1 18-1236-cv Robertson v. MetLife Secs., Inc. 

### UNITED STATES COURT OF APPEALS FOR THE SECO ND CIRCUIT SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 , IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT = S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DA TABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NO T REPRESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Fole y Square, in the City of New York, on the 11 th day of July, two thousand nineteen.
Present: D EBRA A NN L IVINGSTON , S USAN L. C ARNEY , R ICHARD J. S ULLIVAN , Circuit Judges

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_____________________________________ F REDIA R OBERTSON , AS G UARDIAN FOR M ARY K ATHERINE H ART , Plaintiff-Appellant , v. 18-1236-cv
M ET L IFE S ECURITIES , I NC ., M ETROPOLITAN L IFE I NSURANCE C OMPANY , M ET L IFE OF U PSTATE N EW Y ORK , V ERNA D P HILLIPS , Defendants-Cross Defendants-Appellees , C HARLIE W ILLIAMS , J R ., Defendant-Appellee , W OODFOREST N ATIONAL B ANK , Defendant-Cross Claimant-Appellee ,2 M ARKIA L M ERRITT , D EBBIE M ERRITT , Defendants-Cross Defendants , X CEED F INANCIAL C REDIT U NION , Defendant-Cross Claimant , X EROX C ORPORATION , Defendant.

_____________________________________ For Plaintiff-Appellant: M ARY E. M ALONEY , Maloney & Maloney, Niagara Falls, NY. For Defendants-Appellees: P ENELOPE M. T AYLOR , McCarter & English, LLP, Newark, NJ. 

Appeal from a judgment of the United States District Court for the Western District of New York (Geraci Jr., J .). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED

. Plaintiff-Appellant Fredia R obertson (“Robertson”), as gu ardian for her sister Mary Katherine Hart (“Hart”), appeal s from a judgment of the United States District Court for the Western District of New York issued on Ma rch 30, 2018 dismissing her cause of action under the federal securities laws for failure to stat e a claim, declining to exercise supplemental jurisdiction over her rema ining state law claims, and denying leave to amend her complaint. Robertson v. MetLife Securities, Inc. , No. 16-cv-289 (FPG), 2018 WL 1569385 (W.D.N.Y. Mar.

 Penelope Taylor is not representing Woodfor est National Bank, which is represented by other counsel, or Verna D. Phillips, who is pro se . Neither of them submitted briefing in this case, and both confirmed they would not be participating in the appeal. See Docket No. 18-1236, ECF No. 22 (Phillips Lette r), 36 (Woodforest Letter).3 30, 2018). We assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on appeal. At the outset, Robertson notes in her briefing that her appeal “is restricted to the claim against MetLife for securities la w violations.” Pl.- App.’s Brief at 2. Robertson sued Charlie Williams, Jr. (“Williams”), MetLife Securities, In c., Metropolitan Life Insurance Company, and MetLife of Upstate New York (collectively, the “M etLife Defendants”) for their part in the sale of a variable annuity to her si ster Hart, who is incompetent a nd was unable to understand or consent to the sale. The complaint alleges that in filling out the annuity application, MetLife broker Williams, along with Defendants Debbie and/or Markia Merr it (the “Merritts”), misrepresented Hart’s income, assets, and risk tolerance, among other things, in order to make the annuity seem like a suitable investment choi ce for Hart. Hart’s money was later withdrawn from the annuity account by the Merritts and converted for their own use, unchecked by the MetLife Defendants. “We review de novo a district court’s de cision to dismiss a complaint pursuant to Rule 12(b)(6).” Global Network Comms., Inc. v. City of New York , 458 F.3d 150, 154 (2d Cir. 2006). “On such a motion, we are constrained to accept as true the factual allegations contained in the complaint and draw all inferences in plaintiff's favor.” Id. Nonetheless, a plaintiff is required to plead “more than labels and conclusion s, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v Twombly , 550 U.S. 544, 555 (2007). In reviewing a district court decisi on, this Court is “free to affi rm an appealed decision on any ground which finds support in the record, rega rdless of the ground upon which the trial court relied.” McCall v. Pataki , 232 F.3d 321, 323 (2d Cir. 2000) (quoting Leecan v. Lopes , 893 F.2d 1434, 1439 (2d Cir. 1990), cert denied , 496 U.S. 929 (1990)).4 To successfully state a § 10(b) and Rule 10b -5 claim, a plaintiff must allege “(1) a material misrepresentation or omission by the de fendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchas e or sale of a security; (4) reliance upon the misrepresentation or omission; (5) ec onomic loss; and (6) loss causation.” GAMCO Inv’rs, Inc. v. Vivendi Universal, S.A. , 838 F.3d 214, 217 (2d Cir. 2016) (quoting Halliburton Co. v. Erica P. John Fund, Inc. , 573 U.S. 258, 267 (2014)). Under the Private Securities Litigation Reform Act (“PSLRA”) and Federal Rule of Civil Procedur e (“FRCP”) 9(b), “it is well-established that a securities fraud complaint must . . . plead certai n facts with particularity in order to state a claim,” such as particular alle gations of fraud or facts “givi ng rise to a strong inference of fraudulent intent.” Novak v. Kasaks , 216 F.3d 300, 306 (2d Cir. 2000) (internal quotation marks omitted); see also 15 U.S.C. § 78u-4(b)(4) (“[T]he plai ntiff shall have the burden of proving that the act or omission of the defendant alleged to violate this chapter caused the loss for which the plaintiff seeks to recover damages.”). This Court has recognized suitability claims—sometimes called “unsuitability claims”—as “a subset of the ordinary § 10(b) fraud claim.” Brown v. E.F. Hutton Grp. , 991 F.2d 1020, 1031 (2d Cir. 1993). In order to make out a suitability claim: A plaintiff must prove (1) that the securities purchased were unsuited to the buyer’s needs; (2 ) that the defendant knew or reasonably believed the securities were unsuited to the buyer’s needs; (3) that the defendant recommended or purchased the unsuitable securities for the buyer a nyway; (4) that, with scienter, the defendant made material misr epresentations (or, owing a duty to the buyer, failed to disclose mate rial information) relating to the suitability of the securities; and (5 ) that the buyer justifiably relied to its detriment on the defendant’s fraudulent conduct. Id. at 1031. While there has been some c onfusion about what portion of Rule 10b-5 Robertson’s claim implicates, as she claims she is bringing a 10b-5(a) or (c) claim for scheme liability while the MetLife Defendants cast her claim as one for 10b-5(b) misrepresentation5 liability, see 2018 WL 1569385 at *3 (noting confusion am ong parties), this Court treats unsuitability claims as a subset of 1 0b-5(b) misstatement or omission claims. See Brown , 991 F.2d at 1031. In any event, in her brief before th is Court, Robertson app ears to admit that her claim, as she has cast it, falls within the mi srepresentation or omissi on category of § 10(b) claims. See Pl.-App.’s Brief at 18. Regardless of how she casts her claim, howe ver, Robertson’s cause of action under Rule 10b-5 was properly dismissed by the di strict court, as she is unabl e plausibly to allege how the unsuitability of the annuity caused her loss. “Loss causation is the causal link between the alleged misconduct and the economic harm ultimately suffered by the plaintiff.” Lentell v. Merrill Lynch & Co. , 396 F.3d 161, 172 (2d Cir. 2005) (internal quotation marks omitted). “[T]o establish loss causation, a plaint iff must allege . . . that the subject of the fraudulent statement or omission was the cause of the actual loss suffered . . . .” Id. at 173 (internal quotation marks omitted). Here, the only misrepre sentations Robertson a lleges Williams made are those put on the application form for the va riable annuity. However, while her argument revolves around the alleged unsuitab ility of the variable annuity for Hart’s needs, she does not allege that Hart’s loss occurred as a result of the characteristics th at made the annuity unsuitable. For example, Hart did not lose her money because the annuity’s “moderate risk profile” exposed her to too much risk, as Robertson claims it did. In actuality, Hart’s loss was due to “two thieves . . . steal[ing] two-thirds of the money,” see Pl.-App.’s Brief at 21, rather than the materialization of any risks imp licated by the alleged misrepresent ations on the application form.
See Louros v. Kreicas , 367 F. Supp. 2d 572, 593 (S .D.N.Y. 2005) (“Loss cau sation as delineated
in Lentell is satisfied if the risk or other attributes that rendered the investments unsuitable in the first place materialized to the plai ntiff’s detriment.”). This is a sad case; nevertheless, it does not implicate the federal securities laws.6 Having dismissed the only cl aim over which the court had original jurisdiction, the district court declined to exercise supplemental jurisdiction over the remaining state law claims. “[T]he exercise of supplemental juri sdiction is left to the discretion of the district court, and this court’s review is limited to whether the district court abused its discretion.” Purgess v. Sharrock , 33 F.3d 134, 138 (2d Cir. 1994). It is often suggested that “if the federal claims are dismissed before trial . . . the state cl aims should be dismissed as well.” First Capital Asset Mgmt., Inc. v. Satinwood, Inc. , 385 F.3d 159, 183 (2d Cir. 2004) (quoting Castellano v. Bd. Of
Trustees , 937 F.2d 752, 758 (2d Cir. 1991)). The district court did not abuse its discretion here in following that advice. 1
We have considered Robertson’s remaini ng arguments and find them to be without merit. 2 Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk

1 At oral argument, Robertson wi sely abandoned her assertion that there is fede ral jurisdiction based on diversity of citizenship. In her brief, she maintained that there is “diversity of citizenship through Markia Merritt (resident of South Carolina) and Woodforest Bank (principal place of business in Texas).” Pl.-App.’s Brief at 36. However, [d]iversity is not complete if any plaintiff is a citizen of the same state as any defendant.” St. Paul Fire & Marine Ins. Co. v. Universal Builders Supply , 409 F.3d 73, 80 (2d Cir. 2005). Since Robertson and Hart are citizens of New York, as are several of the defe ndants, there clearly is not complete diversity.
2 In particular, Robertson contests the district court’s denial of leave to am end her complaint. “We review a district court’s de nial of leave to amend for abus e of discretion, unless the denial was based on an interpretation of law, such as futility, in which case we review the legal conclusion de novo .” Panther Partners Inc. v. Ikanos Commc’ns, Inc. , 681 F.3d 114, 119 (2d Cir. 2012). While the district court noted Robert son’s failure to comply with local rules—she did not attach a proposed amended pleading to her request, which was contained in her memorandum replying to Defendants’ motions to dismiss—it rested its denial primarily on futility grounds. Given the insurmountable plea ding deficiencies noted above, we discern no error in the district court’s decision.