White v. NYLIFE Sec., LLC
| Decision Date | 02 August 2021 |
| Docket Number | Case No. 3:21-cv-00012-TMB |
| Citation | 551 F.Supp.3d 974 |
| Parties | Terry WHITE, Plaintiff, v. NYLIFE SECURITIES, LLC, Defendant. |
| Court | U.S. District Court — District of Alaska |
Peter Caltagirone, Caltagirone Legal, LLC, Anchorage, AK, for Plaintiff.
Brewster H. Jamieson, Lane Powell LLC, Anchorage, AK, Hans Nicholas Huggler, Lane Powell PC, Portland, OR, for Defendant.
ORDER ON DEFENDANT'S MOTION TO DISMISS (DKT. 8)
The matter comes before the Court on Defendant NYLIFE Securities, LLC's ("NYLIFE") Motion to Dismiss (the "Motion").1 NYLIFE seeks to dismiss the Second Cause of Action pleaded in the Complaint2 ("Count 2") under the Alaska Unfair Trade Practices Act ("UTPA").3 Plaintiff Terry White opposes the Motion.4 The Motion is fully briefed by the Parties,5 and the Court concludes oral argument is not necessary for resolution of the matter. For the reasons stated below, NYLIFE's Motion is DENIED.
White filed his Complaint in Alaska state court on December 28, 2020.6 NYLIFE subsequently removed the action to federal court under diversity jurisdiction on January 26, 2021.7 The Complaint arises out of allegations that Ronald "Buddy" Bailey Jr. ("Bailey"), an employee of NYLIFE, gave fraudulent investment advice to White and that White paid $588,000 in exchange for an ownership stake in a seafood processing company that is now worthless.8 NYLIFE is a Delaware limited liability company headquartered in New York state, a registered broker-dealer, and a wholly-owned subsidiary of the New York Life Insurance Company.9 White, a resident of Anchorage, Alaska, is a customer of NYLIFE.10
In his Complaint for damages, White alleges that in or around May 2009, he purchased a life insurance policy from NYLIFE and that he continues to pay the premiums for the policy to the present day.11 White states that since purchasing his life insurance policy in May 2009 he has been in a fiduciary relationship with NYLIFE.12
In or before 2017, White alleges that NYLIFE assigned Bailey to service White's life insurance policy and other business with NYLIFE.13 White states that in or around 2017, Bailey invited White to a meeting at NYLIFE's Anchorage Office to discuss investment opportunities, which White attended.14 At the meeting, Bailey "discussed several investment options[,]" including "an ownership interest in an Alaska limited liability company that performed seafood processing."15 White states that "[t]he ownership interest turned out to be a 9.04% ownership of Golden Empire Seafoods, LLC [("Golden Empire")] ... in exchange for [White's] principal payment of $588,000."16 White alleges that Golden Empire "owned an approximate 44.25% share in another company, Golden Harvest Alaska Seafood, LLC (‘Golden Harvest’), the ownership structure of which was not disclosed to Plaintiff." 17
At the 2017 meeting, White alleges that Bailey promised him "a minimum of four to six percent return on his investment principal in Golden Empire and an annual dividend of at least ten percent from Golden Empire."18 White alleges that "neither Bailey nor [NYLIFE] provided [White with] a private placement memorandum about Golden Empire, Golden Harvest, or any other investment opportunity."19 White similarly alleges that neither NYLIFE nor Bailey provided White with financial statements for either company.20 In reliance on NYLIFE and Bailey, White purchased his 9.04% stake in Golden Empire, which was finalized on or around December 31, 2017.21
In approximately August 2019, White alleges he "became aware of the omissions set forth [in the Complaint]."22 Specifically, White states he learned that Bailey "held an ownership interest in Golden Harvest, a fact fraudulently omitted by Bailey and [NYLIFE]."23 White alleges that Bailey was promised an "additional ownership interest in Golden Harvest in exchange for obtaining the funds spent by [White] ... a fact fraudulently omitted by Bailey and [NYLIFE]."24 Finally, White asserts that his investment in Golden Empire has no value and that Golden Empire is defunct.25
White brings four causes of action: Violation of Alaska Securities Act (the "Securities Act") under Alaska Stat. Ann. ("AS") § 45.56.100, et seq. (Count 1); Violation of the UTPA (Count 2); Intentional Misrepresentation (Count 3); and Breach of Fiduciary Duty (Count 4).26 White seeks the following damages: (1) actual monetary damages of $588,000; (2) additional monetary losses incurred by White to be proven at trial; (3) treble actual monetary damages as permitted under the UTPA27 ; (4) punitive damages as the Court deems necessary and proper28 ; (5) interest starting from the date White finalized purchase of the security29 ; and (6) attorney's fees and costs and other relief deemed proper.30
NYLIFE moves to dismiss Count 2 of the Complaint.31 NYLIFE argues that Count 2 should be dismissed by the Court because "[d]eceptive or fraudulent conduct in securities transactions is regulated by Alaska securities law and exempt from the UTPA[.]"32 NYLIFE argues that under AS § 45.50.481(a)(1), "the UTPA does not apply to acts in trade or commerce ‘regulated by a statute or regulation administered by the state, including a state regulatory board or commission, unless the statute or regulation does not prohibit the practices declared unlawful.’ "33 The UTPA exemption applies where " ‘conduct is subject to ongoing careful regulation[,]’ " which NYLIFE argues is the case here.34 NYLIFE argues that "[s]ecurities transactions are extensively regulated under state and federal law[,]" including the Securities Act and its corresponding regulations.35 For example, "Alaska law forbids any person from making false statements, omitting material facts, or otherwise engaging in any conduct to defraud or deceive a person in connection with a securities transaction."36 NYLIFE argues that the Securities Act provides a private cause of action and gives the state "civil and criminal authority to enforce Alaska securities laws, which it exercises."37
NYLIFE also cites interpretations of other states’ consumer protection acts to argue that "[i]t is uncontroversial that securities are a specialized area of regulation outside the scope of general consumer protection acts nationwide."38 NYLIFE suggests that the Alaska legislature would not have intended the UTPA to reach securities transactions, in light of the regulatory scheme governed by the Securities Act.39
White opposes the Motion, arguing that NYLIFE asks the Court "to generate new law in Alaska that recognizes an exemption of securities-related claims from the UTPA's purview[.]"40 First, White argues that NYLIFE has not satisfied the two-pronged test required to exempt securities transactions under the Securities Act.41 White argues that NYLIFE must show that (1) the business is regulated elsewhere, and (2) the unfair acts and practices are prohibited therein.42 White argues that "generalized recitation of securities regulation" is not enough to meet the "high burden of demonstrating an ongoing regulatory framework[.]"43 White further states that the Alaska Supreme Court interprets § 481(1) of the UTPA to exempt "only those acts or transactions which are the subject of ‘ongoing, careful regulation.’ "44 White argues that NYLIFE has not met its burden to show how "the transaction at issue here is subject to the type of ‘[ongoing, careful] regulation’ to an extent sufficient to enjoy exemption under the UTPA."45 White further argues that the UTPA is broader in scope and that the lines between the UTPA and Alaska Securities Act are not clear.46
Second, White argues that the out-of-state law cited by NYLIFE is distinguishable and actually supports White's position. 47
He argues that after Massachusetts courts found securities transactions exempt, the legislature amended the law to expressly include securities transactions.48 In New Hampshire, the consumer protection law explicitly excludes securities transactions.49 In North Carolina, the state supreme court adopted an interpretation of the consumer protection law that exempted securities transactions subject to overlapping regulation, but, White argues, the Alaska Supreme Court in Matanuska Maid rejected this interpretation of the UTPA.50 White argues that NYLIFE's discussion of Hawaii law is subject to the same critique and that the Ninth Circuit would not treat Alaska law in a similar manner.51
NYLIFE filed a Reply reiterating its arguments in favor of an exemption. It argues that Matanuska Maid is distinguishable on its facts, since Matanuska Maid concerned a state action, not a "post-complaint, private civil proceeding[ ]."52 It further argues that the Securities Act regulatory scheme is more than mere prohibition—it imposes a number of requirements and the Alaska Division of Banking and Securities "engages in enforcement activities[.]"53 As to the discussion about out-of-state authority, NYLIFE argues that "exempting Alaska securities and investments from [the] Alaska UTPA is a reasonable policy choice by the legislature" and that the exemption written by the legislature should apply on its face.54 NYLIFE states that while Alaska does not apply the " ‘overlapping enforcement schemes’ " approach of North Carolina or Hawaii, the text of the exemption is consistent with the logic imbued in the relevant North Carolina and Hawaii case law.55
NYLIFE moves under Federal Rule of Civil Procedure ("Rule") 12(b)(6) to dismiss Count 2 of the Complaint for failure to state a claim upon which relief can be granted.56 In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must set forth "a short and plain statement of the claim showing that the pleader is entitled to relief,"57 and "contain sufficient factual matter, accepted as true, to ‘state a claim to...
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