Robert Gehring, et al. v. Osaic Incorporated, et al.

Summary

The United States District Court for the District of Arizona addresses motions to dismiss claims arising from financial firms' cash sweep programs. The court dismisses all claims against parent company Osaic, Inc. for lack of privity, agency, fiduciary relationship, aiding-and-abetting allegations, or a basis for veil piercing. The court allows breach-of-contract claims against APA, Osaic Institutions, and Osaic Wealth to proceed based on alleged failures to review or adjust sweep rates, while the excerpt does not include the complete ruling on the fiduciary-duty claims against those entities.

Holdings

1. The complaint did not plausibly establish that Osaic, Inc. was a party to plaintiffs' contracts, was vicariously liable for its subsidiaries' contractual breaches, had a principal-agent relationship with the subsidiaries, or satisfied the requirements for piercing the corporate veil. The contract claims against Osaic, Inc. were therefore dismissed.
2. The complaint did not plausibly allege that Osaic, Inc. owed plaintiffs a fiduciary duty or knowingly participated in its subsidiaries' alleged fiduciary breaches. Those claims were dismissed.
3. Plaintiffs failed to plausibly allege that equity and good conscience required restitution from Osaic, Inc. or that Osaic, Inc. itself received a benefit from plaintiffs for which it unjustly failed to pay. The unjust-enrichment claims against Osaic, Inc. were dismissed.
4. The breach-of-contract claims were timely at the pleading stage and plausibly alleged that the governing agreements required ongoing rate-setting and periodic review of sweep rates. The claims could proceed to the extent based on alleged failures to adjust or reconsider rates as required by the agreements.
5. Only Gehring's advisory account through APA plausibly supported a fiduciary-duty claim. The fiduciary-duty claims based on Gehring's non-advisory Osaic Wealth brokerage IRA and Hunt and Norris's non-advisory Osaic Institutions IRAs were dismissed.
6. Plaintiffs could plead unjust enrichment in the alternative because the parties disputed the scope of the written contracts, but the claims were inadequately pleaded and were dismissed.
7. The Investment Advisers Act claims were dismissed because the section 80b-15 rescission claims were untimely and the Act provides no private cause of action other than contract-voiding relief under section 80b-15.
8. Leave to amend was granted because additional facts could potentially cure the claims against Osaic, Inc., the fiduciary-duty claims against Osaic Wealth and Osaic Institutions, and the unjust-enrichment claims. The IAA claims were also dismissed with leave to amend in case plaintiffs could identify newly added contractual terms within the limitations period.

Questions Presented

1. Whether the complaint plausibly stated contract, fiduciary-duty, unjust-enrichment, or Investment Advisers Act claims against parent company Osaic, Inc.
2. Whether plaintiffs' breach-of-contract claims against the Osaic broker-advisors were timely and plausibly alleged ongoing contractual obligations to review or adjust sweep rates.
3. Whether the broker-advisors owed fiduciary duties to plaintiffs whose accounts were advisory or non-advisory.
4. Whether plaintiffs could plead unjust enrichment in the alternative when the parties disputed the scope of written account agreements.
5. Whether the Investment Advisers Act claims were timely and supported a private cause of action.
6. Whether leave to amend should be granted.

Disposition

other