Opinion ID: 184135
Heading Depth: 2
Heading Rank: 1

Heading: Factual Background: Investment Advisers Act Claim

Text: In 2001, Plaintiffs met with Jeffrey Laxton, a Financial Services Representative (FSR) employed by Met. CJA [1] 130. Mr. Laxton analyzed the Thomases' financial situation and advised them on how to allocate the funds in their 401(k). Id. 142. Met required its FSRs to conduct this suitability analysis to ensure that they recommended appropriate investment and insurance products. JA 294-97, 309-10. Mr. Laxton was not compensated upon completing the suitability analysis. Id. at 337. In April of 2003, the Thomases had a child and became interested in purchasing financial assets to secure the child's future. CJA 142-43. Based in part on his prior financial analysis, Mr. Laxton advised them to purchase a variable universal life insurance policy (VULP) from Met. Id. 144. Plaintiffs promptly heeded this advice. Id. They have since paid a $91.00 monthly premium. Id. The VULP's prospectus stated that 2.25% of the premiums were dedicated to compensating FSRs. Id. at 146. After the sale, Met paid Mr. Laxton a $500 production credit. Id. at 147; JA 393. Met compensates FSRs based on their sales of proprietary products. CJA 147. If FSRs fail to sell enough products, they may be terminated. Id. Met's marketing policy, according to Plaintiffs, requires FSRs to provide investment advice to potential customers as a means to sell more proprietary products. Id. at 138. This policy was so pervasive that FSRs allegedly gave financial advice to every customer to whom they sold a product. Id. In their complaint, Plaintiffs contend that FSRs are investment advisers subject to regulation under the IAA. Id. at 2. The IAA, inter alia, imposes fiduciary duties on investment advisers. See SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191-92, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963). Plaintiffs allege that Mr. Laxton (and, derivatively, Met) violated the IAA by failing to disclose that he had strong incentives to sell Met's proprietary products, as opposed to giving unbiased advice. CJA 2. Defendants claim that Mr. Laxton falls within the IAA's so-called broker-dealer exemption, which exempts from the IAA brokers and dealers who give advice solely incidental to their conduct as a broker-dealer and who receive no special compensation for the advice. JA 155-56; 15 U.S.C. § 80b-2(a)(11)(C) (2006). The district court agreed with Defendants and granted summary judgment on this basis. See Thomas v. Metro. Life Ins. Co., No. 07-0121, 2009 WL 2778663, at -9 (W.D.Okla. Aug.31, 2009). So far as we are aware, application of the broker-dealer exemption to these circumstances is an issue of first impression among the federal appellate courts. Before we reach the district court's grant of summary judgment, however, we must discuss the case's procedural history and Plaintiffs' claim that the district court should have granted leave to amend the complaint.