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LOPER v. ADVEST

September 6, 1985

LINDA T. LOPER, Plaintiff,
v.
ADVEST, INC., Defendant



The opinion of the court was delivered by: COHILL

 Plaintiff has sued Defendant in this action for violations of federal securities law and various state laws in connection with the alleged wrongful liquidation of Plaintiff's margin account. Presently before us is Defendant's motion to dismiss, pursuant to Fed. R. Civ. P. 12(b) (1) and 12(b) (6). Defendant moves, alternatively, for a more definite statement pursuant to Rule 12(e).

 Plaintiff, Linda Loper, is a citizen of Pennsylvania. Defendant Advest, Inc. ("Advest") is a corporation organized under the laws of the State of Connecticut with its principal place of business in Hartford, Connecticut. Plaintiff's claims are based on § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j (b) and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240, 10b-5 (1984), breach of contract, misrepresentation, and misrepresentation through nondisclosure. Plaintiff demands actual and punitive damages, as well as attorneys' fees. Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332 and federal question jurisdiction, 28 U.S.C. § 1331.

 FACTS

 Advest is a brokerage firm which conducts securities transactions on behalf of its customers. It is a member of the New York Stock Exchange and is licensed as a broker-dealer by the Securities and Exchange Commission.

 The amended complaint alleges that, on or about November 28, 1983, Plaintiff opened a margin account with Advest. Amended Complaint, paras. 5, 6. On or about February 29, 1984, Plaintiff purchased 12,000 shares of common stock of Gulf Oil Corporation ("Gulf") through Advest, acting as Plaintiff's broker. Id. P 7. On or about the same date, Plaintiff also purchased 120 Gulf "put" option contracts and sold 120 Gulf "call" option contracts. Id. P 8.

 Plaintiff alleges that, subsequent to these transactions, Defendant made a margin call on Plaintiff, allegedly advising Plaintiff that she had to deposit money or property in her account by March 9, 1984 to cover the stock purchase, and by March 12, 1984 to cover the put and call option contracts. Id. PP 10, 11. Plaintiff alleges that this notification was made March 2, 1984.

 Plaintiff alleges that, upon receipt of the margin call, she advised Defendant that all monies necessary to meet the margin requirements would be deposited in her account on March 7, 1984; she allegedly directed Defendant not to liquidate any open positions prior to that date. Id. P 12. Plaintiff alleges that Advest represented that this was satisfactory and that no action would be taken on the account before March 7.

 Plaintiff further alleges that, on March 1, 1984, prior to the margin call on March 2, Defendant liquidated the put and call options at a loss to Plaintiff. Id. PP 11, 13. Plaintiff then alleges that on or about March 2, 1984, Defendant liquidated "all of Plaintiff's open positions." Id. PP 13, 14. The stock margin account was also liquidated at a loss to Plaintiff. Id. P 16.

 Shortly after the liquidation, the price of Gulf common stock increased significantly. A tender offer was made by Gulf to its stockholders on March 5, 1984 to purchase the stock at a price significantly higher than that Plaintiff paid.

 Plaintiff alleges that Advest falsely represented a material fact in violation of § 10(b) and Rule 10b-5 by advising Plaintiff that her positions would not be liquidated if she satisfied the margin calls by March 9 and 12, respectively, and assuring Plaintiff that, in no event, would action be taken before March 7, 1984. Plaintiff's accounts were apparently liquidated on March 1 and 2, 1984.

 Defendant has moved 1) to dismiss Count 1, the federal securities claim, for failure to state a claim; 2) to dismiss the state law claims pursuant to the arbitration provision of the Customer Agreement; and, alternatively, for a more definite statement pursuant to Fed. R. Civ. P. 12(e). Defendant moves the court to stay or dismiss the Complaint pending outcome of the arbitration proceedings, if arbitration is ordered.

 The Federal Securities Claim

 Defendant argues that Count I fails to state a cause of action for several reasons: first, Defendant argues that Plaintiff never alleged that she was ready, willing and able to meet the margin call on March 9, 1984 with respect to the Gulf common stock or on March 12, 1984 with respect to the put and call options. Motion to Dismiss, at 2. Second, Defendant argues that pursuant to the terms of the Customer Agreement, Defendant had the right to sell any and all securities in Plaintiff's accounts without demand for margin or additional margin, notice of sale or purchase, or any other notice or advertisement. Id. (citing Customer Agreement, para. 6, Amended Complaint, Ex. A). Third, Defendant argues that the Agreement further provided that any prior demand, call or notice of the time and place of any such sale or purchase shall not be considered a waiver of the Defendant's right to sell or buy without demand, call or notice. Id. Fourth, Defendant argues that the alleged reneging of an oral promise by Defendant does not constitute a violation of § 10(b). Finally, Defendant ...


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