Opinion
CASE NO. 10-81269-CIV-DIMITROULEAS
07-12-2011
J. PENNOCK GRAHAM, et. Al., Plaintiff, v. CYPRESS CAPITAL GROUP, INC., et. Al., Defendant.
Magistrate Judge Snow ORDER GRANTING MOTION TO DISMISS
THIS CAUSE is before the Court upon Defendants' Motion to Dismiss First Amended Complaint [DE-31], filed herein on May 9, 2011. The Court has carefully considered the Motion, Plaintiffs' Opposition [DE-36], Defendants' Reply [DE-38], and is otherwise fully advised in the premises.
I. BACKGROUND
Plaintiffs commenced the instant action on October 28, 2010. On March 17, 2011, this Court granted Defendants' motion to dismiss and dismissed Plaintiffs' claims without prejudice. Thereafter, Plaintiffs filed their First Amended Complaint [DE-28] ("Complaint") on April 11, 2011.
Plaintiff J. Pennock Graham ("Graham") brings the action as co-trustee of various family trusts ("Trusts") of which the remaining Plaintiffs are the beneficiaries. Defendant Cypress Capital Group, Inc. ("CCG") is alleged to be an investment advisor registered under and subject to the Investment Advisers Act, 15 U.S.C. § 80b-6 ("IAA"). Defendant Cypress Trust Company ("Trust Company") is alleged to be an unregistered investment adviser and advisory affiliate of CCG, and to have served at all times relevant as co-trustee of the Trusts. Defendant Raymond C. O'Brien ("O'Brien") is alleged to be the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of CCG. Defendant Barry G. Hoyt ("Hoyt") is alleged to be the President of both CCG and the Trust Company.
Plaintiffs allege that Graham entered into an oral contract with Hoyt regarding CCG serving as investment adviser to the Trusts and the Trust Company serving as co-trustee to the Trusts. Plaintiffs allege that CCG and the Trust Company have identical boards of directors and officers, and acted as one entity in the performance of investment advisory duties to the Trusts. Plaintiffs further allege that CCG and its respective officers and directors, and the Trust Company, as an unregistered investment advisor and as an investment advisory affiliate of CCG, had a duty to disclose information pursuant to the IAA, specifically the Form ADV regarding disciplinary history. Plaintiffs contend that Defendants breached their fiduciary duties and duty to disclose under the IAA by failing to disclose O'Brien's expulsion from the CFA Institute and that he was subject to an SEC order and penalty. Plaintiffs allege that CCG has attempted to systematically evade the disclosure provisions of the IAA by using the Trust Company as an intermediary to indirectly contract for the provision of investment adviser services that were in fact directly contracted for between CCG's president and Graham through oral communications. In other words, Plaintiffs allege that CCG used the Trust Company as a "straw man" to enter into contracts with Plaintiffs for investment advisory services in an attempt to avoid its own disclosure obligations.
Plaintiffs assert eight counts: (1) violation of the IAA against CCG; (2) violation of the IAA against the Trust Company; (3) conspiracy to violate the IAA against all Defendants; (4) breach of fiduciary duty against CCG, the Trust Company, and Hoyt as investment advisers or advisory affiliates; (5) breach of fiduciary duty against the Trust Company, as co-trustee, and Hoyt; (6) conspiracy to breach fiduciary duty against CCG, the Trust Company, Hoyt, and O'Brien; (7) aiding and abetting breach of fiduciary duty against CCG, Hoyt, and O'Brien; and (8) fraudulent concealment/inducement against the Trust Company and Hoyt. Defendants filed the instant Motion on May 9, 2011.
II. DISCUSSION
A. Motion to Dismiss Standard
Until the Supreme Court decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), courts routinely followed the rule that, "a complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff could prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). However, pursuant to Twombly, to survive a motion to dismiss, a complaint must now contain factual allegations which are "enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." 550 U.S. at 555. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations . . . a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. Taking the facts as true, a court may grant a motion to dismiss when, "on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action." Marshall Cty. Bd. of Educ. v. Marshall Cty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993). In Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009), the Supreme Court further stated that a court need not accept legal conclusions as true, but only well-pleaded factual allegations are entitled to an assumption of truth.
B. Defendants' Motion to Dismiss
Defendants filed the instant Motion, arguing that they are entitled to dismissal of the Complaint on the following grounds: (1) count I fails to sufficiently plead an oral investment advisory agreement; (2) count II is implausible and fails to state a claim; (3) count III for conspiracy is conclusory, nonsensical and barred by Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (1979); (4) count IV is barred by Transamerica; (5) count V must be dismissed as to Hoyt as Plaintiffs do not allege the basis for a fiduciary relationship between Hoyt and the Trusts; (6) count VI for conspiracy to breach fiduciary duty fails to state a claim; (7) count VII fails to state a claim since it fails to allege any commission of a knowing act of "substantial assistance" by any of the Defendants; and (8) count VIII for fraudulent concealment must be dismissed as to Hoyt for failure to allege any duty to disclose. Plaintiffs do not oppose the dismissal of counts III and IV and, therefore, these claims shall be dismissed without further discussion by the Court. [DE-36, at pg. 12, n. 1].
1. Failure to State an Oral Investment Advisory Agreement as to CCG
Counts I and II purport to allege violations of the IAA against CCG and the Trust Company. There is no private cause of action under § 206 of the IAA. See Clark v. Nevis Capital Mgmt., LLC, Case No. 04 Civ. 2702(RWS), 2005 WL 488641, at *13 (S.D.N.Y. Mar. 2, 2005). "There is, however, a limited private right of action to have an investment advisory contract voided under section 215 of the [IAA] if the formation or performance of the contract violates the [IAA];" but "[o]nly parties to an investment advisory contract may sue for rescission under section 215." Id. (citing Transamerica, 444 U.S. at 24). Consequently, in order for counts I and II to survive, Plaintiffs must first establish the existence of an investment advisory contract with CCG and the Trust Company. In count I, Plaintiffs allege that "[t]hrough the numerous conversations and communications referred to above, Plaintiff Graham and [CCG], through Hoyt, entered into an oral investment advisory contract for [CCG] to provide investment advisory services to the Trusts." [DE-28, ¶ 34].
Defendants argue that the Trust Company fully disclosed that it contracted with CCG to be a sub-adviser to assist with investment decisions made by the Trust Company on behalf of the Trusts, and that the Trust Company maintained supervisory control over any investment decisions. [DE-31-1, pg. 16]. Defendants argue that a registered investment adviser like CCG must provide a Form ADV to its clients or prospective clients. However, since CCG did not have a direct contractual relationship with the Trusts, Defendants argue that the Trusts were not clients of CCG and, therefore, CCG did not provide the Trusts a Form ADV. Defendants argue that simply because the Trust Company hired CCG to be a sub-adviser did not obligate the Trust Company to provide CCG's Form ADV to the Trust Company's clients. Similarly, Defendants argue that the mere hiring of CCG to be a sub-adviser did not transform the Trust Company's clients into clients of CCG. Defendants argue that Florida Statute § 736.0816(20) expressly permits a Florida trust company to hire a registered investment adviser to assist with investment decisions and that there is no law or regulation which requires the Trust Company to provide the investment adviser's Form ADV to the Trust Company's clients. Thus, in order to plead around this scenario, Defendants argue that Plaintiffs attempt to allege the existence of an oral investment adviser contract with CCG in the Complaint.
The Court previously concluded that these same exhibits could be considered in ruling on the instant Motion, without converting the Motion into one for summary judgment. [DE-25, n. 1].
However, Defendants argue that Plaintiffs have failed to sufficiently plead the purported oral investment advisory agreement. Defendants argue that "a meeting of the minds of the parties on all essential elements is a prerequisite to the existence of an enforceable contract." Acosta v. Dist. Bd. of Trs. of Miami-Dade Cmty. Coll., 905 So. 2d 226, 228 (Fla. 3d DCA 2005) (internal citations omitted). Yet, Defendants argue that the key terms of the oral contract are not identified, nor have the Trusts pled a meeting of the minds as to the key terms such as the specific terms of the compensation, the amount of fees and other charges to be paid CCG, the duties and responsibilities required of all the parties, the services to be provided, or whether the Trusts provided any consideration to CCG for rendering investment advice. See Clark, 2005 WL 488641, at *13 (dismissing IAA claim where there were no facts concerning the existence of an investment advisory contract between the defendant and plaintiff, when any such agreement was entered into by the alleged parties thereto, or whether plaintiff provided any consideration to the defendant for rendering investment advice). Moreover, Defendants argue that the notion that CCG would enter into some separate, oral, side agreement with the Trusts fails the Twombly and Iqbal plausibility test when CCG had already been hired and disclosed as a sub-adviser by the Trust Company.
Plaintiffs counter that the allegations of the Complaint demonstrate a meeting of the minds on all essential terms of the oral contracts. Plaintiffs point to paragraphs 15 and 16 of the Complaint as alleging that on or about March 1, 2006, the Wilson Trusts (acting through Graham) and CCG (acting through Hoyt) entered into an oral agreement for CCG to provide investment adviser services to the Wilson Trusts for a fee. [DE-28, ¶¶ 15, 16]. Similarly, Plaintiffs point to paragraphs 15 and 18 of the Complaint as alleging that on or about February 23, 2007, the Graham Trusts (acting through Graham) and CCG (acting through Hoyt) entered into an oral agreement for CCG to provide investment adviser services to the Graham Trusts for a fee. Id. at ¶¶ 15, 18. Finally, Plaintiffs argue that they allege that CCG provided investment adviser services and charged corresponding fees for such services as agreed to in those oral contracts, citing paragraph 19 of the Complaint and Exhibits A through J. Id. at ¶ 19; [DE-28-1].
Plaintiffs acknowledge that "[t]o state a cause of action for breach of an oral contract, a plaintiff is required to allege facts that, if taken as true, demonstrate that the parties mutually assented to 'a certain and definite proposition' and left no essential terms open." W.R. Townsend Contracting, Inc. v. Jensen Civil Constr., Inc., 728 So. 2d 297, 300 (Fla. 1st DCA 1999). Upon a review of the paragraphs of the Complaint cited by Plaintiffs, the Court is not persuaded that Plaintiffs have state a plausible claim for relief. In short, Plaintiffs fail to allege sufficient facts as to the "essential terms." In paragraphs 15, 16 and 18 Plaintiffs simply make the conclusory allegations that Graham and Hoyt engaged in "extensive discussions," "agreed through a series of direct communications to the contractual terms," and "agreed to the contractual terms" of CCG serving as investment adviser. [DE-28, ¶¶ 15, 16, 18]. While Plaintiffs offer the generic allegation that Hoyt and Graham agreed to the "specific terms" of CCG's compensation, the investment background and professional qualifications of CCG personnel, and the investment strategies to be employed, notably, Plaintiffs fail to include any of those purported "specific terms" within the Complaint. Instead, the Court and more importantly, Defendant is left guessing as the essential terms of the purported oral contract.
In fact, its not clear why Plaintiffs even rely upon paragraph 19 and Exhibits A through J of the Complaint in support of the purported oral agreement with CCG. Paragraph 19 and these Exhibits shed no light on the purported essential terms of the oral contract. While these exhibits do show communications between Plaintiffs and CCG, it is unclear how such communications demonstrate the existence of an oral investment advisory contract or the specific terms of such a contract between CCG and Plaintiffs, rather then simply demonstrating CCG's uncontested role as a sub-advisor as alleged throughout the Complaint. [DE-28, ¶¶ 26, 66, 84, 87, 96, 99, 110, 118, 123]. Consequently, based upon the allegations of the Complaint, the Court Finds that Plaintiffs have failed to allege plausible facts as to the existence of an oral investment advisory contract between Plaintiffs and CCG upon which to base their IAA claim. As such, count I is subject to dismissal.
2. Failure to State a Claim Against the Trust Company in Count II
In count II, Plaintiffs allege that the Trust Company "was subject to the [IAA], either as an unregistered investment adviser, or as an advisory affiliate of [CCG]." [DE-28, ¶ 43]. Plaintiffs contend that this count is pled in the alternative to count I, and argue that the Trust Company acted as an unregistered investment adviser under the IAA, and is disqualified from the definition of a "bank," because it was operated for the purpose of aiding CCG in evading the provisions of the IAA with respect to its disclosure obligations. [DE-36, pg. 9]. The IAA defines an "investment adviser" as "any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include (A) a bank . . ." 15 U.S.C. § 80b-2(a)(11). The IAA defines a "bank" as including a "trust company" so long as it "is not operated for the purpose of evading the provisions of this subchapter." Id. § 80b-2(a)(2).
Defendants point out that the Trust Company was permitted by law to hire CCG as a sub-adviser and argue that CCG's role as a sub-adviser was completely disclosed. See Fla. Stat. § 736.0816(2) (permitting a trustee to "[e]mploy persons, including, but not limited to . . . investment advisers . . . even if they are the trustee, an affiliate of the trustee, or otherwise associated with the trustee . . . "). Defendants contend that the simple fact that CCG and the Trust Company had a close affiliation does not provide the Court with the authority to strip the Trust Company of its "bank" designation and the exemption from the IAA that Congress granted it. Consequently, Defendants argue that Plaintiffs have not alleged sufficient facts to plausibly suggest that the Trust Company was operated to evade the provisions of the IAA.
The Court agrees with Defendants. The Court is not persuaded that the allegations of CCG and the Trust Company's close affiliation with identical boards and officers and joint letterhead plausibly demonstrate to the Court that the Trust Company was operated for the purposes of evading the provisions of the IAA in order to strip the Trust Company of its designation as a "bank." See U.S. v. Bestfoods, 524 U.S. 51, 68 (1998) (noting that "it is entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary, and that fact alone may not serve to expose the parent corporation to liability for its subsidiary's acts.") (internal citations omitted). Instead, these allegations simply support the uncontested proposition that CCG and the Trust Company are affiliated. Other than these allegations of a close affiliation, Plaintiffs seem to be simply relying upon a "formulaic recitation" of the language of the statute that does not suffice under Twombly. In the absence of plausible factual allegations, rather than legal conclusions, the Court is not comfortable stripping a trust company of its "bank" designation and allowing a claim to proceed upon a theory that the trust company is really an "investment adviser" subject to the IAA simply because the trust company engaged the services of an affiliated company when Florida law expressly allows a trust company to do so. See Fla. Stat. § 736.0816(20) (permitting a trustee to "[e]mploy persons, including, but not limited to . . . investment advisers . . . even if they are the trustee, an affiliate of the trustee, or otherwise associated with the trustee . . . "). To hold otherwise would potentially subject all trust companies to the requirements of the IAA for engaging the services of an affiliated investment adviser, despite that the trust company is permitted to do so. Based on the foregoing, count II is subject to dismissal.
3. Failure to Allege a Fiduciary Relationship Between Hoyt and the Trusts
In count V, Plaintiffs allege that the Trust Company and Hoyt breached their fiduciary duties to Plaintiffs. Defendants argue that count V fails as to Hoyt since Plaintiffs do not allege facts showing that Hoyt was "under a duty to act for or to give advice for the benefit of another upon matters within the scope of that relation." Doe v. Evans, 814 So. 2d 370, 374 (Fla. 2002) (internal citations omitted). Plaintiffs counter that they have alleged that Hoyt was the "primary contact concerning the Trusts" and "most of the communications, emails, and verbal communications concerning the administration of the Trusts occurred through plaintiff Graham, in behalf of the Trusts, and through Hoyt, in behalf of [the Trust Company]." [DE-28, ¶ 82]. Plaintiffs argue that a fiduciary duty can be implied at law and is not reliant on a contract or other strict formality. Doe, 814 So. 2d at 374. As such, Plaintiffs argue that the Complaint clearly alleges that Plaintiffs placed trust and confidence in Hoyt as it related to the Trusts and management of their asserts and that trust and confidence was accepted. Finally, Plaintiffs contend that the question of whether trust and confidence was reposed and accepted is a fact intensive inquiry and should not be decided on a motion to dismiss.
"[U]nder Florida law, a fiduciary relationship is recognized when there is a showing of dependency by one party and some undertaking by the other party to advise, counsel and protect that party." Bruhl v. PricewaterhouseCoopers Int'l, Case No. 03-23044-Civ, 2008 WL 899250, at *2 (S.D. Fla. Mar. 31, 2008). "A fiduciary relationship may be either express or implied." Hogan v. Provident Life and Acc. Ins. Co., 665 F. Supp. 2d 1273, 1287 (M.D. Fla. 2009). Express fiduciary relationships are created by contract or legal proceedings whereas "[i]mplied fiduciary relationships 'are premised upon the specific factual situation surrounding the transaction and the relationship of the parties' and exist where 'confidence is reposed by one party and a trust accepted by the other.'" Id. (internal citations omitted). "Thus, the plaintiff must allege both that the plaintiff placed trust in the defendant and the defendant accepted that trust." Id.
Although Plaintiffs argue to the contrary in their Opposition [DE-36, pg. 13], importantly, nowhere in the Complaint do Plaintiffs actually allege in count V that they placed trust and confidence in Hoyt and that such trust and confidence was accepted by Hoyt. Instead, Plaintiffs appear to be relying upon the conclusory allegation that as the Trust Company's "primary representative" Hoyt "owed a fiduciary duty to plaintiffs to act with the requisite duties of care, diligence, and loyalty required under Florida statutory and common law." [DE-28, ¶ 83]. In the absence of allegations and facts as to how or why Plaintiffs reposed trust and confidence in Hoyt, individually, and that this trust and confidence was accepted by Hoyt, the Court finds that count V fails as against Hoyt.
In comparison, in count IV, one of the counts for which Plaintiffs do not oppose dismissal and is notably not incorporated into count V, Plaintiffs allege that they "placed and reposed in defendants special trust and confidence in connection with their serving as investment adviser to the Trusts or as an advisory affiliate under the Act." [DE-28, ¶ 75].
4. Failure to State a Claim for Conspiracy to Breach Fiduciary Duty
In count VI, Plaintiffs allege that Defendants conspired to enable the Trust Company to breach its fiduciary duty to Plaintiffs. Defendants argue that this count is too conclusory to satisfy Iqbal, fails to allege an overt act in furtherance of the conspiracy as opposed to concealment of the conspiracy, and the multiplicity of actors for a conspiracy claim does not exist.
In regard to the multiplicity issue, under Florida law, a "conspiracy requires the combination of two or more persons - a meeting of two independent minds intent on one purpose." Cedar Hills Prop., Corp. v. E. Fed. Corp., 575 So. 2d 673, 676 (Fla. 1st DCA 1991). "Since a corporation is a legal entity which can only act through its agents, officers and employees, a corporation cannot conspire with its own agents unless the agent has a personal stake in the activities that are separate and distinct from the corporation's interest." Id. Defendants rely upon Bryant Heating and Air Conditioning Corp., Inc. v. Carrier Corp., 597 F. Supp. 1045, 1054 (S.D. Fla. 1984), for the proposition that "Florida case law holds that members of a single economic unit, such as the named defendants herein, CARRIER CORPORATION, its wholly owned subsidiary CDCC, and the individual defendants who are all officers and/or personnel of CARRIER or its BDP unit, cannot constitute the requisite combination of 'separate economic groups or forces' necessary to establish the Florida tort of conspiracy." As such, Defendants argue that the conspiracy claim fails as a matter of law against all Defendants.
Plaintiffs argue that the Bryant court misconstrued Florida law by concluding that a parent and a subsidiary are one entity. Instead, Plaintiffs argue that under Florida law "[a] parent corporation and its wholly-owned subsidiary are separate and distinct legal entities." Reynolds Am., Inc. v. Gero, 56 So. 3d 117, 120 (Fla. 3d DCA 2011). Plaintiffs argue that they have alleged that the two corporate entities - CCG and the Trust Company - conspired through their agents and that such allegations satisfy the multiplicity of actors necessary for a conspiracy claims. Defendants counter that CCG and the Trust Company are incapable of conspiring with one another whether they are considered parent-subsidiary or principal-agent. Defendants argue that Exhibit 7 and the allegations of the Complaint show that CCG was hired as a sub-adviser by the Trust Company and, thus, CCG was the Trust Company's agent. Consequently, Defendants argue that this destroys any possibility of the "meeting of two independent minds." Cedar Hills, 575 So. 2d at 676.
Plaintiffs appear to concede that the conspiracy claim is subject to dismissal with prejudice as against the individual Defendants Hoyt and O'Brien since as agents and officers of CCG and the Trust Company they cannot conspire with CCG and the Trust Company in the absence of allegations of a personal stake in the activities that are separate and distinct from the corporation's interest. As such, Hoyt and O'Brien are dismissed with prejudice from this count.
In regard to CCG and the Trust Company, Plaintiffs have cited to no authority for the proposition that the holding in Bryant, 597 F. Supp. at 1054, as applied to affiliated corporations is no longer good law or misconstrued Florida law. On the contrary, in Microsoft Corp. v. Big Boy Distribution LLC, 589 F. Supp. 2d 1308, 1324 (S.D. Fla. 2008), the holding of Bryant was recently reaffirmed. In Microsoft, the district court explained that "it is generally recognized that a corporation can only act through its agents and representatives" and "[t]hus, under the intracorporate conspiracy doctrine, a corporation's officers, directors or employees, acting as agents of the corporation, are deemed incapable of conspiring among themselves or with the corporation." Id. at 1322. The Microsoft court then applied the intracorporate doctrine to bar conspiracy claims not only against the employees of the corporation, but also against foreign divisions of the corporation, citing Bryant for the proposition that a "manufacturer, wholly owned subsidiary, and individual officers and/or personnel did not constitute [the] requisite combination of a separate economic group necessary to establish [the] Florida tort of conspiracy." Id. Consequently, the Court finds that the conspiracy claim against CCG and the Trust Company likewise fails for lack of multiplicity, since CCG is repeatedly alleged throughout the Complaint to be an affiliated corporation and "sub-adviser" or agent to the Trust Company. Count VI shall be dismissed by the Court in its entirety with prejudice.
5. Failure to State a Claim for Aiding and Abetting Breach of Fiduciary Duty
In count VII, Plaintiffs allege that CCG, Hoyt and O'Brien aided and abetted the breach of fiduciary duty by the Trust Company. A claim for aiding and abetting a breach of fiduciary duty requires: "(1) a fiduciary duty on the part of the primary wrongdoer; (2) a breach of this fiduciary duty; (3) knowledge of the breach by the alleged aider and abettor; and (4) the aider and abettor's substantial assistance or encouragement of the wrongdoing." Bruhl v. PricewaterhouseCoopers Int'l, Case No. 03-23044-Civ, 2007 WL 983263, at * 10 (S.D. Fla. Mar. 27, 2007) (holding that without clear allegations of substantial assistance the plaintiffs failed to state claims for aiding and abetting). "Substantial assistance occurs when a defendant affirmatively assists, helps conceal or fails to act when required to do so, thereby enabling the breach to occur." Hines v. Fiserv, Inc., Case No. 8:08-cv-2569-T-30AEP, 2010 WL 1249838, at *3 (M.D. Fla. Mar. 25, 2010). Defendants argue that the Complaint does not allege any commission of a knowing act of "substantial assistance" by any of the Defendants, but rather Plaintiffs simply allege that Defendants "facilitat[ed] and encourag[ed]" the sub-adviser's scheme. [DE-28, ¶ 114].
In response, Plaintiffs point to paragraph 113 of the Complaint in support of their aiding and abetting claim where they allege that Defendants "engaged in the charade of retaining [CCG] as a 'sub-adviser' to provide investment advisory services to the Trusts, when in fact, [CCG], through its dealings with Plaintiff Graham, was providing investment advisory services directly to the Trusts and not as a sub-adviser." [DE-28, ¶ 113]. Plaintiffs argue that such affirmative conduct by Defendants aided and abetted the Trust Company's breach of fiduciary duty to disclose O'Brien's wrongdoing. Defendants counter that the allegation that Defendants engaged in a "charade" of hiring CCG as a sub-adviser is conclusory at best and provides no facts as to how or what acts were performed to facilitate the scheme, or even who performed them. Defendants point out that they are lumped together in count VII with no differentiation as to each Defendant's respective role. As such, Defendants argue that there are no facts alleged that these Defendants engaged in substantial assistance to support the aiding and abetting claim.
The Court agrees. Plaintiffs have simply offered the conclusory allegation that Defendants engaged in a "charade," and in doing so improperly lumped the Defendants together with no specific facts as to what substantial assistance each Defendant purportedly offered to the scheme or how each Defendant "facilitat[ed] and encourag[ed]" the scheme. As such, there are no factual allegations as to how each Defendant "affirmatively assist[ed], help[ed] conceal or fail[ed] to act when required to do so." Hines, 2010 WL 1249838, at *3. Plaintiffs make the conclusory argument in their Opposition that CCG, O'Brien and Hoyt "were obligated to disclose that O'Brien had been sanctioned by the SEC, but failed to do so" and that "[s]uch concealment or failure to act when required to do so constitute[d] 'substantial assistance.'" [DE-36, pg. 16]. However, nowhere in the Complaint do Plaintiffs allege the basis for this purported obligation or duty on the part of CCG, O'Brien or Hoyt to disclose this information. Consequently, the Court finds that Plaintiffs have failed to sufficiently allege their aiding and abetting claim in count VII.
6. Failure to State a Claim Against Hoyt for Fraudulent Concealment/Inducement
Finally, in count VIII, Plaintiffs assert a claim for fraudulent concealment/inducement against the Trust Company and Hoyt, alleging that the Trust Company and Hoyt intentionally concealed the negative professional and disciplinary history of O'Brien from Plaintiffs. [DE-28, ¶ 126]. "Under Florida law, omissions are not actionable as fraudulent misrepresentations unless the party omitting the information owes a duty of disclosure to the party receiving the information." Behrman v. Allstate Ins. Co., 388 F. Supp. 2d 1346, 1351 (S.D. Fla. 2005). Defendants argue that there are no facts alleged in the Complaint as to why or how Hoyt had a duty to disclose this information to Plaintiffs. In response, Plaintiffs contend that they have sufficiently established the existence of a duty upon Hoyt owing to the Trusts through their arguments offered in support of count V for breach of fiduciary duty. However, having already concluded that Plaintiffs failed to allege a sufficient basis for the existence of a fiduciary duty as to Hoyt in count V, the Court likewise finds that count VIII fails as against Hoyt for lack of any alleged duty on the part of Hoyt to disclose this information to Plaintiffs. Consequently, count VIII is subject to dismissal as against Hoyt.
III. CONCLUSION
Accordingly, based upon the foregoing, it is ORDERED AND ADJUDGED as follows:
1. Defendants' Motion to Dismiss First Amended Complaint [DE-31] is hereby GRANTED;
2. Counts I, II, III, IV, and VII are hereby DISMISSED without prejudice;
3. Counts V and VIII are hereby DISMISSED without prejudice as to Defendant Hoyt;
4. Count VI is hereby DISMISSED with prejudice;
5. The Court will provide Plaintiffs with a final opportunity to attempt to properly allege their claims in accordance with this Order. Any such amended complaint shall be filed on or before August 1, 2011.
DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida this 12th day of July, 2011.
/s/_________
WILLIAM P. DIMITROULEAS
United States District Judge Copies furnished to:
Counsel of Record