This case was last updated from Los Angeles County Superior Courts on 07/06/2019 at 01:32:32 (UTC).

JOHN KENNEY VS. ARLO BRYAN SULLIVAN

Case Summary

On 03/02/2018 JOHN KENNEY filed a Contract - Other Contract lawsuit against ARLO BRYAN SULLIVAN. This case was filed in Los Angeles County Superior Courts, Norwalk Courthouse located in Los Angeles, California. The Judges overseeing this case are LORI ANN FOURNIER and MARGARET MILLER BERNAL. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****6972

  • Filing Date:

    03/02/2018

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

LORI ANN FOURNIER

MARGARET MILLER BERNAL

 

Party Details

Plaintiffs

KENNEY JOHN AS TRUSTEE OF THE JOHN W.

JOHN W. DAILEY AND DOROTHY M. DAILEY 1989

Defendants

WEALTHSOURCE PARTNERS LLC

SULLIVAN ARLO BRYAN

UBS FINANCIAL SERVICES INC.

VELLUM FINANCIAL LLC

Attorney/Law Firm Details

Plaintiff Attorneys

PYLE JACOB B.

PYLE JACOB B

Defendant Attorneys

GARTENBERG GELFAND HAYTON LLP

KEESAL YOUNG & LOGAN

DOLUKHANYAN MILENA

GARTENBERG EDWARD

 

Court Documents

Legacy Document

3/2/2018: Legacy Document

Notice of Case Management Conference

3/2/2018: Notice of Case Management Conference

Civil Case Cover Sheet

3/2/2018: Civil Case Cover Sheet

Summons

3/2/2018: Summons

Request for Judicial Notice

5/4/2018: Request for Judicial Notice

Legacy Document

5/4/2018: Legacy Document

Legacy Document

5/4/2018: Legacy Document

Legacy Document

5/4/2018: Legacy Document

Legacy Document

5/4/2018: Legacy Document

Legacy Document

5/4/2018: Legacy Document

Legacy Document

5/4/2018: Legacy Document

Proof of Service (not Summons and Complaint)

5/9/2018: Proof of Service (not Summons and Complaint)

Legacy Document

6/8/2018: Legacy Document

Legacy Document

6/8/2018: Legacy Document

Legacy Document

6/12/2018: Legacy Document

Minute Order

6/12/2018: Minute Order

Legacy Document

6/29/2018: Legacy Document

Proof of Service by Mail

7/2/2018: Proof of Service by Mail

57 More Documents Available

 

Docket Entries

  • 06/26/2019
  • at 08:30 AM in Department F, Margaret Miller Bernal, Presiding; Trial Setting Conference (as to plaintiff and remaining parties) - Held - Continued

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  • 06/26/2019
  • at 08:30 AM in Department F, Margaret Miller Bernal, Presiding; Post-Arbitration Status Conference (between plaintiff and UBS) - Held - Continued

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  • 06/26/2019
  • Minute Order ( (Post-Arbitration Status Conference between plaintiff and UBS;...)); Filed by Clerk

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  • 06/20/2019
  • Notice (of Telephonic Appearance); Filed by ARLO BRYAN SULLIVAN (Defendant); VELLUM FINANCIAL, LLC (Defendant); WEALTHSOURCE PARTNERS, LLC (Defendant)

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  • 03/28/2019
  • at 08:30 AM in Department F, Margaret Miller Bernal, Presiding; Trial Setting Conference (as to plaintiff and remaining parties) - Held - Continued

    Read MoreRead Less
  • 03/28/2019
  • at 08:30 AM in Department F, Margaret Miller Bernal, Presiding; Post-Arbitration Status Conference (between plaintiff and UBS) - Held - Continued

    Read MoreRead Less
  • 03/28/2019
  • Minute Order ((Post-Arbitration Status Conference between plaintiff and UBS;...)); Filed by Clerk

    Read MoreRead Less
  • 03/25/2019
  • Notice of Intent to Appear by Telephone; Filed by ARLO BRYAN SULLIVAN (Defendant); VELLUM FINANCIAL, LLC (Defendant); WEALTHSOURCE PARTNERS, LLC (Defendant)

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  • 01/24/2019
  • at 08:30 AM in Department F, Margaret Miller Bernal, Presiding; Order to Show Cause Re: (regarding answer/responsive pleading to the operative complaint) - Held

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  • 01/24/2019
  • at 08:30 AM in Department F, Margaret Miller Bernal, Presiding; Trial Setting Conference - Held

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127 More Docket Entries
  • 05/04/2018
  • Request for Judicial Notice; Filed by Attorney for Defendant

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  • 05/04/2018
  • Demurrer; Filed by Attorney for Defendant

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  • 05/04/2018
  • Demurrer; Filed by ARLO BRYAN SULLIVAN (Defendant); VELLUM FINANCIAL, LLC (Defendant); WEALTHSOURCE PARTNERS, LLC (Defendant)

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  • 03/02/2018
  • Summons; Filed by KENNEY, JOHN, as Trustee of the John W. (Plaintiff); JOHN W. DAILEY AND DOROTHY M. DAILEY 1989 (Plaintiff)

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  • 03/02/2018
  • Complaint filed-Summons Issued; Filed by KENNEY, JOHN, as Trustee of the John W. (Plaintiff); JOHN W. DAILEY AND DOROTHY M. DAILEY 1989 (Plaintiff)

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  • 03/02/2018
  • Notice-Case Management Conference; Filed by Clerk

    Read MoreRead Less
  • 03/02/2018
  • Summons Filed; Filed by Attorney for Plaintiff

    Read MoreRead Less
  • 03/02/2018
  • Complaint filed-Summons Issued; Filed by Attorney for Plaintiff

    Read MoreRead Less
  • 03/02/2018
  • Civil Case Cover Sheet; Filed by JOHN W. DAILEY AND DOROTHY M. DAILEY 1989 (Plaintiff); KENNEY, JOHN, as Trustee of the John W. (Plaintiff)

    Read MoreRead Less
  • 03/02/2018
  • Notice of Case Management Conference; Filed by Clerk

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Tentative Rulings

Case Number: VC066972    Hearing Date: August 13, 2020    Dept: C

JOHN KENNEY vs ARLO BRYAN SULLIVAN

CASE NO.: VC066972

HEARING: 8/13/2020

JUDGE: OLIVIA ROSALES

#8

TENTATIVE ORDER

Defendants Arlo Bryan Sullivan and Vellum Financial, LLC’s Motion for Summary Judgment is DENIED. Defendant Wealthsource Partners, LLC’s Motion for Summary Judgment is GRANTED.

Moving Party to give notice.

Plaintiff John Kenney (“Plaintiff”), as Trustee of the John W. Dailey and Dorothy M. Dailey 1989 Trust, and representative of the Estate of John W. Dailey filed this action against Defendants Arlo Bryan Sullivan, Vellum Financial, LLC, and Wealthsource Partners, LLC (“Defendants”) on November 30, 2018, alleging causes of action for:

1. breach of fiduciary duty;

2. common law fraud and deceit;

3. constructive fraud;

4. negligence and negligent misrepresentation;

5. California statutory securities fraud;

6. violations of Cal. Welfare & Institutions Code §§ 15600, et seq.;

7. breach of contract; and

8. accounting.

The operative Second Amended Complaint (“SAC”) alleges that Defendants solicited, recommended, offered, and sold unsuitable and fraudulent investments to John and Dorothy Dailey (the “Daileys”).

Defendants now move for summary judgment of the SAC, or in the alternative summary adjudication of each cause of action.

1. Statute of Limitations

Defendants contend that the applicable statutes of limitation bar all causes of action.

This action involves two investments made by John Dailey: (1) 2009 investments with Ketchum & Associates (the “Ketchum Investment”); and (2) a 2010 investment in stock of Green House Holdings Corporation (“Green House Investment”).

Defendants argue that John Dailey (“Mr. Dailey”) had notice of the first of two allegedly improper investments when John learned that Ketchum & Associates filed for bankruptcy on September 30, 2013. In support of this position, Defendants submit the declaration of Defendant Arlo Bryan Sullivan, who declares that he discussed the Ketchum Bankruptcy with Mr. Dailey in 2013 and thereafter, and that he “gave Mr. Dailey notice of the Ketchum Bankruptcy shortly after it was filed, and certainly more than four years before the original complaint in this action was filed on March 2 2018.” (Sullivan Decl. ¶¶ 11-12.) Defendants also submit the declaration of Roger Ketchum, owner of Ketchum & Associates, who declares that “[s]hortly after Ketchum & Associates filed bankruptcy, [he] personally contacted Mr. Dailey by telephone and informed him of that bankruptcy,” and concludes that his “telephone call with John Dailey . . . occurred more than four years before March 2, 2018.” (Ketchum Decl. ¶¶ 6-7.) Defendants also submit a Power of Attorney (“POA”) form, “which specified the Ketchum Bankruptcy for signature by Mr. Dailey and his wife Dorothy.” (Sullivan Decl. ¶ 13.) Sullivan declares that Mr. Dailey returned the POA signed on behalf of himself and his wife, and attaches a copy as Exhibit A (Id., Exh. A.) The POA reads as follows:

Agent has authority to (I) hire legal counsel for representation in connection with loans or investments made to or with Ketchum & Associates, Ltd. ("K&A") or any other entity created or controlled by Roger Ketchum; and (2) execute on my behalf the Agreement to Partially Subordinate Liens (the "Trustee Agreement") negotiated in connection with Che bankruptcy proceeding of K&A now pending in the United States Bankruptcy Court for the Eastern District of Texas, No. 13-60771.

(Id. Exh. A.)

Thus, it is Defendants’ position that notice of the bankruptcy proceeding gave Mr. Dailey sufficient notice of any potential claim so as to begin the running of any statute of limitations.

The court is not convinced by this argument. Although Defendant has submitted evidence that Mr. Dailey was informed of the Ketchum & Associates Bankruptcy, it is not immediately apparent that such notice is sufficient to put Mr. Dailey on notice of potential claims for breach of fiduciary duty, fraud, or breach of contract pertaining to the Ketchum Investment. In support of the argument that notice of the bankruptcy was sufficient to put Mr. Dailey on notice of the potential claims, Defendants cite to National Auto. & Cas. Ins., where the court added a footnote citing favorably to Turner v. Lundquist:

[i]n Turner v. Lundquist (9th Cir. 1967) 377 F.2d 44, an investor filed an action for monetary relief based on alleged violations of certain federal statutes prohibiting the use of manipulative or deceptive devices in the sale of securities. In the absence of a federal statute of limitations, the court applied subdivision 4 of section 338 of the Code of Civil Procedure. The court, noting that the plaintiff investor knew from the annual financial reports of the corporation more than three years before suit, that, among other things, the corporation had not been returned to profitable operations, held the action barred. The court pointed out that failure to discover all of the details of the fraud did not prevent the statute of limitations from running.

(Nat'l Auto. & Cas. Ins. Co. v. Payne (1968) 261 Cal. App. 2d 403, 414, referencing Turner v. Lundquist 9th Cir. 1967) 377 F.2d 44, 48.)

Although on face value relevant, the Turner holding reflects that the court’s reasoning relied on “numerous facts which came to his attention prior to May 12, 1961 (three years prior to filing his amended complaint), sufficient in the view of this Court to have put him upon notice and inquiry and commenced the running of the period of limitation as a matter of law.” (Turner, supra at 48.) Additionally, the court noted that “Lundquist, in support of his motion for summary judgment, filed an affidavit together with voluminous supporting exhibits tending to show that prior to May 12, 1961, Turner had adequate information and knowledge to put a reasonably prudent man on inquiry as to possible fraud so as to commence the running of the period of limitation.” (Id. at 47.)

Here, Defendants arguments as to the Ketchum Investment rely solely on notice of Ketchum Investment’s bankruptcy. More specifically, for purposes of this motion, rely solely on the declarations of two defendants and the POA. Defendants make no argument backed by authority that a bankruptcy notice of a financial advisor or investor alone puts a customer on notice of the impropriety of the underlying investments. There is no connection made in the moving papers between the money entrusted to Ketchum Investments and the underlying investments, or why a bankruptcy should put a plaintiff on notice for securities fraud or breach of fiduciary duty claims. Aside from the National Auto. Citation referenced above, the only argument made in the moving papers as to this contention is that unsupported line that “[t]he mere fact that Ketchum & Associates had filed for bankruptcy would put any reasonable investor on notice that his or her investment with Ketchum & Associates was at risk prompting further inquiry.” (Motion 9:5-7.) Finally, Defendants argue that “constructive notice (of the practical impossibility of recouping the investment) occurred more than four years before the initial complaint was filed.” (Id. 9:15-17.) This argument is premised on the “publicly available bankruptcy petition [which] specifically identified the Dailey Family Trust as having an unsecured claim in the full amount of its investment and clearly demonstrated that there was no possibility it could be satisfied.” (Id. 9:13.) Again, this fails to tie in why Plaintiffs should have been on notice of potential fraud pertaining to the underlying investments.

As to the Ketchum Investment, Defendant’s position is unavailing.

As to the Greenhouse Investment, Defendants argue that “Mr. Dailey had constructive, if not actual notice, of the dilution of his number of shares occurring through the reverse split that was occasioned by the Premier merger as that was disclosed in the Form 8K filed with the SEC March 9, 2012.” (Motion 9:25-10:2.) Defendants contend that “the fact that by March 9, 2012, its value was only a small fraction of the purchase price, put Mr. Dailey in inquiry notice.” (Id. 10:4-5.) However, Defendants’ separate statement also reflects that Defendants take the position that Plaintiff can assert no claims as to the Greenhouse Investment because Mr. Dailey was presented with “was provided with a lengthy Subscription Agreement which provided detailed information about the potential investment before Mr. Dailey made it,” and “[t]he cover page of the Subscription Agreement for the Greenhouse Investment stated in bold and all capital letters states, "THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.” (Def. UMF 44-45.) Similar to Ketchum Investment, Defendants provide no authority for the proposition that a decrease in the value an inherently risky investment should put an investor on notice of an alleged wrong when such investment is undertaken by their stock broker. “Where a fiduciary relationship exists, facts which ordinarily require investigation may not incite suspicion [Citation] and do not give rise to a duty of inquiry. [Citation]. Where there is a fiduciary relationship, the usual duty of diligence to discover facts does not exist.” (Hobbs v. Bateman Eichler, Hill Richards, Inc. (1985) 164 Cal. App. 3d 174, 201–02, 210.)

Based on the foregoing, Defendants have not met their burden of demonstrating the non-existence of a triable issue as to whether Plaintiff were on notice of any alleged wrongs four years prior to the filing of this action.

Additionally, Plaintiff’s opposition would create a triable issue as to the time-barring of claims. First, the court notes that Plaintiff has submitted a 46-page opposition memorandum, exceeding the 20-page limit provided for by California Rule of Court 3.1113(d). The court thus declines to consider any argument contained on pages 33 through 46.

Nevertheless, the following interaction occurred at Defendant Sullivan’s deposition:

Q: When did you advise the Daileys that their investments in the Willow Bend, Vintage and Greenhouse was worth zero?

A: I don’t know that I ever advised them that it was worth zero.

. . .

Q: You said you don’t have anything in writing confirming that you notified them that they had lost their money in those investments?

A: That’s correct.

(Sullivan Depo. 125:21-126:12.)

Plaintiff also submits the deposition testimony of Patricia Dailey, the Daileys’ daughter, who testified that the first time the Daileys heard of Ketchum & Associates’ bankruptcy was on February 14, 2017, when Mr. Dailey was stunned to learn thereof. (P. Dailey Depo. 45:1-46:13.) Plaintiff confirmed the same in his deposition. (Kenney Depo. 49:11-15.) Plaintiff also submits the declaration of Patricia Dailey, with an attached March 21, 2017, letter from the Jack and Patricia Dailey to Sullivan, which reflects the Daileys’ lack of knowledge as to the value of the investments and as to the bankruptcy. (P. Dailey Decl. Exh. 3.)

Defendants have not met their burden on summary judgment of demonstrating that the claims are time-barred. In the alternative, Defendants move for summary adjudication of the various claims as discussed below.

2nd, 3rd, and 4th Causes of Action: Reliance

Defendants contend that the 2nd cause of action for common law fraud and deceit, 3rd cause of action for constructive fraud, and 4th cause of action for negligence and negligent misrepresentation fail because there is no evidence of reliance.

Defendants contend that Plaintiff cannot demonstrate reliance, a requisite elements of the aforementioned claims, because with respect to the Ketchum Investment “John Dailey communicated directly with Roger Ketchum about the Ketchum Investment,” and “Mr. Sullivan essentially simply provided Mr. Ketchum's contact information to Mr. Dailey and he did not recommend the investment to Mr. Dailey.” (Motion 13:2-4.) With respect to the Greenhouse Investment, “Greenhouse Investment was made pursuant to Greenhouse's comprehensive offering materials presented to Mr. Dailey,” and “[n]othing Mr. Sullivan said, or did not say, constituted causation.” (Id. 14:1-2, 10-11.) Presumably, Defendants intend to refer to reliance, and not causation, which forms the basis of their next argument.

In support of this position, Defendants submit a portion of Patricia Dailey’s deposition testimony in support of their argument that Plaintiff has no admissible evidence as to why Mr. Dailey made the Ketchum Investment. However, the cited portions reads as follows:

Q: Ms. Dailey, did your father ever discuss his financial decisions with you with respect to investments?

A: No.

Q: Did he ever ask for your opinion on what to invest?

A: No.

Q: Did you ever give him any recommendations what to invest in?

A: No.

(P. Dailey Depo. 34:24-35:8.)

Defendants also submit the declaration of Roger Ketchum for the argument that Mr. Dailey and Ketchum communicated directly. However, the declaration merely reflects that “[a]t various time I spoke to John Dailey by telephone. He expressed his interest in the Willow Bend Investment not only for the rate of return, but also because of the goal of Willow Bend to help boys who had been abused.” (Ketchum Decl. ¶ 6.) Nevertheless, Sullivan declares as follows: “I did not recommend the Ketchum Investment to Mr. Dailey. I did not solicit Mr. Dailey to make that investment, nor did I advise Mr. Dailey to make that investment. Neither I, nor any other defendant in this action receive any commission or fees based upon Mr. Dailey’s Ketchum Investment. (Sullivan Decl. ¶ 6.) Sullivan declares that he provided Ketchum’s information to Mr. Dailey after Mr. Dailey advised him that he “was looking for an investment which provided a greater annual return than was available from traditional, conservative investments.” (Id. ¶¶ 3-4.)

The court is not persuaded by Defendants’ argument. It is undisputed that the Daileys and Sullivan were in a fiduciary relationship, Sullivan serving as the Daileys stockbroker and financial advisor, whether or not such relationship extended throughout the Ketchum Investment. (SAC ¶ 1, Def. UMF 1.) Defendants appears to contend that a investment referral from Sullivan to Dailey in response to a request for specific investment advice cannot constitute reliance. First, Defendants present no authority in support of this position. Second, whether reliance existed here from Defendants’ evidence alone appears to be a triable issue of fact proper for determination by the fact finder.

Based on the foregoing, Defendants have not met their burden of demonstrating the non-existence of a triable issue as to whether Mr. Dailey relied on Sullivan’s referral to Ketchum & Associates in making the Ketchum Investment.

1st, 3rd, 4th Causes of Action: Causation

Defendants contend that the 1st cause of action for breach of fiduciary duty, 3rd cause of action for constructive fraud, and 4th cause of action for negligence and negligent misrepresentation fail because there is no evidence of causation.

After a recitation of the law that causation is a necessary element of the aforementioned claims, Defendants argue that “[f]or the same reasons that reliance cannot be established by Plaintiff, causation cannot be shown.” (Motion 14:5-6.)

Accordingly, for the same reasons as above, Defendants’ argument fails.

2nd, 3rd, and 5th Causes of Action: Wrongful Intent

 

Defendants argue that Plaintiff cannot show “wrongful intent,” which is an element of the 2nd, 3rd, and 5th causes of action.

First, the 3rd cause of action for constructive fraud does not require a showing of “wrongful intent.” “In its generic sense, constructive fraud comprises all acts, omissions and concealments involving a breach of legal or equitable duty, trust, or confidence, and resulting in damages to another.” Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal. App. 4th 1105, 1131.) “Constructive fraud exists in cases in which conduct, although not actually fraudulent, ought to be so treated—that is, in which such conduct is a constructive or quasi fraud, having all the actual consequences and all the legal effects of actual fraud.” (Id.) As no showing of wrongful intent is required for this cause of action, it shall not be considered within this argument.

In support of their position that no misrepresentations were made with the intent to deceive MR. Dailey, Defendants submit Sullivan’s declaration in which he declares that he did not misrepresent anything to Mr. Dailey in connection with the Ketchum and Greenhouse Investments, nor did he intentionally omit telling Mr. Dailey something he knew to cause the investments. (Sullivan Decl. ¶¶ 27-28.) Defendants made no other argument or evidentiary citation to support this position.

Pursuant to Code Civ. Proc. § 437c(e), “summary judgment may be denied in the discretion of the court if the only proof of a material fact offered in support of the summary judgment is an affidavit or declaration made by an individual who was the sole witness to that fact; or if a material fact is an individual’s state of mind, or lack thereof, and that fact is sought to be established solely by the individual’s affirmation thereof.” Here, the declaration is cited as the sole evidence pertaining to the “wrongful intent” element at issue. As this is the only evidence submitted in support of Defendants’ argument that Plaintiff cannot prove “intent to deceive,” the court declines to grant summary adjudication on this ground.

2nd and 5th Causes of Action: No Misrepresentation

Defendants argue that the 2nd cause of action for fraud and 5th cause of action for securities fraud must fail because Plaintiff cannot prove that a misrepresentation was made.

Similar to the above, Defendants again fail to meet their burden on summary judgment. Defendants’ evidentiary submission in support of this position consists solely of Sullivan’s legal conclusion that he “did not misrepresent anything to Mr. Dailey in connection with Mr. Dailey’s Investments in the Ketchum Investment,” nor did he “intentionally omit telling Mr. Dailey something that [he] knew about the investments, in order to cause Mr. Dailey to make the Ketchum Investment or the Greenhouse Investment.” (Sullivan Decl. ¶¶ 27-28.)

There are no facts set forth in paragraphs 27 and 28 of Sullivan’s declaration. Defendants’ reply papers are equally of little assistance; Defendants merely repeat that “[t]he moving papers set forth that Mr. Sullivan did not misrepresent anything to Mr. Dailey to induce Mr. Dailey’s investments at issue.” (Reply 9:19-20.)

Based on the foregoing, Defendants fail to show the non-existence of a triable issue as to the existence of misrepresentation.

7th Cause of Action: Breach of Contract

Defendants argue that the 7th Cause of Action for breach of contract fails because Plaintiff cannot identify a contract for which Defendant Sullivan was personally a party.

Defendants submit the declaration of Edward Gartenburg, counsel for Defendants, who attaches a copy of Plaintiff’s responses to Form Interrogatories. (Gartenburg Decl. ¶ 6, Exh. D.) Plaintiff responded in relevant part as follows:

The Daileys entered into oral and written agreement(s) with Defendant Sullivan, and other Defendants, to provide financial advice and services and for Defendant Sullivan to serve as Plaintiff's investment advisor and broker. To the extent these agreements were reduced to or otherwise reflected in written documents, these agreements include but are not limited to:

1) 2006 Form U-4 Uniform Application For Securities Industry Registration or Transfer;

2) 2006 UBS Account Application(s), including but not limited to 2006 UBS Strategic Advisor Program Account Application(s), 2006 UBS IRA Applications, and 2006 UBS Resource Management Account Application(s);

3) 2009 Investment Advisory Agreement;

4) 2011 Investment Advisory Agreement;

5) 2014 Investment Advisory Agreement;

6) 2017 Investment Advisory Agreement;

(Id., Resp. to Form Interrog. 50.1.)

Thus, Defendants argue that “the only written contracts which Plaintiff identified in his discovery response which would have been in existence as of the time of the investments at issue were: (1) a 2006 Form U-4 (Uniform Application For Securities Industry Registration or Transfer), and (2) 2006 UBS Applications.” (Motion 16:7-10.) Defendants also note that the Investment Advisory Agreements were entered into between the Daileys and Vellum or Wealthsource, and did not name Sullivan individually.

Again, Defendants’ evidentiary submissions fall short. Pursuant to Defendants’ Separate Statement, the only supporting evidence for the fact that “[e]xcept for the Form U-4 and the UBS applications, the written contracts identified by Plaintiff in his discovery responses, were contracts between the Daileys and Vellum or Wealthsource” is “Gartenberg Decl. ¶ 6, Exhibit D,” which in turn consists solely of Plaintiff’s responses to the Form Interrogatories but fails to attach the referenced documents. (Def. UMF 50.) Without the disputed documents, the court cannot make a determination as to their contents.

Based on the foregoing, Defendants have not met their burden of demonstrating the non-existence of a triable issue as to whether Sullivan was party to a contract with the Daileys.

8th Cause of Action: Accounting

 

Defendant argue that as the 8th cause of action for accounting is derivative of the other claims, it shall succeed or fail symmetrically.

Accordingly, the motion for summary adjudication is DENIED as to the 8th cause of action for accounting.

Conclusion

 

Based on the foregoing, Defendants Sullivan and Vellum Financial, LLC have failed to meet their burden as to any of the causes of action of the Second Amended Complaint. Defendants’ Motion for Summary Judgment is DENIED. As reflected below, summary judgment shall be GRANTED as against Defendant Wealthsource Partners, LLC, only.

Wealthsource Liability

Finally, Defendants argue that Wealthsource cannot be liable for any activities occurring prior to 2015 as it was formed that same year. Defendants cite no evidence for this assertion. Nevertheless, the court locates allegations in the SAC which assert that “Defendant WealthSource is an affiliated firm and successor in interest to Defendant Vellum which was formed in or about November 2015 as a joint venture between Defendant Vellum and Avant-Garde Advisors LLC.” (SAC ¶ 16.)

Premised on the issues framed by the SAC, allegations pertaining to improper investments made at the latest in 2012 may not be brought against an entity before it came into existence. The burden shifts to Plaintiff.

In opposition, Plaintiff fails to address this argument, and raises arguments as to how Wealthsource is vicariously liable for the wrongful acts of Sullivan. “Under the doctrine of respondeat superior, an employer is vicariously liable for his employee’s torts committed within the scope of the employment. This doctrine is based on ‘a rule of policy, a deliberate allocation of a risk. The losses caused by the torts of employees, which as a practical matter are sure to occur in the conduct of the employer’s enterprise, are placed upon that enterprise itself, as a required cost of doing business.’” (Perez v. VanGroningen & Sons, Inc. (1986) 41 Cal.3d 962, 967.)

Here, the allegations all pertain to conduct undertaken prior to Wealthsource’s existence. For example, the SAC alleges that “[i]n 2010, Defendant Sullivan recommended and advised the Daileys to invest in Green House Holdings. The terms of this investment contract are unknown to Plaintiff and more particularly within the knowledge of Defendants Sullivan, Vellum and Wealthsource.” (SAC ¶ 48.) However, such investment was made 5 years prior to Wealthsource’s incorporation. It appears that Wealthsource’s sole role in this matter is limited to being Sullivan’s employer “from at least November 2015 through the present.” (Id. ¶ 16.)

As no allegations are made as against Wealthsource, and as Wealthsource was not in existence at the time of the investment allegations forming the core of this action, Defendants’ Motion for Summary Judgment of the claims against Defendant Wealthsource Partners, LLC is GRANTED.

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