Unity House, Inc. v. North Pacific Inv., Inc., Civil No. 93-00764 ACK.
| Decision Date | 16 January 1996 |
| Docket Number | Civil No. 93-00764 ACK. |
| Citation | 918 F. Supp. 1384 |
| Parties | UNITY HOUSE, INC., Plaintiff, v. NORTH PACIFIC INVESTMENTS, INC., et al., Defendants. |
| Court | U.S. District Court — District of Hawaii |
COPYRIGHT MATERIAL OMITTED
Randall N. Harakal, Shigemura & Harakal, Honolulu, HI, Robert Carson Godbey, Gilbert & Jeynes, Honolulu, HI, William A. Sokol, Sandra Rae Benson, Van Bourg Weinberg Roger & Rosenfeld, Oakland, CA, for Unity House, Inc.
Samuel P. King, Jr., Honolulu, HI, Steven J. Thomas, Wallace M. Rudolph, Law Offices of Steven J. Thomas, Enumclaw, WA, for North Pacific Investments, Inc., Stafford Mew.
Kevin S.W. Chee, Keith K. Kato, Phil Y. Kouyoumdjian, Chee & Markham, Honolulu, HI, for Jack M.K. Gonzales.
Jack M.K. Gonzales, Honolulu, HI, pro se.
James E. Duffy, Jr., Lee T. Nakamura, Fujiyama Duffy & Fujiyama, Honolulu, HI, Colbert M. Matsumoto, Matsumoto LaFountaine & Chow, Honolulu, HI, for James K. Tam.
Charles E. Andrews, Chicago, IL, pro se.
Andrews & Associates, Chicago, IL, pro se.
Margaret Ann Leong, Law Offices of Jay T. Suemori, Honolulu, HI, for Roberta Lea Kapioalani Cabral, Individually dba R. Cabral & Associates, Defalco Pacific Advertising, a subsidiary of Delfalco West Advertising, Island West Extraordinaire, and Sky Television, Inc.
Mark D. Bernstein, Honolulu, HI, for Michael Chatzky, Individually dba Chatzky & Associates.
Margaret E. Di Donna, Ashford & Wriston, Honolulu, HI, Joan M. Kubalanza, Scott E. Early, Nehad S. Othman, Foley & Lardner, Chicago, IL, for First Commercial Financial Group.
Leroy E. Colombe, Trevor A. Brown, Chun Kerr Dodd & Kaneshige, Honolulu, HI, for Fidelity Brokerage Services, Inc.
Bruce L. Lamon, Goodsill Anderson Quinn & Stifel, Honolulu, HI, for Charles Schwab, Inc.
William A. Sokol, Van Bourg Weinberg Roger & Rosenfeld, Oakland, CA, Robert Carson Godbey, Gilbert Jackson & Godbey, Honolulu, HI, for Anthony Rutledge, Orlando Soriano, Roderick Rodriguez, James Walter, Gilbert Farias.
Calvin E. Young, Ayabe Chong Nishimoto Sia & Nakamura, Pauahi Tower, Honolulu, HI, for Reynaldo D. Graulty.
ORDER GRANTING DEFENDANTS CHARLES SCHWAB & CO., INC. AND FIDELITY BROKERAGE SERVICES, INC.'S MOTIONS FOR SUMMARY JUDGMENT
Defendants Charles Schwab & Co., Inc. ("Schwab") and Fidelity Brokerage Services, Inc. ("Fidelity") have filed motions for summary judgment against plaintiff Unity House, Inc. ("Unity House"), contending that they are so entitled because the trading accounts at issue opened at defendants' branches in Washington state by North Pacific Investments, Inc. ("NPI"), allegedly with monies misappropriated from Unity House, were nondiscretionary. Defendants contend that because they had no control over trading decisions by NPI, and no knowledge that NPI was investing on behalf of Unity House, they owed Unity House no duties supporting any claims against them.
On January 9, 1996, the Court heard defendants' motions. Defendants and plaintiff appeared through counsel. Upon considering the papers submitted by the parties, the arguments of counsel and the record, the Court hereby GRANTS both defendants' motions for summary judgment. The Court further DENIES plaintiff's request for a Rule 56(f) continuance.
The Second Amended Complaint alleges that various officers and employees1 of defendant NPI, a Washington corporation, induced Unity House to participate in a putative international banking transaction described as "prime bank paper." This solicitation took place in Hawaii.
Defendant Charles Andrews was the president and owner of defendant Andrews & Associates (collectively, "Andrews"), a commodities brokerage firm located in Illinois. Andrews is alleged to have assisted NPI in inducing Unity House to participate in the "prime bank paper" transaction by (1) vouching for NPI's ability to complete such a transaction; (2) assuring prospective investors and borrowers that "bank paper" would be provided; (3) causing a foreign bank account to be established for NPI; and (4) agreeing to negotiate and purchase the so-called prime bank instruments on behalf of NPI.
Accordingly, in January 1993, NPI, Andrews, and other defendants prepared a "Private Participation Agreement," pursuant to which Unity House was to take part in the "prime bank paper" transaction. Unity House executed the agreement. Andrews assisted in opening a Swiss bank account, into which Unity House transferred $10 million dollars for the limited purpose of the purchase and sale of the prime bank debt obligations.
Rather than investing the monies in the "prime bank paper" transaction, however, from February through April 1993, NPI and/or other defendants allegedly diverted monies from the Swiss bank account into NPI's bank account in Washington and then to a discretionary trading account with First Commercial Financial Group2 and to trading accounts with Schwab and Fidelity, two discount brokerages. NPI lost a significant amount of money trading in its Schwab and Fidelity accounts.
Summary judgment shall be granted where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). One of the principal purposes of the summary judgment procedure is to identify and dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).
The United States Supreme Court has declared that summary judgment must be granted against a party who fails to demonstrate facts to establish an element essential to his case where that party will bear the burden of proof of that essential element at trial. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. "If the party moving for summary judgment meets its initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact citations omitted, the nonmoving party may not rely on the mere allegations in the pleadings in order to preclude summary judgment." T.W. Elec. Serv. v. Pacific Elec. Contractors Assoc., 809 F.2d 626, 630 (9th Cir.1987).
Rather, Rule 56(e) requires that the nonmoving party set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that there is a genuine issue for trial. T.W. Elec. Serv., 809 F.2d at 630. At least some "significant probative evidence tending to support the complaint" must be produced. Id. Legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978).
The standard for a grant of summary judgment reflects the standard governing the grant of a directed verdict. See Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th Cir.1987) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986)). Thus, the question is whether "reasonable minds could differ as to the import of the evidence." Anderson, 477 U.S. at 250-51, 106 S.Ct. at 2511.
The Ninth Circuit has established that "no longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment." California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987). Moreover, the United States Supreme Court has stated that "when the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Indeed, "if the factual context makes the nonmoving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." Franciscan Ceramics, 818 F.2d at 1468 (emphasis in original) (citing Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356). Of course, all evidence and inferences to be drawn therefrom must be construed in the light most favorable to the nonmoving party. T.W. Elec. Serv., 809 F.2d at 630-31.
The central issue in defendants' motions is whether the trading accounts with Schwab and Fidelity were discretionary or nondiscretionary. Defendants contend essentially that because the accounts were nondiscretionary, defendants owed no duties to Unity House and therefore Unity House can assert no claims against them.
Defendants also argue that (1) there is no private right of action for violations of NYSE and NASD rules; (2) Unity House's claims for churning must be dismissed because (i) defendants had no control over the accounts and (ii) there is no private right of action for churning under Section 15 of the Securities Exchange Act ("Act"); (3) Unity House has no standing to bring a private right of action under Section 10(b) of the Act because it was neither a "purchaser" nor a "seller" of securities; (4) there is no liability under Rule 10b-5 or common law for "aiding and abetting" securities fraud; and (5) defendants owed Unity House no fiduciary duties under any "constructive trust" theory.
In its opposition, Unity House argues that (1) there is a genuine issue whether the accounts were discretionary or nondiscretionary; (2) defendants are liable for common law negligence; and (3) defendants' violations of NYSE and NASD "know your customer" and "suitability" rules are "tantamount to fraud" in violation of Rule 10b-5. Because Unity House fails to address all of defendants' contentions, those not addressed will be deemed unopposed.
The Court first will consider those of defendants' contentions that are at least in part unopposed. The Court then will consider Unity House's arguments raised in its opposition.
To continue reading
Request your trial
-
Dale v. Ala Acquisitions, Inc.
...courts in three other states have held that the viability of such claims remains an open question. See Unity House, Inc. v. N. Pac. Invests., Inc., 918 F.Supp. 1384, 1390 (D.Haw.1996); Daniel Boone Area Sch. Dist., v. Lehman Bros., Inc., 187 F.Supp.2d 400, 413 (W.D.Pa.2002); Shinn v. Allen,......
-
Wood v. Greenberry Fin. Servs., Inc.
...that: Hawai'i courts have not explicitly articulated a test for civil aiding and abetting. See Unity House, Inc. v. North Pacific Inv., Inc., 918 F.Supp. 1384, 1390 & n. 5 (D.Haw.1996) (“even assuming there existed aiding and abetting liability for fraud in Hawai'i, Unity House would not su......
-
Roberson v. PaineWebber, Inc.
...Georgia: Tigner v. Shearson-Lehman Hutton, Inc., 201 Ga.App. 713, 411 S.E.2d 800, 802 (1991); Unity House, Inc. v. North Pacific Investments, Inc., 918 F.Supp. 1384, 1392 (D. Hawaii 1996); Illinois: Martin v. Heinold Commodities, Inc., 163 Ill.2d 33, 205 Ill.Dec. 443, 643 N.E.2d 734, 738 (1......
-
Television Events & Marketing v. Amcon Distribut.
...reads too much into the holdings of Nakamoto v. Hartley, 758 F.Supp. 1357, 1366 (D.Haw.1991), and Unity House, Inc. v. North Pacific Investments, Inc., 918 F.Supp. 1384, 1390 (D.Haw.1996), as the bases for its contention that aiding and abetting a breach of fiduciary duty is not a viable ca......
-
Liability of stockbrokers: claims for churning and unsuitability.
...(M.D. Tenn. 1989) (Tennessee act not applicable to transaction in securities). (4.) See Unity House Inc. v. North Pacific Inv. Inc., 918 F.Supp. 1384 (D. Hawaii 1996); Friedlob v. Trustees of Alpine Mut. Fund Trust, 905 F.Supp. 843 (D. Col. 1995); Sheldon Co. Profit Sharing Plan and Trust v......