UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY 

MARY ANN SIVOLELLA, for the use and benefit of the 

EQ/Common Stock Index Portfolio, the EQ/Equity Growth PLUS 

Portfolio, the EQ/Equity 500 Index Portfolio, the EQ/Large Cap 

Value PLUS Portfolio, the EQ/Global Multi-Sector Equity 

Portfolio, the EQ/Mid Cap Value PLUS Portfolio, the EQ/GAMCO 

Small Company Value, and the EQ/Intermediate Government Bond 

Index Portfolio; MARY ANN SIVOLELLA for the use and benefit 

of the EQ Advisors Trust; MARY ANN SIVOLELLA, individually 

and on behalf of any person or entity that is a party to a variable 

annuity contract issued by/sold by AXA Equitable Life Insurance 

Company, which offered the ability to invest in, and resulted in an 

investment in, the EQ/Common Stock Index Portfolio, the 

EQ/Equity Growth PLUS Portfolio, the EQ/Equity 500 Index 

Portfolio, the EQ/Large Cap Value PLUS Portfolio, the EQ/Global 

Multi-Sector Equity Portfolio, the EQ/Mid Cap Value PLUS 

Portfolio, the EQ/GAMCO Small Company Value, or the 

EQ/Intermediate Government Bond Index Portfolio; and MARY 

ANN SIVOLELLA, individually and on behalf of any person or 

that paid investment management fees to either AXA Equitable Life 

Insurance Company or AXA Equitable Funds Management Group, 

LLC, on account of investments in, the EQ/Common Stock Index 

Portfolio, the EQ/Equity Growth PLUS Portfolio, the EQ/Equity 

500 Index Portfolio, the EQ/Large Cap Value PLUS Portfolio, the 

EQ/Global Multi-Sector Equity Portfolio, the EQ/Mid Cap Value 

PLUS Portfolio, the EQ/GAMCO Small Company Value, or the 

EQ/Intermediate Government Bond Index Portfolio, 

 Plaintiffs, 

vs. 

AXA Equitable Life Insurance Company and AXA Equitable Funds 

Management Group, LLC, 

 Defendants. 

Civil Action No. 11-4194 

Oral Argument Requested 

Document Filed 

Electronically

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS’ 

MOTION TO DISMISS THE AMENDED COMPLAINT PURSUANT TO 

RULES 12(b)(1) AND 12(b)(6) 

Case 3:11-cv-04194-PGS -DEA Document 21 Filed 03/05/12 Page 1 of 23 PageID: 630
Blank Rome LLP 

 Jonathan M. Korn 

301 Carnegie Center, 3rd Floor 

Princeton, NJ 08540 

(609) 750-7700 (Phone) 

(609) 750-7701 (Fax) 

Milbank, Tweed, Hadley & McCloy LLP 

 James N. Benedict (pro hac vice) 

 Sean M. Murphy (pro hac vice) 

 Andrea G. Hood 

 Will P. Gross 

1 Chase Manhattan Plaza 

New York, NY 10005-1413 

(212) 530-5000 (Phone) 

(212) 530-5219 (Fax) 

Attorneys for Defendants 

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................................................................... ii

PRELIMINARY STATEMENT ..............................................................................1

ARGUMENT ............................................................................................................3

I. PLAINTIFF’S “EQUITABLE” INTEREST IN THE FUNDS DOES NOT 

CONFER STATUTORY STANDING UNDER SECTION 36(b)................3

A. Section 36(b) Requires That Plaintiff Be a “Security Holder,” 

Which Requires Legal Ownership of the Funds. .................................3

B. The Term “Security Holder” Does Not Include Persons With 

Mere “Equitable” Interests In a Mutual Fund......................................5

1. The Text Of Section 36(b) Is Controlling..................................5

2. Plaintiff’s Cases Are Irrelevant..................................................6

3. Plaintiff’s Argument That The Funds Will Be “Immune” 

From Protection Is Immaterial and Incorrect.............................9

4. Plaintiff Fails To Distinguish Curran......................................10

II. PLAINTIFF IS NOT ENTITLED TO A REMEDY UNDER SECTION 

47(b) FOR ALLEGED VIOLATIONS OF SECTION 26(f).......................11

III. PLAINTIFF’S UNJUST ENRICHMENT CLAIM SHOULD BE 

DISMISSED. ................................................................................................14

CONCLUSION.......................................................................................................16

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TABLE OF AUTHORITIES

 Page(s)

CASES

Alexander v. Sandoval, 

532 U.S. 275 (2001)........................................................................................2, 13 

Ali v. Fed. Bureau of Prisons, 

552 U.S. 214 (2008)..............................................................................................5 

AMP Inc. v. United States, 

820 F.2d 612 (3d Cir. 1987) .................................................................................4 

Angelastro v. Prudential-Bache Sec., Inc., 

764 F.2d 939 (3d Cir. 1985) .................................................................................7 

Bache & Co. v. Gen. Instrument Corp., 

74 N.J. Super. 92 (App. Div. 1962)......................................................................7 

Barnhart v. Sigmon Coal Co., 

534 U.S. 438 (2002)..........................................................................................2, 5 

C.H. Sanders Co., Inc. v. BHAP Housing Dev. Fund Co., 

903 F.2d 114 (2d Cir. 1990) ...............................................................................14 

Certainteed Corp. & Bay Mills, Ltd. v. Fed. Ins. Co., 

913 F. Supp. 351 (E.D. Pa. 1995).........................................................................7 

Curran v. Principal Management Corporation, 

No. 09-cv-00433 (RP-CFB), 2011 U.S. Dist. LEXIS 6577 (S.D. Iowa 

Jan. 24, 2011)......................................................................................................10 

Drachman v. Harvey, 

453 F.2d 722 (2d Cir. 1972) .............................................................................7, 8 

Foremost-McKesson, Inc. v. Provident Sec. Co., 

423 U.S. 232 (U.S. 1976)....................................................................................14 

Gelman v. State Farm Mut. Auto. Ins. Co., 

583 F.3d 187 (3d Cir. 2009) .................................................................................5 

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Green v. Fund Asset Mgmt., 

286 F.3d 682 (3d Cir. 2002) .............................................................................7, 9 

HFG Co. v. Pioneer Pub. Co., 

162 F.2d 536 (7th Cir. 1947) ................................................................................8 

In re Am. Home Mort. Holdings, Inc., 

637 F.3d 246 (3d Cir. 2011) .................................................................................5 

In re Eaton Vance Mutual Funds Fee Litig., 

380 F. Supp. 2d 222 (S.D.N.Y. 2005) ................................................................13 

In re Franklin Nat’l Bank Sec. Litig., 

574 F.2d 662 (2d Cir. 1978) .................................................................................8 

In re The Pittsburgh & Lake Erie Railroad Co. Sec. & Antitrust Litig., 

543 F.2d 1058 (3d Cir. 1976) ...............................................................................8 

Jones v. Taylor, 

348 A.2d 188 (Del. 1975) ...................................................................................15 

Mills v. The Electric Auto-Lite Co., 

396 U.S. 375 (1970)............................................................................................12 

Olmsted v. Pruco Life Ins. Co., 

283 F.3d 429 (2d Cir. 2002) ........................................................................passim 

Piper v. Chris-Craft Indus., Inc., 

430 U.S. 1 (1977)................................................................................................14 

Pope v. East Brunswick Bd. of Educ., 

12 F.3d 1244 (3d Cir. 1993) .................................................................................4 

Prudential Insurance Company of America. v. S.E.C., 

326 F.2d 383 (3d Cir. 1964) ...........................................................................6, 10 

Reves v. Ernst & Young, 

494 U.S. 56 (1990)................................................................................................6 

Sery v. Fed. Bus. Ctrs., Inc., 

No. 06-1026 (SRC), 2008 U.S. Dist. LEXIS 31647 (D.N.J. Apr. 15, 

2008) ...............................................................................................................7, 11 

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Silber v. Mabon, 

957 F.2d 697 (9th Cir. 1992) ................................................................................8 

Smith v. Oppenheimer Funds Distrib., 

No. 10 Civ. 7387 (LBS), 2011 U.S. Dist. LEXIS 60877 (S.D.N.Y. June 

6, 2011) ...........................................................................................................8, 12 

Steinberg v. Janus Capital Mgmt., 

No. 10-1207, 2011 U.S. App. LEXIS 24053 (4th Cir. Dec. 2, 2011) ................11 

Texas Indus., Inc. v. Radcliff Materials, Inc., 

451 U.S. 630 (1981)............................................................................................14 

Transamerica Mortgage Advisors, Inc. v. Lewis, 

444 U.S. 11 (1979)..............................................................................................12 

United Housing Found., Inc. v. Forman, 

421 U.S. 837 (1975)..............................................................................................6 

United States v. Cheeseman, 

600 F.3d 270 (3d Cir. 2010) .................................................................................4 

United States v. SmithKline Beecham Clinical Labs., 

149 F.3d 227 (3d Cir. 1998) .................................................................................5 

Wilson v. Daily News of the Virgin Islands, 

881 F.2d 82 (3d Cir. 1989) ...............................................................................4, 5 

Woodward Governor Co. v. Curtiss-Wright Flight Sys., 

164 F.3d 129-30 (2d Cir. 1999) ..........................................................................14 

Young v. Nationwide Life Ins. Co., 

2 F. Supp. 2d 914 (S.D. Tex. 1998)................................................................8, 11 

STATUTES

15 U.S.C. § 46(b) ..............................................................................................passim 

15 U.S.C. § 78j(b)......................................................................................................7 

15 U.S.C. § 80a-2(a)(9)..............................................................................................4 

15 U.S.C. § 80a-3(c)(1)..............................................................................................4 

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15 U.S.C. § 80a-26(f)........................................................................................passim 

15 U.S.C. § 80a-35(b) .......................................................................................passim 

15 U.S.C. § 80a-41...................................................................................................13 

15 U.S.C. § 80a-43...................................................................................................15 

15 U.S.C. § 80a-46(b) ..............................................................................................15 

N.Y. Ins. Law. § 4240(a)(12)...................................................................................11 

OTHER AUTHORITIES

17 C.F.R. § 270.30e-1..............................................................................................11 

17 C.F.R. § 270.30e-2..............................................................................................11 

Merriam-Webster’s Collegiate Dictionary 871-72 (1998) ........................................4 

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PRELIMINARY STATEMENT

Plaintiff concedes that she is not the legal owner of any shares of the Funds.1

Nevertheless, Plaintiff contends that she has statutory standing under Section 36(b) 

based on the “equitable” and “beneficial” interests she claims to have in the Funds. 

Section 36(b), however, does not confer statutory standing on persons with an 

“equitable” or “beneficial” interest in mutual funds. Although Congress has used 

such terms and equivalent concepts in other sections of the Investment Company 

Act (“ICA”), Congress specifically provided in Section 36(b) that only a “security 

holder” of mutual funds has standing to bring a private action under Section 

36(b)—i.e., a person or entity with legal ownership of shares of the funds. 

Because, as Plaintiff concedes, AXA (and not Plaintiff) is the legal owner of shares 

of the Funds, Plaintiff lacks statutory standing to assert a Section 36(b) claim. 

Plaintiff’s argument that this Court should expand the meaning of the term 

“security holder” in Section 36(b) to include persons with mere “equitable” or 

“beneficial” interests in a mutual fund is unavailing. The crux of Plaintiff’s 

argument is that the “substance” and “economic reality” of her interest in the 

Funds should prevail over its “form”—i.e., that because performance of the Funds 

 

1 Plaintiffs’ Opposition Brief (“Pl. Br.”) at 15 (“The Mutual Fund Shares Are Titled 

in AXA’s Name And Held in AXA’s Account.”), 16 (“Plaintiff lacks . . . nominal 

title to the [Funds].”). 

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has a financial impact on her, it should not matter that she is not the legal owner of 

any shares of the Funds. 

Plaintiff’s argument is contrary to a well-established body of Supreme Court 

and other federal cases that unequivocally hold that courts must defer to the text of 

a statute, even if doing so may seem at odds with “economic reality,” the purpose 

of a statute, or policy considerations. E.g., Barnhart v. Sigmon Coal Co., 534 U.S. 

438 (2002). Furthermore, the cases Plaintiff cites are irrelevant, as they interpret 

federal statutes other than the ICA and/or arise out of factual contexts that are 

entirely different from those at issue here. 

Plaintiff’s argument that she must have statutory standing because otherwise 

the Funds will be “immune” from protection under Section 36(b) also fails. It is 

neither remarkable nor inconsistent with the purpose or objectives of Section 36(b) 

that the statute bars private suits by Plaintiff. Section 36(b) was intended to 

provide only a very narrow private right of action, and the SEC has standing to 

enforce Section 36(b) with respect to mutual funds used in a variable annuity. 

Plaintiff also incorrectly claims that Section 47(b) has an implied private 

right of action or can be used to imply one under Section 26(f). In making this 

argument, Plaintiff relies on cases from the discredited “ancien regime” that 

existed before the Supreme Court’s seminal decision in Alexander v. Sandoval, 532 

U.S. 275 (2001) (holding that courts must defer to statutory text when determining 

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whether there is an implied private right of action) and the Second Circuit’s 

seminal decision in Olmsted v. Pruco Life Ins. Co., 283 F.3d 429 (2d Cir. 2002) 

(rejecting implied private rights of action under the ICA). Plaintiff also disregards 

the sea of post-Olmsted cases in which courts have consistently refused to imply 

private rights of action under the ICA. 

Because Plaintiff’s federal claims must be dismissed, the Court should 

exercise its discretion to dismiss Plaintiff’s unjust enrichment claim. Plaintiff’s 

argument that this claim is actually a “federal” claim is unavailing, and in any 

event, the claim must be dismissed because Plaintiff failed to plead it derivatively. 

ARGUMENT

I. PLAINTIFF’S “EQUITABLE” INTEREST IN THE FUNDS DOES 

NOT CONFER STATUTORY STANDING UNDER SECTION 36(b). 

Plaintiff does not dispute that Separate Account A is the legal owner of 

shares of the Funds.2

 Instead, Plaintiff argues that this Court should expand the 

meaning of the term “security holder” under Section 36(b) so that she is afforded 

statutory standing based on her “equitable” interest in the Funds and the “economic 

reality” of her variable annuity investment. Plaintiff’s argument fails. 

A. Section 36(b) Requires That Plaintiff Be a “Security 

Holder,” Which Requires Legal Ownership of the Funds. 

The ICA does not expressly define “security holder.” However, this term, as 

used in Section 36(b), plainly refers to the legal or record owner of a security. As 

 

2

 Pl. Br. at 15. 

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Defendants explained in their opening brief (“Def. Br.”),3 Congress expressly uses 

the term “beneficial ownership” in certain sections of the ICA, but omits it in 

Section 36(b), and instead uses only the term “security holder.” 15 U.S.C. § 80a3(c)(1)(A) and (B) (using “beneficial ownership” for purposes of identifying 

entities that do not qualify as an “investment company”); id. § 80a-2(a)(9) (using 

“beneficially own” for purposes of defining “control”). When Congress “refers to 

[one term] in one section of the Act but omits it in another, the statute should 

normally be construed to give effect to the distinction Congress makes thereby.”4

 

Pope v. East Brunswick Bd. of Educ., 12 F.3d 1244, 1249 (3d Cir. 1993).5

 

Plaintiff’s reading of “security holder” to be synonymous with “beneficial owner” 

would violate this basic canon of statutory construction. Tellingly, Plaintiff does 

not respond to these points in her opposition brief. 

 

3

 Def. Br. at 17-18. 

4 See also Merriam-Webster’s Collegiate Dictionary 871-72 (1998) (defining 

“holder” as “a person that holds [as] owner”). 

5 See also AMP Inc. v. United States, 820 F.2d 612, 616 (3d Cir. 1987) (“[W]here 

Congress includes particular language in one section of a statute but omits it in 

another section of the same Act, it is generally presumed that Congress acts 

intentionally and purposely in the disparate inclusion or exclusion.”) (internal 

quotation omitted); Wilson v. Daily News of the Virgin Islands, 881 F.2d 82, 85-86 

(3d Cir. 1989) (refusing to expand “audit data” to include “audit report” because 

statute expressly referred to “audit report” in separate sections); United States v. 

Cheeseman, 600 F.3d 270, 281 (3d Cir. 2010). 

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B. The Term “Security Holder” Does Not Include Persons 

With Mere “Equitable” Interests In a Mutual Fund. 

1. The Text Of Section 36(b) Is Controlling. 

It is black-letter law that courts may not construe a statutory term more 

broadly than its plain meaning. Barnhart, 534 U.S. at 461-62 (“We have stated 

time and again that courts must presume that a legislature says in a statute what it 

means and means in a statute what is says there.”).6

 When a statutory term has a 

plain meaning within the context of the statute (and here, it does), the judicial 

inquiry must end there—legislative history, policy considerations, and “economic 

reality” are irrelevant. Id. at 462 (“When the words of a statute are unambiguous 

. . . ‘judicial inquiry is complete.’”); Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 

228 (2008) (“We are not at liberty to rewrite the statute to reflect a meaning we 

deem more desirable. Instead, we must give effect to the text Congress enacted.”); 

United States v. SmithKline Beecham Clinical Labs., 149 F.3d 227, 232 (3d Cir. 

1998) (“[I]f Congress unambiguously addressed the issue in question, we may not 

inquire further . . . .”).7

 

Accordingly, Plaintiff’s arguments that she should be granted statutory 

standing in light of the “substance” and “economic reality” of her variable annuity 

 

6 See also Wilson, 881 F.2d at 86 (“We are remitted to the plain language and 

meaning of the statute.”); Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 

194 (3d Cir. 2009) (“[O]ur inquiry must focus on the text of the statute itself.”). 7

 The mere fact that two parties “proffer different interpretations of the statutory 

language does not make the language ambiguous.” In re Am. Home Mort. 

Holdings, Inc., 637 F.3d 246, 256 (3d Cir. 2011). 

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investment must be rejected. Instead, the Court’s analysis must begin and end with 

the text of Section 36(b), which plainly provides (in light of other sections of the 

ICA) that only legal owners of mutual fund shares have statutory standing. 

2. Plaintiff’s Cases Are Irrelevant.

The cases Plaintiff relies on for her argument that the “substance” of her 

investment should be elevated over its “form” are irrelevant. For example, 

Plaintiff relies on Prudential Insurance Company of America. v. S.E.C. for this 

argument. 326 F.2d 383 (3d Cir. 1964). (Pl. Br. at 16-18, 26-27.) Prudential, 

however, has nothing to do with statutory standing under Section 36(b) (which was 

not even enacted until six years after the case was decided). In Prudential, the 

Third Circuit merely held that the ICA applied to the segregated account Prudential 

had established to fund variable annuity investments. Prudential, 326 F.3d at 385, 

387. The case offers no support for Plaintiff’s claim that she is a “security holder” 

under Section 36(b).8

 In fact, the Third Circuit explained in Prudential that it is 

the segregated account (here, Separate Account A) “and no other entity, in which 

[the variable annuitant] has an interest.”9

 Id. at 387 (emphasis added). 

 

8

 The other cases Plaintiff cites in support of her “substance over form” argument 

are equally irrelevant. United Housing Found., Inc. v. Forman, 421 U.S. 837 

(1975) (holding that co-op stock is a “security” under the Securities Act and 

Exchange Act); Reves v. Ernst & Young, 494 U.S. 56 (1990) (holding that certain 

demand notes were “securities” under the Securities Act and Exchange Act). 

9

 Notably, in her brief, Plaintiff specifically omits just this sentence when quoting 

Prudential. (Pl. Br. at 17.) 

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Plaintiff cites equally irrelevant cases in support of her claim that courts 

“have found that the equitable owner of a security, not the title owner, is the 

shareholder.”10 (Pl. Br. at 19-22.) For example, in Drachman v. Harvey, the 

Second Circuit held that a beneficial owner of stock held in “street name” has 

standing to assert a derivative claim as a “shareholder” for violations of Section 

10(b) of the Exchange Act of 1934. 453 F.2d 722, 724 (2d Cir. 1972). But the 

question of “shareholder” derivative standing for purposes of Section 10(b) of the 

Exchange Act has no bearing on whether Plaintiff is a “security holder” under 

Section 36(b) of the ICA. The two statutes use different language and have 

different objectives,11 and “the mere assertion of similarity between different 

statutes is no substitute for a careful analysis . . . [of] the text and structure of the 

 

10 Plaintiff also ignores that some courts (including this District Court) have found 

that the word “shareholder” is generally understood to refer only to “record” 

owners. Sery v. Fed. Bus. Ctrs., Inc., No. 06-1026 (SRC), 2008 U.S. Dist. LEXIS 

31647, at *16 (D.N.J. Apr. 15, 2008) (the definition of “‘shareholder’ as ‘one who 

is a holder of record of shares in a corporation’ . . . comports with the general 

understanding of the term ‘shareholder’ as used in corporation law”) (emphasis 

added); Certainteed Corp. & Bay Mills, Ltd. v. Fed. Ins. Co., 913 F. Supp. 351, 

357 (E.D. Pa. 1995) (the term “stockholder” is not ambiguous because “it means 

owner of stock. . . . [and] [s]hareholders of record are generally considered the 

‘stockholders’”); Bache & Co. v. Gen. Instrument Corp., 74 N.J. Super. 92, 98 

(App. Div. 1962) (“[T]he legal owner, rather than the beneficial owner, is 

considered the ‘stockholder’ or shareholder.”). 

11 Compare Drachman, 453 F.2d at 729-30 (Section 10(b) provides a broad remedy 

“to protect completely and effectively the rights of the investing public”); 

Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 949 (3d Cir. 1985) 

(Section 10(b) is the “‘catch-all’ anti-fraud provision”); with Green v. Fund Asset 

Mgmt., 286 F.3d 682, 685 (3d Cir. 2002) (Section 36(b) provides “a very specific, 

narrow federal remedy”) (emphasis added). 

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entire statute at issue.”12 Smith v. Oppenheimer Funds Distrib., No. 10 Civ. 7387 

(LBS), 2011 U.S. Dist. LEXIS 60877, at *21 (S.D.N.Y. June 6, 2011). None of 

the cases cited by Plaintiff involved the interpretation of the term “security holder” 

to mean “beneficial owner” in the context of a statute that uses both terms 

separately, as in the ICA. 

Furthermore, Plaintiff’s analogy to stocks held in “street name” is an inapt 

one. The “beneficial” owner of stocks held in street name holds “all the equitable 

and beneficial interest in the stock,” and the “record” owner “owns nothing,” “is a 

mere dummy,” and holds “naked legal title.” Drachman, 453 F.2d at 730; HFG 

Co., 162 F.2d at 537, 540. Here, Plaintiff does not hold all the equitable and 

beneficial interest in the Funds, and AXA and Separate Account A are not “mere 

dummies.” Plaintiff, for example, does not receive the dividends issued by the 

 

12 Like Drachman, the other cases Plaintiff cites have nothing to do with the 

meaning of “security holder” under Section 36(b). In re Franklin Nat’l Bank Sec. 

Litig., 574 F.2d 662 (2d Cir. 1978) (beneficial owners are required to receive 

notice of class action settlements under F.R.C.P.); Silber v. Mabon, 957 F.2d 697 

(9th Cir. 1992) (same); HFG Co. v. Pioneer Pub. Co., 162 F.2d 536 (7th Cir. 1947) 

(beneficial owner has standing to assert a derivative claim under F.R.C.P.); In re 

The Pittsburgh & Lake Erie Railroad Co. Sec. & Anti-Trust Litig., 543 F.2d 1058 

(3d Cir. 1976) (“pledgee” of stock has standing to assert a derivative claim under 

F.R.C.P.); see also Pl. Br. at 15 (citing SEC Releases and Rules that expressly 

define “security holder” as record and beneficial holders for purposes of tender 

offers and proxy solicitations under the Exchange Act). Plaintiff’s reliance on 

Young v. Nationwide Life Ins. Co., 2 F. Supp. 2d 914 (S.D. Tex. 1998), is also 

misplaced because Young did not involve Section 36(b) (it involved Section 36(a), 

which does not have a “security holder” requirement) and only addressed whether 

variable insurance owners have constitutional standing. (Def. Br. at 17 n.12.) 

Notably, Young is also one of the cases specifically rejected by the Second Circuit 

in Olmsted as having implied a private right of action under the discredited “ancien 

regime.” Olmsted, 283 F.3d at 434 n.4; supra at 2; infra at 12. 

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Funds—instead, Separate Account A receives and reinvests them.13 Likewise, 

while the record owner of a stock has no authority to alter the beneficial owner’s 

interest in the underlying stock, AXA is permitted to close, add, or modify the 

mutual funds in which Plaintiff’s variable annuity is invested. Similarly, while 

Plaintiff merely holds “units” of Separate Account A (the value of which is 

determined only in part by the performance of the underlying Funds),14 the 

beneficial owner of stock held in street name does not merely hold “units” and, 

instead, holds and owns the actual stock (just without the certificate). 

3. Plaintiff’s Argument That The Funds Will Be “Immune” 

From Protection Is Immaterial and Incorrect. 

Plaintiff argues that she should be granted statutory standing because 

otherwise the Funds will be “immune” from protection under Section 36(b). 

However, as explained above, the Court is bound by the relevant statutory text, and 

such “policy considerations” are for Congress, and not courts, to decide. In any 

event, Plaintiff ignores that Section 36(b) was not intended to afford a broad 

private right of action to all investors in all types of investment products and, 

instead, affords only a very limited private right of action to, specifically, “security 

holders” of mutual funds. Green, 286 F.3d at 685 (Section 36(b) provides “a very 

specific, narrow federal remedy”). 

 

13 See Def. Br. at 16-17. 

14 Def. Br. at 16-17. 

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Plaintiff also ignores that the SEC has standing to assert a claim against an 

investment adviser for violations of Section 36(b). 15 U.S.C. § 80a-35(b). Thus, 

the fact that Plaintiff lacks statutory standing does not mean that the Funds’ “fees 

are, as a practical matter, immune from review.” (Pl. Br. at 2.) It is telling that 

when Congress enacted Section 26(f) of the ICA, which specifically provides that 

fees charged to variable insurance contracts must be reasonable, it did not provide 

a private right of action. Olmsted, 283 F.3d at 432-33. If Congress intended for 

anyone other than the SEC to enforce this provision, it could have easily done so. 

4. Plaintiff Fails To Distinguish Curran.

The most analogous case is Curran v. Principal Management Corporation, 

where the court held that an investor in a “fund of funds” is not a “security holder” 

of the underlying funds under Section 36(b). No. 09-cv-00433 (RP-CFB), 2011 

U.S. Dist. LEXIS 6577 (S.D. Iowa Jan. 24, 2011). Plaintiff argues Curran is 

inconsistent with the purported holding in Prudential that “the form of a 

transaction must yield to its substance to accomplish the salutary goals of the 

ICA.” (Pl. Br. at 25-26.) However, as discussed above, Prudential has no bearing 

on the issue presented here. 

Plaintiff also argues that she is different from the investor in Curran because 

she purportedly possesses “all of the indicia of ownership” of the Funds. (Pl. Br. 

at 9.) Citing no authority whatsoever, Plaintiff contends that “as a matter of 

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property and creditor law” she is “the holder of” the assets held by Separate 

Account A because they “are vulnerable to claims” by Plaintiff’s creditors. (Pl. Br. 

at 11.) Plaintiff’s uncorroborated interpretation of common law principles runs 

directly counter to New York statutes and relevant federal law.15 Plaintiff’s 

argument that she must be the “security holder” of the Funds because AXA sends 

her certain reports relating to the Funds also fails. Sery, 2008 U.S. Dist. LEXIS 

31647, at *12-13 (“[P]arties cannot alter statutory provisions by their conduct”).16 

II. PLAINTIFF IS NOT ENTITLED TO A REMEDY UNDER SECTION 

47(b) FOR ALLEGED VIOLATIONS OF SECTION 26(f). 

As Plaintiff concedes, there is no private right of action under Section 26(f) 

of the ICA. (Pl. Br. at 28.) Nevertheless, Plaintiff contends that she can end-run 

this limitation by asserting a private right of action under Section 47(b) for alleged 

violations of Section 26(f). Plaintiff’s argument fails. 

As a threshold matter, there is no private right of action under Section 47(b). 

Steinberg v. Janus Capital Mgmt., No. 10-1207, 2011 U.S. App. LEXIS 24053, at 

 

15 N.Y. Ins. Law. § 4240(a)(12) (requiring that AXA be the legal owner of the 

assets in Separate Account A); Young, 2 F. Supp. 2d at 926 (variable insurance 

investors “do not have a legal interest” in underlying funds). Defendants’ 

argument that Plaintiff lacks statutory standing is not, as Plaintiff contends, 

“premised” on this insurance statute or any other “state law.” See Def. Br. at 10-20 

(explaining that Plaintiff lacks standing based on federal law, including the text of 

Section 36(b) and the ICA, Section 817(d) of the I.R.C., and Curran). 

16 Furthermore, AXA sends Plaintiff reports relevant to the Funds not because 

AXA views her as a “stockholder of record” of the Funds under 17 C.F.R. § 

270.30e-1 (as Plaintiff contends), but rather because AXA is required to send those 

reports to each “shareholder of record” of Separate Account A under 17 C.F.R. § 

270.30e-2. 

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*14 (4th Cir. Dec. 2, 2011) (“[T]here is no private cause of action to enforce 

Section 47(b).”); Olmsted, 283 F.3d at 432-33 (the ICA does not afford a private 

right of action unless Congress “explicitly provides” for one). 

Furthermore, even if there was a private right of action under Section 47(b), 

in order to obtain the remedy afforded under that Section, Plaintiff “must assert a 

predicate violation of a substantive provision of the ICA which itself has a private 

right of action.” Smith, 2011 U.S. Dist. LEXIS 60877, at *24 (emphasis added). 

Plaintiff contends that this requirement is inconsistent with the Supreme Court’s 

decisions in Mills and Transamerica. (Pl. Br. at 30-32, 35.) But Mills and 

Transamerica are irrelevant—they each implied a private right of action under 

statutes other than the ICA, and did so under the discredited “ancien regime.” 

Olmsted, 283 F.3d at 434 (“Past decisions reflecting judicial willingness to ‘make 

effective [statutory] purpose’ in the context of implied rights of action belong to an 

‘ancien regime’” and are neither binding nor persuasive) (internal quotation 

omitted) (emphasis added); Smith, 2011 U.S. Dist. LEXIS 60877, at *21 

(“[Transamerica’s] interpretation of the IAA is distinguishable from the ICA.”). 

Plaintiff also contends that any such requirement would render Section 47(b) 

“superfluous, since a victimized investor could sue under the predicate statute.” 

(Pl. Br. at 35.) But Section 47(b) provides, at most, a specific remedy (not a right), 

and that remedy may be broader than the remedy otherwise available for the 

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underlying predicate violation. Smith, 2011 U.S. Dist. LEXIS 60877, at *17-18 

(Section 47(b) “provides a remedy rather than a distinct cause of action”). 

Remarkably, Plaintiff contends that whenever a provision of the ICA is 

silent as to whether the SEC may enforce it, a plaintiff may assert a private right of 

action for violations of that provision merely by “boot-strapping” it to a request for 

rescission under Section 47(b). (Pl. Br. at 28-29, 34.) Plaintiff ignores that the 

ICA expressly provides that the SEC has authority to enforce all sections of the 

ICA, including Section 26(f). 15 U.S.C. § 80a-41; In re Eaton Vance Mutual 

Funds Fee Litig., 380 F. Supp. 2d 222, 232 (S.D.N.Y. 2005) (Section 42 

“authorizes the SEC to enforce all provisions of the ICA” and the “‘express 

provision of one method of enforcing a substantive rule suggests that Congress 

intended to preclude others’”) (internal quotation omitted). 

Plaintiff’s proposed back-door method of implying private rights of action 

under the ICA also must be rejected under Olmsted and its progeny. Olmsted, 283 

F.3d at 432 (“‘[P]rivate rights of action to enforce federal law must be created by 

Congress.’”); see also Sandoval, 532 U.S. at 286-288 (courts may not imply a 

private right of action in contravention of statutory text, “no matter how desirable 

that might be as a policy matter”). Since Olmsted, only one court has ever implied 

a private right of action under any provision of the ICA (and that court was 

reversed), and at least 35 cases have cited Olmsted with approval in decisions 

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refusing to imply a private right of action under the ICA. (Def. Br. at 22-23.) 

Plaintiff cites no authority for finding—against this sea of precedent—that Section 

47(b) provides a basis for implying a private right of action under Section 26(f).17 

III. PLAINTIFF’S UNJUST ENRICHMENT CLAIM SHOULD BE 

DISMISSED. 

This Court should decline to exercise supplemental jurisdiction over 

Plaintiff’s unjust enrichment claim because each of Plaintiff’s federal claims must 

be dismissed. (Def. Br. at 25-26.) Plaintiff contends that her unjust enrichment 

claim is not a pendent state law claim, but rather is asserted under the “federal 

common law.” However, regardless of how Plaintiff labels it, Plaintiff’s unjust 

enrichment claim is not part of the federal common law.18 Texas Indus., Inc. v. 

Radcliff Materials, Inc., 451 U.S. 630, 641 (1981) (“[F]ederal common law exists 

 

17 The cases Plaintiff cites as recognizing a private right of action under Section 

47(b) were decided under the ancien regime. (Pl. Br. at 32.) In fact, one of those 

cases (Blatt) is specifically cited and rejected in Olmsted as a case decided under 

that discredited regime. Olmsted, 283 F.3d at 434 n.4. Likewise, any opinion 

expressed by the SEC in the amicus brief Plaintiff cites is irrelevant. Piper v. 

Chris-Craft Indus., Inc., 430 U.S. 1, 42 n.27 (1977) (the SEC’s “presumed 

‘expertise’ in the securities-law field is of limited value when the narrow legal 

issue is one peculiarly reserved for judicial resolution, namely whether a cause of 

action should be implied by judicial interpretation”) (emphasis added); ForemostMcKesson, Inc. v. Provident Sec. Co., 423 U.S. 232, 259-60 (U.S. 1976) (rejecting 

SEC’s views in amicus brief from separate case because SEC had “not appeared as 

an amicus in [Foremost]” and its “theory did not reflect the intent of Congress”). 18 The only case Plaintiff cites in support of this argument is wholly irrelevant. 

C.H. Sanders Co., Inc. v. BHAP Housing Dev. Fund Co., 903 F.2d 114 (2d Cir. 

1990) (court had jurisdiction over equitable claim to enforce a judgment against 

federal agency because claim “arose under” federal common law and a federal 

statute); see also Woodward Governor Co. v. Curtiss-Wright Flight Sys., 164 F.3d 

129-30 (2d Cir. 1999) (rejecting unjust enrichment claim as basis for jurisdiction 

and distinguishing C.H. Sanders because there the defendant was “an 

instrumentality of the federal government”). 

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only in such narrow areas as those concerned with the rights and obligations of the 

United States, interstate and international disputes implicating the conflicting 

rights of States or our relations with foreign nations, and admiralty cases.”); 

Woodward, 164 F.3d at 130 (“A Plaintiff cannot establish federal question 

jurisdiction simply by asserting equitable rights under the federal common law.”). 

And contrary to what Plaintiff contends, there is nothing in Sections 44 or 47(b) of 

the ICA that requires this Court to exercise jurisdiction over an unjust enrichment 

claim. 15 U.S.C. §§ 80a-43, 80a-46(b). 

Additionally, notwithstanding that Plaintiff is not a “security holder” for 

purposes of Section 36(b), Plaintiff’s unjust enrichment claim still must be asserted 

derivatively on behalf of the Funds. Whether Plaintiff is required to assert this 

claim derivatively is determined by the law of the state of incorporation (here, 

Delaware)—not by Section 36(b). (Def. Br. at 26-27.) Under Delaware law, 

“shareholder” includes both record and beneficial holders for purposes of 

derivative actions. Jones v. Taylor, 348 A.2d 188, 190 (Del. 1975) (“[U]nder 

Delaware law . . . for purposes of a derivative action, the term ‘stockholder’ . . . 

includes an equitable owner.”). Plaintiff alleges that she is a beneficial owner of 

the Funds. Therefore, she must assert the unjust enrichment claim derivatively, 

and she has not done so. For this reason as well, the claim should be dismissed.

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CONCLUSION

Defendants’ Motion to Dismiss the Amended Complaint with prejudice 

should be granted. 

Dated: March 5, 2012 

BLANK ROME LLP 

By: /s/ Jonathan M. Korn 

Jonathan M. Korn 

301 Carnegie Center, 3rd Floor 

Princeton, NJ 08540 

 MILBANK, TWEED, HADLEY & 

MCCLOY LLP 

James N. Benedict (pro hac vice) 

Sean M. Murphy (pro hac vice) 

Andrea G. Hood 

Will P. Gross 

1 Chase Manhattan Plaza 

New York, NY 10005-1413 

(212) 530-5000 

Attorneys for Defendants 

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