Court Opinion

ID: 218172
Source: CourtListenerOpinion
Date Created: 2011-06-07 00:02:15+00
Date Added: 2024-06-11T17:28:35.254409
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              JUN 06 2011

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

ELLEN STOODY-BROSER, individually                No. 09-17112
and on behalf of all others similarly
situated,                                        D.C. No. 3:08-cv-02705-JSW

              Plaintiff - Appellant,
                                                 MEMORANDUM*
  v.

BANK OF AMERICA, N.A. and BANK
OF AMERICA CORPORATION,

              Defendants - Appellees.

                   Appeal from the United States District Court
                      for the Northern District of California
                    Jeffrey S. White, District Judge, Presiding

                       Argued and Submitted May 11, 2011
                            San Francisco, California

Before: HUG and PAEZ, Circuit Judges, and WATSON,** District Judge.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable Michael H. Watson, District Judge for the U.S.
District Court for Southern Ohio, Columbus, sitting by designation.
      Ellen Stoody-Broser appeals the district court’s order dismissing her class

action complaint against Bank of America (“BOA”) pursuant to Fed. R. Civ. P.

12(b)(6) as well as the court’s denial of leave to amend the complaint. We have

jurisdiction under 28 U.S.C. § 1291. We affirm the district court’s order

dismissing the complaint, but we remand with instructions to grant Stoody-Broser

leave to amend.

      The Securities Litigation Standards Act of 1998 (“SLUSA”) provides that

“[n]o covered class action based upon the statutory or common law of any State . .

. may be maintained in any State or Federal court by any private party alleging–

(A) a misrepresentation or omission of a material fact in connection with the

purchase or sale of a covered security; or (B) that the defendant used or employed

any manipulative or deceptive device or contrivance in connection with the

purchase or sale of a covered security.”1 15 U.S.C. § 78bb(f)(1). We have held

that “[m]isrepresentation need not be a specific element of the claim to fall within

[SLUSA]’s preclusion.” Proctor v. Vishay Intertechnology Inc., 584 F.3d 1208,

1222, n.13 (9th Cir. 2009).

      1
        Here, there is no dispute that the complaint pleads a "covered class action,"
see 15 U.S.C. § 78bb(f)(5)(B), that the claims are "based on" state common law,
see 15 U.S.C. § 78bb(f)(1), or that the complaint's allegations concern a "covered
security," see 15 U.S.C. §§ 78bb(f)(5)(E), 77r(b).

                                          2
      Stoody-Broser’s complaint alleges omissions of material fact and deceptive

practices in connection with BOA’s investment in proprietary mutual funds. For

instance, the complaint alleges that the trust beneficiaries had no advance

knowledge of BOA’s investments and that they only learned about the investments

after they were made. The complaint also alleges that BOA failed to document its

transactions and make such documentation available. The complaint further

alleges that these omissions allowed BOA to reap millions as part of an unlawful

“scheme.” The district court correctly ruled that the essence of these allegations is

that BOA fraudulently engaged in self-dealing. See Segal v. Fifth Third Bank, 581

F.3d 305 (6th Cir. 2009) (holding that similar complaint was precluded by

SLUSA); Siepel v. Bank of America, 526 F.3d 1122 (8th Cir. 2008) (same); Kutten

v. Bank of America, 530 F.3d 669 (8th Cir. 2008) (same). Accordingly, we agree

with the district court that Stoody-Broser’s complaint, as currently drafted, is

precluded under SLUSA.

      We are not convinced, however, that amendment of the complaint would be

futile.2 “Dismissal without leave to amend is improper unless it is clear, upon de

      2
        Although Stoody-Broser did not challenge the district court’s denial of
leave to amend in her opening brief, we exercise our discretion to review whether
denial of such relief was proper. See Vasquez v. Holder, 602 F.3d 1003, 1010 n.6
(9th Cir. 2010).

                                          3
novo review, that the complaint could not be saved by any amendment.” Gompper

v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002) (quoting Polich v. Burlington

Northern, Inc., 942 F.2d 1467, 1472 (9th Cir.1991)). We recognize the danger of

artful pleading, and we do not hold that the removal or the addition of any specific

allegation will necessarily avoid preclusion of the breach of fiduciary duty claim in

this case. We believe, however, that a complaint may allege a violation of a trust

administrator’s fiduciary duty to the trust’s beneficiaries even where that violation

involves trading in covered securities so long as the complaint does not allege,

either expressly or implicitly, misrepresentations, omissions, or fraudulent

practices coincidental to the violation. We therefore remand so that Stoody-Broser

may be given the opportunity to plead such a complaint.

      AFFIRMED in part; REVERSED in part and REMANDED.

      Each side to bear their own costs on appeal.

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