Judge Cooke Goes to the 11th Circuit!

Did you know the judiciary is now the "feeblest branch"?

(Shh, don't tell some of our judicial brethren).

But yes, apparently there can be a problem with equal access to the courts when you gut funding and fail to fill judicial vacancies:

This means that the courts are limiting access just when Americans need more adjudication. The recession left a vast legacy of foreclosures, personal and business bankruptcies, debt-collection and credit-card disputes. In Florida in 2009, according to the Washington Economics Group, the backlog in civil courts is costing the state some $9.8 billion in GDP a year, a staggering achievement for a court system that costs just $1.2 billion in its entirety. To make up the funding shortfall, courts are imposing higher filing fees on litigants. This threatens the idea of the equal right to justice, says Rebecca Love Kourlis of the Institute for the Advancement of the American Legal System.

Oh well -- I'm sure the Florida legislature will do the right thing.

In other news, Judge Cooke pays a visit to the 11th Circuit and sits on a very interesting securities fraud case:

We hold that the securities laws prohibit corporate representatives from knowingly peddling material misrepresentations to the public -- regardless of whether the statements introduce a new falsehood to the market or merely confirm misinformation already in the marketplace. In other words, a defendant may be liable for fraudulent statements intentionally made that have the purpose and effect of propping up an already inflated stock price in an efficient market.

Now good luck finding a judge to hear your case -- or just pay Paul Siegal to adjudicate the darn thing.

SEC Loses Summary Judgment Motion Against Pro Se Defendant?

How does the SEC lose an sj motion against a pro se defendant?

It's like shooting fraudulent fish in a barrel!

Actually it's not, as Judge Marra explains:

[CENSORED]

I'm sorry I'd like to quote from the opinion but I see it makes repeated reference to the "risk-enhancing" features of an "Inverse Floater" -- which apparently is a defined term(!).

Ahh, thanks but no thanks.

(No wonder this guy had to proceed pro se.)

Read This Post and Bill 1.4 Hours To "Professional Development."

Well it's been an interesting week, and it suddenly got more interesting with this fascinating 11th Circuit opinion on fiduciary duty, motions to dismiss, and when consideration of an agreement referenced in a complaint converts a motion to dismiss into a motion for summary judgment.

The 11th affirmed an order of dismissal by Judge Ryskamp in a securities fraud case where the Judge relied on a brokerage agreement to find on a motion to dismiss that the brokerage could not, under any set of facts, owe any fiduciary duties to the plaintiff.

Here is the core holding from Judge Ryskamp's order:

Finally, the Complaint fails to allege that Banc of America breached a fiduciary duty owed to SFM. Here, the parties’ Prime Brokerage Agreement states unequivocally that Banc of America was not “acting as a fiduciary,” and was not “advising [SFM], performing any analysis, or... offer[ing] any opinion, judgment or other type of information pertaining to the nature, value, potential or suitability of any particular invest[ment].” (Anello Decl., ¶ 11(b)). Banc of America thus owed SFM no fiduciary duties and cannot be sued for alleged failure to disclose. Although SFM alleges that Dr. Melgen believed Kim to be Banc of America’s agent, the language of the brokerage agreement clearly demonstrates that Banc of America owed SFM no fiduciary duty.

On appeal the 11th affirmed, basically saying if you reference a document in your complaint you better be ready to deal with it at the motion to dismiss stage.

In addressing the general exception that permits consideration of extrinsic materials at the 12(b)(6) stage if they are central to the complaint and their authenticity not challenged, the 11th held:

Although the PB Agreement was not attached to the complaint, the complaint noted that the brokerage account was opened by “documents provided to John Kim and Won Lee by Banc of America Securities.” (Compl. ¶ 18). These documents were repeatedly described as “account opening documents.” (Id.) SFM does not deny that the PB Agreement is one of the account opening documents mentioned in the complaint. The Defendant argues that the agreement was the account opening document that established Banc of America Securities as a prime broker for SFM and absolved Banc of America Securities from any fiduciary duty as to the account. According to SFM, another document, the IA Agreement, established Banc of America Securities as its executing broker. Under SFM’s theory, Banc of America Securities’s role as an executing broker imposes upon it a fiduciary duty. However, there is no doubt that the PB Agreement determined the terms of the relationship between SFM and Banc of America Securities. The agreement set forth the “terms and conditions” on which Banc of America Securities will “open and maintain accounts for and otherwise transact business with the customer.... ” (Appellee’s Br., Ex. A at 1). Further, to the extent that the terms of the PB Agreement conflicted with another agreement, it stated that it controlled over any other agreements between Banc of America Securities and its customer. (Appellee’s Br., Ex. A ¶ 20). We have previously held that such relationship-forming contracts are central to a plaintiff’s claim. Maxcess, 433 F.3d at 1340 n.3. The district court did not err in considering the PB Agreement in ruling on the motion to dismiss.

I find this ruling very interesting, because it is at the outer edge of this doctrine in my opinion.

As a jurisprudential matter, and in light of the important policy reasons behind Rule 56, would it have been better for the district judge to convert the motion to an SJ anyways, in order to allow the parties to fully address the impact and interaction of the two competing agreements?

Wow, how'd I get so wonky (and on a Friday no less!)