Sistrunk v. Haddox
| Decision Date | 31 March 2021 |
| Docket Number | CIVIL ACTION NO. 18-516 |
| Parties | GLYNN DALE SISTRUNK, ET AL. v. GREGORY LAMAR HADDOX, ET AL. |
| Court | U.S. District Court — Western District of Louisiana |
Now before the Court is a Motion for Summary Judgment, filed by Defendant Gregory Haddox ("Haddox") pursuant to Federal Rule of Civil Procedure 56. [Record Document 176]. The motion has been fully briefed. [Record Documents 176-77, 183-84, & 189-90]. For the reasons discussed below, the Motion for Summary Judgment [Record Document 176] is GRANTED IN PART and DENIED IN PART.
Plaintiffs Glynn and Lawana Sistrunk ("Plaintiffs") filed the instant lawsuit against their former investment advisor Gregory Haddox and Haddox's investment firm, Lincoln Financial Advisors Corporation ("LFA"), for allegedly churning their accounts and other fraudulent activity. Record Document 1, ¶s 8-9 & 27. Plaintiffs allege that this churning occurred through Haddox's and LFA's "repeated buying and selling [surrendering and taking distributions and liquidating] plaintiffs' investments [annuities]" for the purpose of generating excessive fees for themselves. Id. at ¶ 128. Shortly after filing suit, Plaintiffs amended their complaint to properly name LFA, which their original complaint misidentified as Lincoln National Corporation. See Record Documents 7 & 9. In March of 2019, Plaintiffs amended their complaint again to add several new Defendants, including Jackson National Life Insurance Company ("Jackson") and Allianz Life Insurance Company of North America ("Allianz"). Record Document 84, pp. 2-3. Plaintiffs allege that Haddox was a "licensed, authorized agent and employee" of Jackson and Allianz, both licensed securities and annuity dealers, and as such, Jackson and Allianz were therefore liable for the acts, omissions, and fault of Haddox. Id. at 3, 5-6. Aside from adding new Defendants, Plaintiffs re-adopted and re-alleged the entirety of their amended complaint with only minor substantive changes. Id. at 2. Plaintiffs have since dismissed their claims against LFA. Record Document 152. The Court dismissed all claims against Jackson and Allianz. Record Documents 157, 181, & 186. The only remaining Defendants are Haddox, National Union Fire Insurance Company of Pittsburg, PA, and Continental Casualty Company. See Record Document 186.
Plaintiffs assert a variety of federal and state law claims against Haddox, including negligence, breach of trust and fiduciary duties, violation of Texas's deceptive trade practices laws, violation of Louisiana's Blue Sky laws, misrepresentation, fraud, unjust enrichment, breach of contract, civil conspiracy, violation of the Texas Securities Act, and violation of the Securities Act of 1934, 15 U.S.C. § 78. Record Document 9, ¶s 133-64. Plaintiffs request judgment in their favor for all reasonable damages they sustained, legal interest, attorney's fees, and court costs. Record Document 84, p. 8. Now, Haddox has filed a Motion for Summary Judgment seeking to dismiss all claims against him.
Federal Rule of Civil Procedure 56(a) directs a court to "grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Summary judgment is appropriate when the pleadings, answers to interrogatories, admissions, depositions, and affidavits on file indicate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). When the burden at trial will rest on the non-moving party,the moving party need not produce evidence to negate the elements of the non-moving party's case; rather, it need only point out the absence of supporting evidence. See id. at 322-23.
If the movant satisfies its initial burden of showing that there is no genuine dispute of material fact, the non-movant must demonstrate that there is, in fact, a genuine issue for trial by going "beyond the pleadings and designat[ing] specific facts" for support. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citing Celotex, 477 U.S. at 325). "This burden is not satisfied with some metaphysical doubt as to the material facts," by conclusory or unsubstantiated allegations, or by a mere "scintilla of evidence." Id. (internal quotation marks and citations omitted). However, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1985) (citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59 (1970)). While not weighing the evidence or evaluating the credibility of witnesses, courts should grant summary judgment where the critical evidence in support of the non-movant is so "weak or tenuous" that it could not support a judgment in the non-movant's favor. Armstrong v. City of Dall., 997 F.2d 62, 67 (5th Cir. 1993).
Additionally, Local Rule 56.1 requires the movant to file a statement of material facts as to which it "contends there is no genuine issue to be tried." The opposing party must then set forth a "short and concise statement of the material facts as to which there exists a genuine issue to be tried." W.D. La. R. 56.2. All material facts set forth in the movant's statement "will be deemed admitted, for purposes of the motion, unless controverted as required by this rule." Id.
Plaintiffs have brought claims under federal law, Texas law, and Louisiana law. The Court will analyze each in turn.
15 U.S.C. § 77c(a). However, the United States Supreme Court has found that the classification of a product as an annuity is not dispositive as to whether the SEA's insurance exemption applies. See SEC v. Variable Annuity Life Ins. Co. of Am. (VALIC), 359 U.S. 65 (1959); SEC v. United Ben. Life Ins. Co., 387 U.S. 202 (1967). Typically, fixed annuities are insurance and exempted under § 77c(a)(8). However, variable annuities are considered securities under federal law. See VALIC, 359 U.S. 65 (1959). A third type of annuity, the fixed index annuity ("FIA"), has traits of both fixed annuities and variable annuities. The state of the law is not clear as to whether FIAs are more akin to variable annuities or fixed annuities. See Am. Equity Inv. Life Ins. Co. v. SEC, 613 F.3d 166 (D.C. Cir. 2010); Malone v. Addison Ins. Mktg., Inc., 225 F. Supp. 2d 743, 748-51 (W.D. Ky. 2002); Van Dyke v. White, 2019 IL 121452, 131 N.E.3d 511, 526 n.5. Haddox states that the annuities at issue are fixed annuities and thus exempted from the SEA. Record Documents 176-1, pp. 11, 14; 189, pp. 1-2. Plaintiffs did not even respond to this assertion even though it was the crux of Haddox's SEA argument. Plaintiffs' failure to respond indicates acquiescence to the fact that the annuities atissue are exempt from federal securities law. Thus, for the purpose of summary judgment, the Court deems it admitted that the annuities at issue should be treated like fixed annuities.1 See Fed. R. Civ. P. 56(e)(2). As such, the SEA does not apply to these annuities. Therefore, Haddox's motion for summary judgment as to Plaintiffs' federal law claims is GRANTED.
Plaintiffs, who reside in Kilgore, Texas, allege that Haddox is liable to them for violating the Texas Securities Act ("TSA") and the Texas Deceptive Trade Practices Act ("DTPA"). The Court will address each in turn.
Plaintiffs allege that Haddox violated the TSA, which imposes liability on sellers who make false statements or omissions related to the sale of securities. Record Document 9, ¶s 148-54; see Tex. Rev. Civ. Stat. art. 581-33(A)(2). However, in the Court's prior opinion in this case, it dismissed Plaintiffs' claims under the TSA against Jackson and Allianz because Plaintiffs' claims arise from the sale of annuities, not securities. See Sistrunk v. Haddox, No. 18-516, 2020 WL 2549699, at *10 (W.D. La. May 19, 2020). Like the SEA, a prerequisite for maintaining suit under the TSA is the sale of securities. Unlike the SEA, the TSA exempts all annuities from its coverage regardless of the type. See Tex. Rev. Civ. Stat. Ann. art. 581-4(A) (); Gallier v. Woodbury Fin. Servs., Inc., No. H-14-888, 2015 WL 1296351, at *11 (S.D. Tex. Mar. 23, 2015) (). Thus, Plaintiffs' claims against Haddox arising from the sale of annuities do not give rise to a cause of action under the TSA. Accordingly, the motion for summary judgment is GRANTED with respect to Plaintiffs' claims under the TSA.
In Pl...
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