Court Opinion

ID: 2805994
Source: CourtListenerOpinion
Date Created: 2015-06-05 20:01:23.347058+00
Date Added: 2024-06-11T12:05:56.795544
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                 JUN 05 2015

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

GEORGIA ALEXANDER, on behalf of                  No. 13-55726
herself and all others similarly situated,
                                                 D.C. No. 8:12-cv-00813-JVS-AN
              Plaintiff - Appellant,

 v.                                              MEMORANDUM*

CITIGROUP GLOBAL MARKETS INC.
and MORGAN STANLEY SMITH
BARNEY, LLC,

              Defendants - Appellees.

                   Appeal from the United States District Court
                      for the Central District of California
                    James V. Selna, District Judge, Presiding

                             Submitted June 2, 2015**
                               Pasadena, California

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: THOMAS, Chief Judge, CALLAHAN, Circuit Judge and SINGLETON,***
Senior District Judge.

      Plaintiff-Appellant Georgia Alexander appeals the dismissal of her claims

for securities fraud under Section 10(b) of the Securities Exchange Act, 15 U.S.C.

§ 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5; violation of SEC Rule 10b-

16, 17 C.F.R. § 240.10b-16; and breach of fiduciary duty under California law.

Because the parties are familiar with the facts and procedural history, we do not

restate them except as necessary to explain our decision. We have jurisdiction

under 28 U.S.C. § 1291, and we affirm.

      1.      Plaintiffs asserting Rule 10b-5 claims must allege that the defendant

made a material false statement or omission, and must also allege a strong

inference of scienter. Rubke v. Capitol Bankcorp. Ltd., 551 F.3d 1156, 1164–65

(9th Cir. 2009). The express terms of Alexander’s client agreements explained that

Morgan Stanley could sell her stock without demand for payment and without

notice in order to meet margin requirements, and that Morgan Stanley could

change the margin requirements without notice. The account conversion materials

also explained that Alexander could see a change in borrowing power and margin

requirements after the conversion. Given these express disclosures, Alexander did

        ***
             The Honorable James K. Singleton, Senior District Judge for the U.S.
District Court for the District of Alaska, sitting by designation.

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not sufficiently allege falsity or scienter. A more compelling explanation is that

Morgan Stanley acted without fraudulent intent.

      2.     Plaintiffs asserting Rule 10b-16 claims must adequately plead

scienter. Robertson v. Dean Witter Reynolds, 749 F.2d 530, 540 (9th Cir. 1984).

Alexander’s 10b-16 claim fails to adequately plead scienter for the same reasons as

her Rule 10b-5 claims.

      3.     Under California law, a claim for breach of fiduciary duty must allege

the existence of a fiduciary relationship, a duty imposed by the relationship, breach

of that duty by the defendant, and damages from the breach. City of Atascadero v.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 80 Cal. Rptr. 2d 329, 355 (Cal. Ct.

App. 1998). Because the express terms of the client agreements allowed Morgan

Stanley to sell Alexander’s stock without demand for payment and without notice

in order to meet margin requirements, and allowed Morgan Stanley to change the

margin requirements without notice, Morgan Stanley did not breach any duty it

may have owed to Alexander. Moreover, to the extent the breach of fiduciary duty

claim was based on false statements or non-disclosures, it is precluded by the

Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. § 77p(b). See

Madden v. Cowen & Co., 576 F.3d 957, 965 (9th Cir. 2009).

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      4.     A district court's decision to allow amendment is reviewed for abuse

of discretion, and the district court has broad discretion where the plaintiff has

previously filed an amended complaint. United States ex rel. Cafasso v. Gen.

Dynamics C4 Sys., Inc., 637 F.3d 1047, 1058 (9th Cir. 2011). Leave to amend is

not required where granting leave would be futile. Id. Alexander has already filed

three amended complaints, and she does not explain what further amendments she

might make to cure the pleading deficiencies. The district court did not abuse its

discretion in denying further leave to amend.

      AFFIRMED.

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