Twiss v. Kury
| Decision Date | 20 July 1994 |
| Docket Number | No. 92-2475,92-2475 |
| Citation | 25 F.3d 1551 |
| Court | U.S. Court of Appeals — Eleventh Circuit |
| Parties | Fed. Sec. L. Rep. P 98,327 Dorothy G. TWISS and Armin R. Twiss, Plaintiffs-Appellants, v. David J. KURY, Kury Financial Planning Group, Inc., Associated Planners Securities Group, American Capital Equities Corp., Robert E. Hillard, Prudential-Bache Securities Corp., Defendants, Shearson Lehman Hutton, Inc., Defendant-Appellee. Martha P. SANDERS, Plaintiff-Appellant, v. David J. KURY, Kury Financial Planning Group, Inc., Associated Planners Securities Group, American Capital Equities Corp., Robert E. Hillard, Prudential-Bache Securities Corp., Defendants, Shearson Lehman Hutton, Inc., Defendant-Appellee. James R. ADDONIZIO, Plaintiff-Appellant, v. David J. KURY, Kury Financial Planning Group, Inc., Associated Planners Securities Group, American Capital Equities Corp., Robert E. Hillard, Prudential-Bache Securities Corp., Defendants, Shearson Lehman Hutton, Inc., Defendant-Appellee. Jeffrey B. MILLER, Plaintiff-Appellant, v. David J. KURY, Kury Financial Planning Group, Inc., Associated Planners Securities Group, American Capital Equities Corp., Robert E. Hillard, Prudential-Bache Securities Corp., Defendants, Shearson Lehman Hutton, Inc., Defendant-Appellee. J. Letcher LAMKIN, Plaintiff-Appellant, v. David J. KURY, Kury Financial Planning Group, Inc., Associated Planners Securities Group, American Capital Equities Corp., Robert E. Hillard, Prudential-Bache Securities Corp., Defendants, Shearson Lehman Hutton, Inc., Defendant-Appellee. David O. STEFL and Patricia A. Stefl, Plaintiffs-Appellants, v. David J. KURY, Kury Financial Planning Group, Inc., Associated Planners Securities Group, American Capital Equities Corp., Robert E. Hillard, Prudential-Bache Securities Corp., Defendants, Shearson Lehman Hutton, Inc., Defendant-Appellee, Mary M. Warner, Plaintiff. |
H. Michael Madsen, John G. Crabtree, Tallahassee, FL, for appellant.
Nicholas V. Pulignano, Jr., Jacksonville, FL, for appellee.
Appeal from the United States District Court for the Northern District of Florida.
Before COX, Circuit Judge, JOHNSON, Senior Circuit Judge, and PAINE *, Senior District Judge.
Dorothy G. Twiss, Armin R. Twiss, Martha P. Sanders, James R. Addonizio, Jeffrey B. Miller, J. Letcher Lamkin, David O. Stefl, and Patricia A. Stefl (collectively the "Investors") appeal from summary final judgments entered in this consolidated action in favor of Shearson Lehman Hutton, Inc. ("Hutton"), a securities brokerage firm. Because the district court erroneously held that, as a matter of law, Hutton owed no duty under Florida law to the Investors in this case, we reverse the court's order of summary judgment on the Investors' negligence claims and remand for further proceedings. We, however, affirm the court's grant of summary judgment in favor of Hutton on the Investors' aiding and abetting claims because private plaintiffs no longer may maintain such a cause of action.
From 1978 until January 1984, David J. Kury ("Kury") was a registered sales representative with E.F. Hutton & Company, Inc., 2 and was the manager of Hutton's Pensacola branch office. In 1983, Kury's supervisor, Fred Ronald Brown ("Brown"), discovered that Kury had taken money from several of his clients in exchange for personal and corporate promissory notes. Since he was "very definitely" concerned, Brown immediately notified Hutton's legal department and regional vice president. Brown subsequently asked Kury for a list of the people to whom Kury or his corporation owed money and the amount owed. Hutton then sent letters to all such customers and asked them to verify that Hutton was not obligated on Kury's promissory notes. There is evidence that Brown was aware that Kury's actions violated Hutton's internal rules and policies, the Rules of Fair Practice of the National Association of Securities Dealers ("NASD"), as well as state and federal securities laws. 3 In January 1984, Brown requested and received Kury's resignation.
In February 1984, Hutton filed a Uniform Termination Notice For Securities Industry Registration ("Form U-5") concerning Kury's resignation. Hutton reported on the Form U-5 that Kury's termination was voluntary 4 and that it had no "reason to believe" that Kury had violated any state or federal law or regulation or had "engaged in conduct which may be inconsistent with just and equitable principles of trade."
Following his termination with Hutton, Kury went to work as a registered sales representative with Prudential-Bache Securities Corporation ("Prudential"). Kury also served as branch office manager of Prudential's Escambia County office. In March 1985, Kury left Prudential and obtained employment with Associated Planners Securities Corporation ("Associated"), where he worked as a registered sales representative and registered principal. In October 1985, Kury Financial Planning Group, Inc. ("Kury Financial") was incorporated under the laws of the State of Florida, and Kury served as director and sole shareholder of that entity. After leaving Associated in April 1987, Kury became the registered sales representative, registered principal, and branch office manager of American Capital Equities Corporation ("American").
In May 1988, the Florida Department of Banking and Finance (the "Department") began an investigation of Kury's affairs involving the sale of promissory notes issued by Kury or Kury Financial. In January 1989, a hearing officer with the Florida Division of Administrative Hearings issued a recommended order and found, inter alia, that Kury and Kury Financial had sold approximately $2.4 million worth of personal and corporate notes to at least fifty investors 5 and that Kury's activities constituted, at least in part, the operation of a "pyramid" or "ponzi" scheme. 6 The Department permanently revoked Kury's securities license by final order entered in April 1989.
The Investors, persons who became Kury's clients subsequent to his resignation from Hutton, thereafter brought the instant action against Kury, Hutton, and several other defendants. The Investors sued Hutton in negligence for lack of due care and breach of duty to Kury's then and future customers that Hutton allegedly exhibited in misrepresenting the reasons for Kury's termination and in failing to report properly to the regulatory authorities. The Investors also asserted claims against Hutton for aiding and abetting violations of Section 10(b) of the Securities Exchange Act of 1934, 7 and Rule 10b-5 promulgated thereunder. 8 Hutton eventually moved for summary final judgment. Although it concluded that genuine issues of fact exists, the district court nevertheless entered summary judgment on the Investors' negligence claims on the basis that Hutton owed no duty under Florida law to the Investors. The court also granted summary judgment in favor of Hutton on the Investors' aiding and abetting claims. The Investors have timely appealed the district court's rulings.
A district court's grant of summary judgment is reviewed de novo by an appellate court. Thrasher v. State Farm Fire & Cas. Co., 734 F.2d 637, 638 (11th Cir.1984). "When we examine a decision granting or denying summary judgment, we apply the same legal standards that control the district court's determination." Mercantile Bank & Trust Co. v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir.1985) (citing Environmental Defense Fund v. Marsh, 651 F.2d 983, 991 (5th Cir.1981) 9).
Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any 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, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986). There is no genuine issue for trial where the record could not lead a rational trier of fact to find for the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538, 552 (1986). When the non-moving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it has the burden of proof at trial, there is no genuine issue of material fact and summary judgment in favor of the movant is appropriate. Schmelz v. Monroe County, 954 F.2d 1540, 1543-44 (11th Cir.1992) (citing Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. at 2552-53, 91 L.Ed.2d at 273).
The party seeking summary judgment bears the burden of demonstrating that no genuine dispute exists as to any material fact in the case. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142, 154 (1970); Clemons v. Dougherty County, Georgia, 684 F.2d 1365, 1368 (11th Cir.1982). In determining whether a movant has met this burden, the court must review the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion. Adickes, 398 U.S. at 157, 90 S.Ct. at 1608, 26 L.Ed.2d at 154. "Summary judgment should only be entered when the moving party has sustained its burden of showing the absence of a genuine issue as to any material fact when all evidence is viewed in the light most favorable to the non-moving party." Morrison v. Washington County, Alabama, 700 F.2d 678, 682 (11th Cir.), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983) (citing Adickes, 398 U.S. at 157, 90 S.Ct. at 1608, 26 L.Ed.2d at 154).
"[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202,...
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