Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_15-cv-03354/USCOURTS-cand-4_15-cv-03354-3/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332 Diversity-Breach of Contract

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United States District Court

Northern District of California

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UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

CHARLOTTE B. MILLINER, et al.,

Plaintiffs,

v.

MUTUAL SECURITIES, INC.,

Defendant.

Case No. 15-cv-03354-TEH 

ORDER RE: SEPTEMBER 12, 2016 

HEARING

Counsel shall come prepared to address the following questions at the September 

12, 2016 hearing on Plaintiffs’ motion for partial summary judgment: 

For Plaintiffs 

1. Is your argument that Defendant had a duty to supervise the investment 

advisory activities of Bock and Evans dependent on the Court’s earlier 

Order, ECF No. 39, finding a duty was created by the “suitability clause” in 

the parties’ Brokerage Agreement? In other words, do you argue that the

Defendant’s duty to supervise Bock and Evans would exist even without the 

“suitability clause” in the Brokerage Agreement? 

2. You argue that Chevron requires that the court grant deference to the NTMs 

(Pls.’ Reply 5:1-2 n. 2). However, NTMs do not appear to be promulgated 

by an administrative agency such as the Securities and Exchange 

Commission. Can you cite any cases holding NTMs are entitled to Chevron

deference? 

3. Can you cite any cases addressing how much deference, if any, courts should 

give to the Notice to Members (“NTMs”) that accompany FINRA rules? 

4. You argue 15 U.S.C. §78cc “invalidates provisions in brokerage agreements 

that require customers to waive compliance with FINRA rules.” (Pls.’ Reply 

Case 4:15-cv-03354-DMR Document 49 Filed 09/08/16 Page 1 of 3
United States District Court

Northern District of California

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7:20-21). Can you cite any cases where courts have applied § 78cc in this 

particular way? 

5. Several recent Ninth Circuit cases establish that there are two elements 

required for “control person” liability: (1) a primary violation of federal 

securities laws and (2) actual power or control over the primary violator. 

See, e.g., Howard v. Everex Systems, Inc., 228 F.3d 1057, 1065 (9th Cir. 

2000). What federal security laws, if any, have you alleged Defendant 

violated? 

6. What was the reasoning behind the Plaintiffs refusing to provide some 

documents that Defendant asked for? (See Def.’s Opp’n. at 15-16; Pls.’

Reply at 11:15-12:1). Was there a particular difficulty involved with turning

over the requested documents? 

For Defendant

1. Can you cite any cases where courts, in applying FINRA rules (or other 

related rules), have differentiated between RR/IAs acting as registered 

representatives or as investment advisors? 

2. If we accept your argument that FINRA Rules 3270 and 3280 only apply 

when registered agents are acting as such (i.e., not as investment advisors) 

(Def.’s Opp’n. 6:22-7:1), wouldn’t broker-dealers always be able to contract 

their way out of FINRA’s supervision requirement? 

3. If we accept your argument that the application of FINRA Rules may depend 

on whether a person is acting as a registered representative or an investment 

advisor, how should the Court determine in what capacity a person is acting? 

4. Defendant argues the non-binding nature of the NTMs accompanying the 

relevant rules (Def.’s Opp’n. 9:8-23), yet Defendant’s Representative 

Agreement for Registered Representatives expresses a commitment to 

comply with “The Rules” which is defined to include “all rule or conduct 

interpretations and directives issued by the NASD.” Also, Defendant’s 

Written Supervisory Procedures Manual directly cites several NTMs. How 

do you reconcile your position regarding NTMs in your Opposition with the

inclusion of NTMs in your policies?

Case 4:15-cv-03354-DMR Document 49 Filed 09/08/16 Page 2 of 3
United States District Court

Northern District of California

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5. Regarding the discovery dispute brought up in your opposition (See Def.’s 

Opp’n. at 14-17), please explain exactly what facts you expect or hope to 

find that should prevent the Court from ruling on Plaintiffs’ summary 

judgment motion now? Why did Defendant not bring up the discovery issue 

earlier?

IT IS SO ORDERED.

Dated: 09/08/16 _____________________________________ 

THELTON E. HENDERSON 

United States District Judge

Case 4:15-cv-03354-DMR Document 49 Filed 09/08/16 Page 3 of 3