster learned that her funds were mistakenly put into an aggressive fund, but she also learned that the portfolios had grown by 12%. See [D.E. 51-15] PW 802-03. Webster kept the money in the aggressive funds. See id.; Carter Dep. [D.E.'63-11] 190-91; [D.E. 51-7] Ameritas 2624. On March 9, 2009, Webster emailed King and said, “I’m thinking that I want out now.” See [D.E. 51-14] PW 744. Four days later King responded and said, “I will be transferring into the ameritas money market on
On October 13, 2009, Ameritas sent a letter to Webster informing her that the GLWB rider was and had been inactive on her account since the policy was issued. See [D.E. 51-7] Ameritas 1820. Webster acknowledged receiving documents stating that the GLWB rider was inactive. Webster Dep. 334. Webster also stated that she had received documents with a UNIFI coversheet but did not read them because she “thought [she] had [her] money somewhere safe, and [she] didn’t want to read anything.” Id. at 350.
In March or April 2010, Webster called Ameritas and spoke with Eric Hall, an Ameritas client service representative. See [D.E. 59-13] Ameritas 2667; [D.E. 51-15] PW 801; Fine Dep. [D.E. 59-12] 83. Among other questions, Webster asked if the policy was guaranteed to earn 5% each year. See [D.E. 59-13] Ameritas 2667. Hall did some research and called Webster back and explained that the GLWB rider was on the рolicy but currently inactive. Id. Webster asked further questions about the GLWB rider. Id. Webster claims that she did not know about the GLWB rider until she talked with Ameritas directly in 2010. Webster Dep. 191. Webster also asked Hall for additional information on her policy fees, and Hall called her back the next day to answer. See [D.E. 59-13] Ameritas 2667. Webster told Hall she would speak with her agent and call back if she had further questions. Id.
Between April 27, 2010, and July 27, 2010, Webster and King exchanged numerous emails. See [D.E. 63-4] Ameritas 1637-58. In an email dated May 25, 2010, Webster referenced a prior conversation and stated that King had told her that Ameritas’s agents had given her inaccurate information about the annuity. See [D.E. 63-5] Ameritas 1651. King replied that “the annuity is as I said.” Id. Webster composed a letter to King on July 28, 2010, in which she stated that she “had a misunderstanding, based on [her] conversations with [King], about the terms of the ‘base plus 5%’ part of the annuity.” See [D.E. 51-15] PW 801-04.
On July 13, 2011, Webster’s attorney, Thomas Wilson, contacted Ameritas requesting additional information and informing them to place a litigation hold on relevant materials. See [D.E. 51-2] Amer-itas 189-92. Communication between Wilson and Ameritas continued until plaintiffs filed suit on November 10, 2011. Id. Am-eritas 173-88; Compl. [D.E. 1].
II.
Before addressing defendants’ motion for summary judgment, the court considers defendants’ motion to strike plaintiffs’ errata sheet concerning Webster’s deposition [D.E. 60]. Defendants moved to strike based on the numerous material
Rule 30(e) permits a deponent “(A) to review the transcript; and (B) if there are changes in form or substance, to sign a statement listing the changes and the reasons for making them.” Fed.R.Civ.P. 30(e)(l)(A)-(B). The Fourth Circuit has not construed Rule 30(e)(1)(B). This court concludes, however, that Rule 30(e)(1)(B) does not permit a party to make changes that substantively contradict or modify sworn deposition. See, e.g., E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc.,
The court has reviewed plaintiffs’ original errata sheet containing 38 changes, see [D.E. 60-1], and the revised errata sheet containing 19 changes. See [D.E. 68-1]. Both errata sheеts contain significant, material changes that modify and contradict Webster’s original testimony regarding material issues in the litigation, including Webster’s understanding of the annuity that she purchased and of the GLWB rider. For example, one of Webster’s changes would alter her deposition testimony to state “[T]hat’s how I understand [King’s] investment proposal” instead of “[T]hat’s how I understand the GLWB.” See [D.E. 60-1] 6; [D.E. 60-2] 11. Plaintiffs’ reason for the change is that it is “[m]ore accurate. I never heard [King] talk about GLWB.” See [D.E. 60-1] 6. Accuracy aside, the change fundamentally alters and contradicts Webster’s sworn deposition testimony about how she understood the GLWB rider, a key issue in many of plaintiffs’ claims. Another change would alter Webster’s original response to the question “did you purchase the five percent guaranteed lifetime benefit rider?” from “I did.” to “I did not. I had never heard of a guaranteed lifetime benefit rider. As King represented this plan to me, I thought I had a guaranteed 5% yield on the Plan from the time I transferred my money over. No rider was mentioned.” See [D.E. 68-1] Ex. A, at 4. Although Webster later corrected herself in the original deposition, the proposed change adds significant factual testimony tаilored to bolster plaintiffs’ case. The errata sheets contain other similar, material changes.
In opposing the motion to strike, plaintiffs cite DeLoach v. Philip Morris Companies, Inc.,
III.
Summary judgment is appropriate if the moving party demonstrates that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The party seeking summary judgment bears the initial burden of showing an absence of genuine dispute of material facts or the absence of evidence to support the nonmoving party’s case. Celotex Corp. v. Catrett,
IV.
A.
Before addressing plaintiffs’ individual claims, the court considers defendants’ argument that defendants UNIFI and AHC are entitled to summary judgment because they were not involved with the transactions in question. Defs.’ Am. Mem. Supp. Summ. J. [D.E. 62] 10; see Fed.R.Civ.P. 56(c)(1)(B). “It is a general principle of corporate law deeply ingrained in our economic and legal systems that a parent corporation ... is not liable for the acts of its subsidiaries.” United States v. Bestfoods,
Plaintiffs alleged that UNIFI is the parent company of AHC, which in turn is the parent company of ALIC. Am. Compl. ¶¶ 4-5. They also alleged that “[a]t all relevant times, King was an agent and official representative for AIC, UNIFI, AHC and ALIC.” Id. In their memorandum opposing summary judgment, plaintiffs fail to cite any evidence or make any argument to support these allegations concerning UNIFI or AHC. See Pis.’ Mem. Opp’n Summ. J. [D.E. 59]. The record contains no evidence that UNIFI or AHC exercised actual control with respect to the transactions at issue or that ALIC or AIC were mere instrumentalities of UNIFI and AHC. Thus, the court grants defendants’ motion for summary judgment on all remaining claims against defendants UNIFI and AHC and dismisses UNIFI and AHC as defendants.
B.
Plaintiffs’ first two claims accuse AIC, ALIC, and King of committing seeu-rities fraud under federal law, 17 C.F.R. § 240.10b-5, and North Carolinа law, N.C. GemStat. § 78A-8(1)-(3). See Am. Compl. ¶¶ 64-81. Section 78A-8 “closely parallels the Rule 10b-5 antifraud provision of the Securities Exchange Act.” State v. Davidson,
To prevail on their seeurities-fraud claims, plaintiffs must show (1) a material misrepresentation or omission by defendants, (2) scienter, (3) a connection between the misrepresentation and the purchase or sale of a security, (4) reliance, (5) economic loss, and (6) loss causation. See, e.g., Matrixx Initiatives, Inc. v. Siracusa-no,—U.S.--, 131 S.Ct. 1309, 1317,
First, defendants argue that they made no material misrepresentation. Id. A misrepresentation is material if
This court limited plaintiffs’ securities-fraud claims to King’s alleged misrepresentations, made on or before Webster’s October 15, 2008 purchase of the ALIC annuities, that the ALIC annuities would have a guaranteed annual return of 5%. See [D.E. 31] 7, 11. Although some evidence suggests that King orally misrepresented to Webster that the annuities would have a guaranteed annual return of 5%, see, e.g., Webster Dep. 88-89, 189; King Dep. 169-70; [D.E. 59-4] PW 614-15; [D.E. 59-5] Ameritas 627, defendants argue that the prepurchase written disclosure of the annuity terms to Huband and Wilson, Webster’s CPA and attorney, negated any oral misrepresentation that King may have made. Defs.’ Am. Mem. Supp. Summ. J. 13-14; see Gasner,
Under North Carolina law, “[t]he general rule is that a principal is chargeable with, and bound by, the knowledge of or notice to his agent received while the agent is acting as such within the scope of his authority ... although the agent does not in fact inform his principal thereof.” Greensboro Hous. Auth. v. Kirkpatrick & Assocs., Inc.,
Here, the court need not resolve the parties’ dispute about the material-misrepresentation requirement. Cf. Matrixx,
Defendants argue that, even when the evidence is viewed in the light most favorable to plaintiffs, the evidence
Defendants argue that, had King intended to deceive Webster or acted recklessly, he would not have provided Webster’s attorney and CPA with accurate documentation, see [D.E. 51-1] Ameritas 144-52; [D.E. 51-2] Ameritas 252-61,
Carter opines that King negligently interacted with Webster leading up to the purchase. See, e.g., Ops. Dwight Carter [D.E. 59-14] 4-5 (“King was negligent in his failure to properly explain these benefits and the resulting cost.... King was negligent in failing to properly explain that the 5% was an income roll-up feature and not actual investment returns or interest on her money.”). Negligence, however, “will not suffice” to prove scienter. Ottmann,
As for plaintiffs’ suggestion that King failed to respond to Webster’s requests for information in 2010, plaintiffs acknowledge that any avoidance occurred “after [Webster] discovered the truth about the 5%
As for whether King had a pecuniary interest in selling the annuities to plaintiffs, he did based on the commission that he received for selling the annuities. See King Dep. 270. Pecuniary motive is a “relevant consideration” concerning scienter. Tellabs, Inc.,
Alternatively, plaintiffs have failed to raise a genuine issue of material fact concerning reliance. “Reliance by the plaintiff upon the defendant’s deceptive acts is an essential element of the [section] 10(b) private cause of action.” Stoneridge Inv. Partners, LLC v. Scientific-Atlanta,
The court must examine eight factors to determine whether reliance is reasonable when oral representations directly contradict later-received prepurchase written documentation:
(1) [t]he sophistication and expertise of the plaintiff in financial and securities matters; (2) the existence of long standing business or personal relationships; (3) access to relevant information; (4) the existence of a fiduciary relationship; (5) concealment of the fraud; (6) the opportunity to detect the fraud; (7) whether the plaintiff initiafed the stock transaction or sought to expedite the transaction; and (8) the generality or specificity of the misrepresentations.
Foremost Guar. Corp. v. Meritor Sav. Bank,
As for the first factor, plaintiffs’ sophistication, relevant factors include wealth, age, education, professional status, and investment experience. Myers,
As for the second factor, Webster and King did not have a long-standing business or personal relationship. Webster first met King in June 2008, King Dep. 166, and purchased the ALIC annuities four months later. See [D.E. 51-8] Ameritas 2849. Webster had not previously done business with King. See King Dep. 166, 169. Thus, this factor weighs against plaintiffs. See, e.g., Poth,
As for the third factor, access to relevant information, Webster or her agents had access to written documentation containing thе annuity terms before the second meeting and before Webster’s October 15, 2008 purchase of the annuities. See [D.E. 51-1] Ameritas 5, 64-161; [D.E. 51-2] Ameritas 193-279; Webster Dep. 179-80; Huband Dep. 101-02. Thus, this factor weighs against plaintiffs.
As for the fourth factor, whether a fiduciary relationship existed between King and Webster, under North Carolina law, a fiduciary relationship exists where
there has been a special, confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence, and it extends to- any possible case in which a fiduciary relationship exists in fact, and in which there is confidence reposed on one side, and resulting domination and influence on the other.
Dalton v. Camp,
An investment advisor-client relationship is not a de jure fiduciary relationship. Silverdeer, LLC v. Berton, No. 11 CVS 3539,
Webster and King discussed the purchase of the ALIC annuities at arms-length. Webster relied on her own “team” of experts, Wilson and Huband. See [D.E. 51-1] Ameritas 33-34; [D.E. 59-4] PW 614-15; [D.E. 59-5] Ameritas 627; Webster Dep. 125. Webster declined to purchase life insurance from King, even though he offered it. See Webster Dep. 89; [D.E. 51-1] Ameritas 27, 31, 34; [D.E. 51-5, 51-8]. Webster’s correspondence with King before purchasing the annuities on October 15, 2008, does not reflect a relationship where King held “domination and influence.” See, e.g., [D.E. 59^4] PW 614 (Webster suggesting to King what he should discuss at their meeting and telling him that “I will start off the meeting by giving a brief background about why I’m thinking about this move”); [D.E. 59-5] Ameritas 627 (Webster telling King to “[f|ocus ... on your original plan for my portfolio ... focus on if we go with the annuity alone, why I will be better off ... BE PREPARED TO BACK UP YOUR CLAIMS WITH WRITTEN MATERIAL .... I feel like you are already a member of my team. Step up to that.”). Webster took an independent, analytical, reasoned approach in choosing to work with King to maximize her investment returns and maintain her principal. See, e.g., [D.E. 51-10] Ameritas 3929. While Webster, ultimately may have reposed confidence in King’s opinions, see Webster Dep. 56, King did not exercise domination and influence over her to the extent of creating a de facto fiduciary relationship. See, e.g., Broussard,
In response, plaintiffs make two arguments. First, they cite Phillips v. State Farm Mutual Automobile Insurance Company,
Second, plaintiffs argue that whether a fiduciary relationship existed is a question of fact for the jury. This argument fails. See, e.g., Broussard,
King and plaintiffs did not have a fiduciary relationship. Thus, the fourth factor weighs against plaintiffs.
As for the fifth factor, concealment of the fraud, King did not take measures to conceal the alleged fraudulent statements. On the contrary, well before the October 15, 2008 purchase, King provided written documentation to Huband and Wilson that included the specific terms of the GLWB rider, see [D.E. 51-1] Ameritas 5, 64-161; [D.E. 51-2] Ameritas 193-279, and on September 21, 2008, he provided Webster, Hu-band, and Wilson with the names and telephone numbers of two Ameritas employees who could explain the annuity. See [D.E. 51-14] PW 636. Thus, the fifth factor weighs against plaintiffs.
As for the sixth factor, opportunity to detect the fraud, Webster, Huband, and Wilson possessed the accurate, written GLWB documentation well before plaintiffs purchased the ALIC annuities on October 15, 2008. Webster Dep. 179-80; Huband Dep. 101-02. Moreover, on September 21, 2008, King provided Webster, Huband, and Wilson with the contact information of two other Ameritas employees who could have explained the ALIC annuities to them in full. See [D.E. 51-14] PW 636. Thus, the sixth factor weighs against plaintiffs.
As for the seventh factor, whether the plaintiff initiated the stock transaction or sought to expedite the transaction, Webster initiated the transaction by approaching King “about doing some business.” Webster Dep. 71-72. Thus, the seventh factor weighs against plaintiffs.
As for the eighth factor, the generality or specificity of the misrepresentations, plaintiffs argue that King misrepresented the specific nature of the alleged 5% return. See Banca Cremi, S.A.,
Considering all eight factors, seven factors favor defendants and one factor favors plaintiffs. Consequently, the balance weighs heavily in defendants’ favor, and plaintiffs fail to raise a genuine issue of material fact concerning whether they reasonably relied on King’s oral statements in the face of the entire record. See Poth,
C.
Plaintiffs’ third claim alleges a violation of N.C. GemStat. §§ 78C-8(a) and (b) in the North Carolina Investment Advisers Act (“NCIAA”). Am. Compl. ¶¶ 82-91. The pertinent sections state:
(a) It is unlawful for any person who receives, directly or indirectly, any consideration from another person for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analy-ses or reports or otherwise,
(1) To employ any device, scheme, or artifice to defraud the other person, [or]
(2) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person....
(b) In the solicitation of advisory clients, it is unlawful for any person to make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.
N.C. GemStat. §§ 78C-8(a), (b). Absent controlling authority from the North Carolina Supreme Court, this court interprets the statutory language and predicts how that court would rule if presented with the issue. See, e.g., Ellis v. Grant Thornton LLP,
Initially, defendants argue that “[i]n order to be covered by the NCIAA, one must be an ‘investment adviser.’ ” Defs.’ Am. Mem. Supp. Summ. J. 19. However, sections 78C-8(a) and (b) apply to “any person.” N.C. GemStat. § 78C-8(a), (b) (emphasis added). The North Carolina General Assembly defined “person” separately from “investment adviser.” N.C. Gen.Stat. §§ 78C-2(1), (5). Moreover, within section 78C-8, the General Assembly uses the two terms in separate provisions. Compare N.C. Gen.Stat. § 78C-8(a), with N.C. Gen.Stat. § 78C-8(c). Thus, the court rejects defendants’ argument that one must be an investment adviser to be covered by the NCIAA. See Szulik v. Tagliaferri,
Section 78C-8(a) creates two antecedent conditions before a person may be liable under 78C-8(a)(l) or 78C-8(a)(2). First, the person must receive, directly or indirectly, consideration from another person. N.C. GemStat. § 78C-8(a). Second, that consideration must result from the person “advising the other person as to the value of securities or their purchase or sale,
In State v. Clemmons,
Alternatively, plaintiffs’ section 78C-8(a) claim fails because King’s alleged oral misrepresentations do not, as a matter of law, violate 78C-8(a)(l) or (2). Absent a definitive ruling from the North Carolina Supreme Court, this court interprets these sections in accordance with its construction of section 78A-8(1) and (3), which are identical to 78C-8(a)(l) and (2), and therefore in accordance with Rule 10b-5(a) and (c). See Teague,
As for section 78C-8(b), the statute applies to statements made “[i]n the solicitation of advisory clients.” N.C. GemStat. § 78C-8(b). Viewing the evidence in the light most favorable to plaintiffs, King gave investment advice to Webster concerning the annuities in the hopes of receiving a fee should Webster be happy
Section 78C-8(b) makes it “unlawful for any person to make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.” N.C. Gen.Stat. § 78C-8(b). Apart from the antecedent condition, section 78C—8(b) is identical to section 78A-8(2). Compare N.C. Gen.Stat. § 78C-8(b), with N.C. Gen.Stat. § 78A-8(2). As discussed, North Carolina courts interpret section 78A-8 in light of Rule 10b-5 and its attendant case law. See Davidson,
D.
Plaintiffs’ fourth claim allegеs a violation of the Investment Advisers Act (“IAA”), 15 U.S.C. § 80b-6. Am. Compl. ¶¶ 92-98. To establish a claim under section 80b-6, plaintiffs must prove that defendants (1) were investment advisors; (2) engaged in fraudulent activities; and (3) negligently breached their fiduciary duty by making false and misleading statements or omissions of material fact. SEC v. Gotchey,
“[T]he [IAA’s] broker-dealer exemption[ ] exempts brokers and dealers who give investment advice so long as (1) the advice is solely incidental to their conduct as brokers or dealers, and (2) they receive no special compensation for that advice.” Thomas v. Metro. Life Ins. Co.,
King’s investment advice was incidental to the sale of annuities to Webster. Although King promoted his financial-planning experience to Webster, see King Dep. 168-69, King received no compensation for any investment advice he gave to Webster. His only compensation was his commission on the sale of the ALIC annuities, an investment and tax-deferral product. King Dep. 270. Thus, King gave advice solely incidental to his conduct as a broker or dealer and received no “special compensation” for investment advice. See Thomas,
E.
Plaintiffs’ seventh claim alleges a breach of fiduciary duty. See Am. Compl. ¶¶ 113-17. As explained above, King and plaintiffs did not have a fiduciary relationship when plaintiffs purchased the ALIC annuities, and no material changes occurred after the purchase that created a fiduciary relationship. See, e.g., Silverdeer,
F.
In claims eight and nine, plaintiffs allege that defendants committed fraud (claim eight) and fraud in the inducement (claim nine). Am. Compl. ¶¶ 118-34. To prove either claim, a plaintiff must show: “(1) [f]alse representation or concealment of a past or existing material fact, (2) reasonably calculated to deceivе, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party.” Whisnant v. Carolina Farm Credit,
Defendants contend that plaintiffs’ reliance on the alleged misrepresentation was not reasonable. Defs.’ Am. Mem. Supp. Summ. J. 26. A plaintiffs reliance is unreasonable when the plaintiff “could have discovered the truth upon inquiry” unless “[s]he was denied the opportunity to investigate or ... could not have learned the true facts by exercise of reasonable diligence.” Hudson-Cole,
This is not a “close case.” Id. at 438,
G.
Plaintiffs’ tenth claim alleges negligence on the part of King and the other
The court assumes without deciding that defendants owed a duty to plaintiffs.
To the extent that plaintiffs allege negligence after the October 2008 purchase, their vague allegations dо not create a factual dispute for a jury. Plaintiffs claim that “[djefendants damaged [plaintiffs ... by negligently misleading Ms. Webster to enter into ruinous and unsuitable financial investments, and by negligently managing and directing the assets of [p]laintiffs.... ” Pis.’ Mem. Opp’n Defs.’ Mot. Summ. J. 30. The record, however, belies these assertions. First, Webster had sole control over the accounts. Webster Dep. 306-07; King Dep. 294-95; [D.E. 51-8] Ameritas 2848. Second, King mistakenly put Webster’s money into an aggressive fund when she opened the account in October 2008, but when she discovered this error three months later the “mistake” had yielded a 12% return. See [D.E. 51-15] PW 802-03; cf. Webster Dep. 350. Third, had Webster stayed in the aggressive fund, her annual return through 2013 would have been between 7.62% and 14.2%, a higher return than the alleged 5% guaranteed return. See [D.E. 63-17] Ameritas 3940.
In sum, plaintiffs did not justifiably rely on defendants’ alleged negligent misrepresentations before purchasing the ALIC annuities, and plaintiffs have not demonstrated a genuine issue for trial concerning any alleged postpurchase negligence. Accordingly, the court grants defendants’ motion for summary judgment on claim ten.
H.
Plaintiffs’ eleventh claim asserts that AIC and ALIC are liable for King’s allegedly negligent conduct based on the doctrine of respondeat superior. Am. Compl. ¶¶ 145-51. “Rеspondeat superior is a doctrine which makes a principal liable for the acts of an agent within the scope of the agent’s authority.” Blanton v. Moses H. Cone Mem’l Hosp., Inc.,
V.
In sum, the court GRANTS summary judgment to defendants UNIFI and AHC and DISMISSES them as defendants. The court GRANTS summary judgment for the remaining defendants on all claims [D.E. 51]. The court GRANTS defendants’ motion to strike plaintiffs’ errata sheet [D.E. 60]. In light of the disposition of the motion for summary judgment, the court DISMISSES as moot the parties’ pending motions to strike expert testimony and defendants’ motion to compel [D.E. 64, 66, 74], The clerk shall close the case.
Notes
. Plaintiffs and defendants dispute Webster’s true risk tolerance. In addition to the new account forms, defendants cite two 2008 communications in which Webster wrote that she was "non-risk-adversive” and "not risk-aversive." See [D.E. 51-14] PW 627; [D.E. 51-10] Ameritas 3928-29. Webster testified that the first of these was a joke and that she is risk averse. Webster Dep. 63.
. In construing North Carolina law, the court must, absent "definitive authority from Nоrth Carolina's highest court, attempt to divine what that court would do were it faced with this [case].” Teague,
. The documents state:
Variable products are subject to investment risk, including possible loss of principal. Products underwritten by affiliate Ameritas Investment Corp. Before investing, carefully consider the investment objections, risks, charges and expenses, and other important information about the policy issuer and underlying investment options. This information can be found in the policy and investment option prospectuses. Prospectus are available online at variable.ameritas.com or you can obtain copies from us at 800-[XXX-XXXX], Read the prospectuses carefully before investing.
[D.E. 51-1] Ameritas 72; see also id. at Am-eritas 152 ("Guarantees ... do not apply to the investment performance or account value of the underlying variable portfolios.”); id. at Ameritas 81, 86, 101, 132, 140, 142. The GLWB brochure also stated that "[y]our policy value will not be affected by the Premium Acсumulation Value,” that the GLWB rider does not apply "to the investment performance or account value of the underlying variable portfolios,” and that "[v]ariable annuities are suitable for long-term investing and are subject to investment risk, including possible loss of principal.” See [D.E. 51-2] Ameritas 152, 256, 261.
. The court rejects plaintiffs’ argument that Stoneridge,
. Alternatively, claims under Rule 10b-5(a) and (c) are subject to proving scienter and • reasonable reliance. Matrixx,
. Again, the court notes that Huband's and Wilson’s knowledge is imputed to Webster because they acted as Webster’s agents before her purchase of the ALIC annuities. See Greensboro Hous. Auth.,
. The prepurchase documentation states that a customer must activate and pay for the GLWB rider to receive its benefits, [D.E. 51-1]-Ameritas 145-47, yet Webster did not activate the GLWB rider. Webster, however, did purchase a guaranteed death benefit. See [D.E. 51-8] Ameritas 2846. Furthermore, no later than October 13, 2009, ALIC notified Webster that the GLWB rider was inactive on her policy. See [D.E. 51-7] Ameritas 1820. Webster acknowledged that she received but did not read this notice. Webster Dep. 350.
. See Bridges v. Parrish, 222 N.C.App. 320,
. Defendants assert that had Webster stayed in the aggressive fund, her investment now would be worth approximately $3 million. Defs.’ Am. Mem. Supp. Summ. J. 9.
. The court has also considered the relevant factual allegations made in the verified amended complaint. See Williams v. Griffin,