The docket reflects the following entry: 9/23/2005 — Judge Nancy Gertner: Electronic ORDER granting in part and denying in part  Motion to Dismiss, adopting Report and Recommendations  there having been no objections filed. REPORT AND RECOMMENDATION ON DEFENDANTS' MOTION TO DISMISS AND, IN THE ALTERNATIVE, FOR A MORE DEFINITE STATEMENT (#5) I. Introduction
This matter is before the Court on the defendants' motion todismiss pursuant to Fed.R.Civ.P. 12(b)(6), and, in thealternative, for a more definite statement pursuant toFed.R.Civ.P. 12(e). The plaintiff, Desiree Pearce ("Pearce"),originally filed this action in state court on March 9, 2004. Thedefendants, the Duchesneau Group, Inc. (the "Company"), DavidMichael Duchesneau ("Duchesneau"), and Brant P. McGettrick("McGettrick") (collectively referred to hereinafter as"defendants"), removed this case to federal court pursuant to28 U.S.C. §§ 1441 and 1446 and federal diversity jurisdiction.Pearce alleges, among other things, that the defendants failed toadvise her properly in investing her retirement savings, andfailed to advise her of the details of her investmenttransaction. She asserts in her complaint (#1) the followingcauses of action: Count I, Breach of Contract; Count II, Breachof the Covenant of Good Faith and Fair Dealing; Count III, Breachof Fiduciary Duty; Count IV, Violation of Chapter 93A of theMassachusetts General Laws; Count V, Violation of MassachusettsSecurities Laws; Count VI, Fraud; Count VII, Control PersonLiability Under Massachusetts Securities Laws; and Count VIII,Respondeat Superior.
On July 23, 2004, the defendants filed their Motion to Dismissand, in the Alternative, Motion for a More Definite Statement (#5) along witha Memorandum of Law in support of that motion (#6). Thedefendants move to dismiss all counts except Count IV, whichalleges violations of Mass.Gen. L. c. 93A. In response, Pearcefiled her Opposition to Defendants' Motion to Dismiss, or in theAlternative, Motion for a More Definite Statement (#10). Thedefendants have filed a Reply Memorandum of Law (#21) and Pearcehas filed a Sur-Reply Memorandum of Law (#17). The motion hasthus been fully briefed, and is now ripe for disposition.
II. The Facts
The facts are those as alleged by the plaintiff in hercomplaint (#1). Pearce is a resident of Florida. (#1 ¶ 1).Duchesneau was the principal and the president of the Company,which was, at all relevant times, located in Weston,Massachusetts. (#1 ¶¶ 2-3). McGettrick was, at all relevanttimes, an unregistered investment advisor employed by theCompany. (#1 ¶ 4).
In or about February 2000, Pearce was referred to the Companyas possible investment advisors to manage her retirement funds.(#1 ¶ 5). Pearce spoke with McGettrick at the Company andinformed him that she had limited investment experience andwanted her funds to be invested conservatively. (#1 ¶¶ 6-7).Pearce explained to McGettrick that she needed an investor whowould regularly monitor her account and McGettrick assured her that hewould monitor her account and would choose investments inaccordance with her conservative objectives. (#1 ¶¶ 9-10).McGettrick represented himself to be "a knowledgeable andexperienced investment advisor" capable of providing professionalexpertise and advice. (#1 ¶ 6). McGettrick recommended thatPearce split her SEP IRA funds into two managed accounts: InsightCapital Management's ("Insight Capital") Non-DiversifiedAggressive Growth Portfolio and TCW Asset Management's ("TCW")Small Cap Growth Fund. (#1 ¶ 11). McGittrick assured Pearce thatthese were conservative investments and that he would monitor theinvestments to ensure against losses. Relying on that statement,Plaintiff transferred her SEP IRA funds to the defendants with abalance of $321,580.77. (#1 ¶ 13).
Unbeknownst to Pearce, the Company was not a licensedbroker/dealer and therefore could not purchase or sell securitieson her behalf. (#1 ¶ 14). Instead, the Company sent Pearceseveral forms to sign in order to open a Salomon Smith Barney("SSB") brokerage account. (#1 ¶ 15). The Company did notdisclose to Pearce certain details about her investment account,to wit: that both funds had wrap fees that included managementfees and transaction costs (#1 ¶ 16); that she would paycommissions and fees to the funds themselves in addition to those due to SSB, McGettrick and theCompany (#1 ¶ 17); and that independent managers of the fundsmade all the decisions concerning her investments, without anyregard for Pearce's conservative objectives. (#1 ¶ 18). She alsoavers that McGittrick failed to disclose that he had beencertified as a financial planner for only one month at the timehe first spoke to Pearce. (#1 ¶ 23).
Pearce further alleges that, along with the defendants' failureto disclose the intricacies of her investment account, both theTCW and Insight Capital funds were not conservative investmentsbecause they were comprised of technology companies and othercompanies with small capitalization levels. (#1 ¶ 19). Accordingto the complaint, "[t]hese volatile and concentrated investmentsexposed Ms. Pearce to unnecessarily high levels of risk,significantly higher than she informed McGettrick she was willingto accept." (#1 ¶ 21).
Pearce alleges that the defendants failed to monitor the fundsregularly as promised and that when Pearce asked the defendantsabout a decline in her account they "actively encouraged" her tokeep her money in the two funds. (#1 ¶¶ 22, 24). In or about June2001, Pearce contacted Duchesneau about a further decline in heraccount and he informed her that McGettrick was no longer withthe Company. (#1 ¶ 26). Duchesneau reaffirmed that McGittrick's initial recommendations were appropriate given Pearce'sconservative objectives. (#1 ¶ 27). On November 20, 2001, Pearceclosed her account; she had, however, "lost the vast majority ofher retirement funds." (#1 ¶ 30).
A. Relevant Standards
1. Motion to Dismiss Standard
"[C]ourts faced with the task of adjudicating motions todismiss under 12(b)(6) must apply the notice pleadingrequirements of Rule 8(a)(2). Under that rule, a complaint needonly include a `short and plain statement of the claim showingthat the pleader is entitled to relief.'" EducadoresPuertorriquenos en Accion et al. v. Hernandez, 367 F.3d 61, 66(1st Cir. 2004). "This statement must `give the defendantfair notice of what the plaintiff's claim is and the grounds uponwhich it rests.'" Id. (quoting Conley v. Gibson, 355 U.S. 41,47, 78 S. Ct. 99 (1957)). Thus, "[g]reat specificity isordinarily not required to survive a 12(b)(6) motion."Alternative System Concepts, Inc. v. Synopsys, Inc.,374 F.3d 23, 29 (1st Cir. 2004) (internal quotations and citationsomitted.) "Given the Federal Rules' simplified standard forpleading, `[a] court may dismiss a complaint only if it is clearthat no relief could be granted under any set of facts that could be proved consistent with theallegations.'" Swierkiewicz v. Sorema N.A., 534 U.S. 506,514,122 S. Ct. 992, 998 (2002) (quoting Hishon v. King &Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229 (1984)).
2. Standard for Motion for a More Definite Statement
The Federal Rules of Civil Procedure permit a party to move fora more definite statement pursuant to Fed.R.Civ.P. Rule 12(e)when a complaint "is so vague or ambiguous that a party cannotreasonably be required to frame a responsive pleading. . . ."Fed.R.Civ.P. 12(e). "Courts do not invoke Rule 12(e)frequently and more often dismiss such complaints with leave toamend." Fease v. Town of Shrewsbury, 188 F. Supp.2d 16, 17 (D.Mass. 2002) (citation omitted). Generally, 12(e) motions are notfavored because the Federal Rules of Civil Procedure permitnotice pleading and ample pretrial discovery procedures, seeHaghkerdar v. Husson College, 226 F.R.D. 12, 13-14 (D. Me. 2005)(and cases cited), and parties ought not employ the motion as asubstitute for discovery. See Fed.R.Civ.P. 12(e), AdvisoryCommittee Notes to 1946 Amendment. Thus, a court properly grantsa Rule 12(e) motion "only when a party is unable to determine theissues he must meet." Haghkerdar, 226 F.R.D. at 14 (internalquotations and citation omitted.)
B. Analysis of Arguments 1. Breach of Contract Claim
The defendants argue that dismissal is warranted on the breachof contract claim because the plaintiff has not identified thecontract that forms the basis of her claim, and has not specifiedwhether the contract was written or oral. In addition, thedefendants argue that the plaintiff has not sufficiently pled"consideration" supporting the contract.
"A breach of contract complaint must allege (1) the existenceof a valid and binding contract; (2) that plaintiff has compliedwith the contract and performed his own obligations under it; and(3) breach of the contract causing damages." Persson v. ScotiaPrince Cruises, Ltd., 330 F.3d 28, 34 (1st Cir. 2003)(citing 5 Charles Alan Wright & Arthur R. Miller, FederalPractice and Procedure § 1235, at 268-70 (2d ed. 2002)). Theplaintiff has alleged the following: By offering financial and advisory services for a fee to Ms. Pearce, by agreeing and representing to provide such services to Ms. Pearce, by accepting and maintaining Ms. Pearce's retirement assets and accounts, and by having Ms. Pearce process investment transactions through the Company based on the defendants' advice and expertise, the defendants entered into a contract with Ms. Pearce to provide her with competent services and advice on a continuous basis, to gather and document sufficient relevant information in order to properly advise Ms. Pearce, to serve the best interests of Ms. Pearce as a client and investor, to follow Ms. Pearce's instructions, and to ensure the legal and appropriate handling and supervision of Ms. Pearce's assets and accounts and transactions therein.Complaint #1 ¶ 32.
These allegations are sufficient to allege the existence of acontract and Pearce's compliance with her own obligations underit. The complaint also alleges that the plaintiff transferred herfunds to the Company (#1 ¶ 13); that McGettrick failed, amongother things, to monitor the plaintiff's account as promised (#1¶¶ 24-25); and that, as a result, the plaintiff lost the majorityof her retirement funds. (#1 ¶ 30). The Court concludes thatthese allegations are sufficient to put the defendants on noticeof the nature of the claim. Further, although under First Circuitlaw the plaintiff is not required to plead consideration, theCourt can fairly infer that the contract is supported byconsideration.
The defendants have also moved the Court, pursuant toFed.R.Civ.P. 12(e), to require the plaintiff to state whether thecontract at issue was written or oral. The defendants complainthat they are unable to assert defenses such as statute of fraudswithout knowing whether the contract is oral or written, and thatit is unfair to permit the plaintiff to "imply" (#21 at 1) thatthe contract is oral "leaving Defendants open to a later claim thatit is written." (#21 at 1-2). The Court disagrees that theplaintiff is required to state with particularity whether thecontract was written or oral. "Th[e] simplified notice pleadingstandard relies on liberal discovery rules and summary judgmentmotions to define disputed facts and issues and to dispose ofunmeritorious claims." Swierkiewicz, 534 U.S. at 512,122 S. Ct. at 998 (citations omitted.) Further, "`[t]he provisions fordiscovery are so flexible and the provisions for pretrialprocedure and summary judgment so effective, that attemptedsurprise in federal practice is aborted very easily. . . .'"Id. at 512-513, 122 S.Ct. at 998 (quoting 5 C. Wright & A.Miller, Federal Practice and Procedure § 1202, p. 76 (2d ed.1990)). The question of whether the contract was written or oralis a proper matter for discovery. See C. Wright & A. Miller,5 Federal Practice and Procedure: Civil 3d § 1235, p. 395 (3d ed.2004) (noting that "[i]t has been held that the complaint in acontract action should show whether the contract is written ororal or both or be subject to a motion to dismiss or for a moredefinite statement, but the few decisions to this effect are notin accord with the spirit of federal pleading policy and itshould be sufficient merely to allege that a contract exists.")
In complaining that they are unable to plead proper defenses,the defendants again misunderstand the simplicity of the federalpleading standards: Fed.R.Civ.P. 8(b) requires only that "[a]party shall state in short and plain terms the party's defensesto each claim asserted. . . ." Further, Fed.R.Civ.P. 8(e)(2)states that, subject to the obligations of Rule 11, "[a] partymay . . . state as many separate claims or defenses as the partyhas regardless of consistency and whether based on legal,equitable, or maritime grounds." The Court therefore cannotconclude that, under Fed.R.Civ.P. 12(e), the complaint in thisinstance "is so vague or ambiguous that [the defendants] cannotreasonably be required to frame a responsive pleading. . . ."Fed.R.Civ.P. 12(e).
For all these reasons, the Court will recommend thatdefendants' motion to dismiss the breach of contract claim bedenied. The Court will further recommend that the defendants'motion for a more definite statement be denied.
2. Breach of the Covenant of Good Faith and Fair Dealing
Under Massachusetts law, every contract contains an impliedcovenant of good faith and fair dealing. McAdams v. Mass. Mut.Life Ins. Co., 391 F.3d 287, 301 (1st Cir. 2004) (citingAnthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451,583 N.E.2d 806, 820 (1991)). The defendants move to dismiss Count II, Breach of the Covenant of Good Faith and Fair Dealing, arguingsimply that no contract existed and that therefore they are notbound by an implied covenant. Because the Court has determinedthat the plaintiff has sufficiently pled the existence of acontract, the Court will recommend that the defendants' motion todismiss Count II be denied.
3. Breach of Fiduciary Duty
The defendants move to dismiss the plaintiff's claim for breachof fiduciary duty, arguing that the plaintiff has failed toallege facts that establish that the plaintiff's relationshipwith the defendants was fiduciary in nature. They point, inparticular, to a number of federal cases within this circuitgranting motions to dismiss breach of fiduciary claims between acustomer and stockbroker, and holding that no such fiduciaryrelationship exists under Massachusetts law. See, e.g.,Lefkowitz v. Smith Barney, Harris Upham & Co., 804 F.2d 154, 155(1st Cir. 1986); Shamsi v. Dean Witter Reynolds, Inc.,743 F. Supp. 87, 92 (D. Mass. 1989). The leading Massachusetts caseon the question of whether a fiduciary duty has arisen between astockbroker and his or her client, however, is Patsos v. FirstAlbany Corp., 433 Mass. 323, 741 N.E.2d 841 (2001).1 In Patsos, the Massachusetts Supreme JudicialCourt recognized that the relationship between a stockbroker anda customer may be either a fiduciary one or an ordinary businessone, and enumerated a number of factual considerations that candetermine whether a fiduciary duty has arisen between astockbroker and a customer. As a preliminary matter, the SupremeJudicial Court noted that "the scope of a stockbroker's fiduciaryduties in a particular case is a factual issue that turns on themanner in which investment decisions have been reached andtransactions executed for the account." Id. at 433 Mass. 332,741 N.E.2d at 849 (citations omitted.) Under Patsos, the"degree of discretion a customer entrusts to his broker," id.at 333, 741 N.E.2d at 849, is a principal consideration: Where the account is `non-discretionary,' meaning that the customer makes the investment decisions and the stockbroker merely receives and executes a customer's orders, the relationship generally does not give rise to general fiduciary duties. . . . Conversely, where the account is `discretionary,' meaning that the customer entrusts the broker to select and execute most if not all of the transactions without necessarily obtaining prior approval for each transaction, the broker assumes broad fiduciary obligations that extend beyond individual transactions.Patsos at 333-334, 741 N.E.2d at 849-850 (citations omitted).
In analyzing the extent to which a customer has entrusted"discretion" to his or her stockbroker, Patsos notes thattrading without the customer's prior approval suggests an accountis discretionary while frequent communications between thecustomer and the stockbroker about the "prudence" of certaininvestments suggests that the customer has retained control ofthe account. Id. at 334, 741 N.E.2d at 850. Further, Patsosinstructs that a fact finder may consider as evidence of adiscretionary account whether "a broker has acted as aninvestment advisor, and particularly if the customer has almostinvariably followed the broker's advice. . . ." Id. Beyond thequestion of discretion or control, Patsos notes that a"customer's lack of investment acumen may be an importantconsideration, where other factors are present" especially when"the broker holds himself out as an expert in a field in whichthe customer is unsophisticated." Patsos at 334-335, 850-851.
The defendants argue that the plaintiff has failed to state aclaim for breach of fiduciary duty under the factors set out inPatsos because the plaintiff has alleged no facts thatestablish that the defendants had discretion over Pearce'saccount. (#21 at 11). The defendants maintain that the face ofthe complaint itself establishes that the defendants sought theplaintiff's prior approval before investing her funds and thatthe defendants merely recommended investments that the plaintifffollowed. (#21 at 11). The Court rejects this argument,particularly at this stage of the proceedings. Under Patsos,whether a stockbroker obtained prior approval is a consideration.But, as noted, Patsos also instructs that when the "broker hasacted as an investment advisor, and particularly if the customerhas almost invariably followed the broker's advice, the factfinder may consider this as evidence that the relationship isdiscretionary." Id. at 433, 741 N.E.2d at 850. The plaintiffhere has alleged that McGettrick held himself out to Pearce as a"knowledgeable and experienced investment advisor." (#1 ¶ 6). Andalthough the plaintiff here followed McGettrick'srecommendations, nothing in her complaint suggests thatMcGettrick merely executed the plaintiff's buy and sellorders.2 To the contrary, the plaintiff has alleged thatshe gave clear instructions to McGettrick that she wastransferring her retirement assets to the defendants to ensurethat they were professionally managed, and nothing in thecomplaint suggests that the plaintiff exercised any independent judgment on the investmentdecisions. Cf. Birch v. Arnold & Sears, 288 Mass. 125,192 N.E. 591 (1934), cited in Patsos, 433 Mass. at 331,741 N.E.2d at 848; In re Murphy, 297 B.R. 332, 350 (Bankr. D. Mass. 2003)(nondiscretionary account found to exist where customertelephoned several times a day to "keep abreast of daily marketperformance and to discuss trading strategies. . . .")3
Finally, although the degree of discretion a stockbrokerexercises is a key consideration in determining whether afiduciary relationship existed, the degree of control ordiscretion that Pearce has accorded to McGettrick is itself afactual one, and, for that reason, resolution of this issue, andapplication of the other Patsos factors, requires furtherfactual development. See e.g., Twin Fires Investment, LLC v.Morgan Stanley Dean Witter & Co., 2001 WL 1249303, *4 (Mass.Super. 2001) (applying Patsos, and denying summary judgment onquestion of whether fiduciary relationship existed); WilsonFarm, Inc. v. Berkshire Life Ins. Co., 2002 WL 31440151, *8(Mass. Super. 2002) (stating that "[w]hether or not a fiduciary relationship existed is afactual question to be decided by a jury.") (citing Patsos,433 Mass. at 329, 741 N.E.2d 841). See also McAdams,391 F.3d at 302 (citing Patsos, 433 Mass. 323, 741 N.E.2d 841, 849-51(2001)). Whether the plaintiff's claim survives further factualscrutiny is another question.4 On a motion to dismiss,the plaintiff is not obligated to prove that a fiduciaryrelationship existed. Rather, she need only put the defendants onnotice of her claim. She has done so here. For these reasons, theCourt will recommend that the motion to dismiss the claim ofbreach of fiduciary duty be denied.
4. Massachusetts Blue Sky Laws (Count V) and Fraud (Count VI)
The defendants move to dismiss the plaintiff's common law fraudclaim (Count VI), arguing that it fails to meet the heightenedpleading requirements of Fed.R.Civ.P. 9(b). The defendantsalso urge the Court to apply 9(b)'s standards to the plaintiff'sclaim under the Massachusetts Uniform Securities Act, Mass. Gen.L. c. 110A § 101, 410(a) ("Blue Sky Law"), arguing that, althoughfraud is not a required element of the statutory claim, the CountV "sounds in fraud." (#6 at 8 n. 3). The Court considers thesearguments in that order.
a. The Common Law Fraud Claim (Count VI)
Although the Court looks to state law to determine whether theelements of fraud have been pled, the procedure for pleadingfraud in federal court is governed by the heightenedparticularity requirements of Fed R.Civ P. 9(b). See e.g.,Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir. 1985). Rule9(b) states: Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally."This heightened pleading standard is satisfied by an averment`of the who, what, where, and when of the allegedly false orfraudulent representation.'" Rodi v. Southern New England Schoolof Law, 389 F.3d 5,15 (1st Cir. 2004) (quoting AlternativeSystem Concepts, Inc., 374 F.3d at 29 (other citations omitted).The First Circuit has noted that "the specificity requirementextends only to the particulars of the allegedly misleadingstatement itself." Id. (citing Educadores Puertorriquenos enAccion v. Hernandez, 367 F.3d 61, 66 (1st Cir. 2004)). "Theother elements of fraud, such as intent and knowledge, may beaverred in general terms." Id. (citing Fed.R.Civ.P. 9(b)). Seealso Hayduk, 775 F.2d at 444 (stating that "Rule 9(b) requires `specification ofthe time, place and content of an alleged false representation,but not the circumstances from which fraudulent intent could beinferred.'") (quoting McGinty v. Beranger Volkswagen, Inc.,633 F.2d 226, 228 (1st Cir. 1980)) (other citation omitted).
"To prevail on a claim of fraudulent misrepresentation underMassachusetts law, the plaintiff must show that the defendant`made a false representation of a material fact with knowledge ofits falsity5 for the purpose of inducing the plaintiff toact thereon, and that the plaintiff reasonably relied upon therepresentation as true and acted upon it to his damage.'" EurekaBroadband Corp. v. Wentworth Leasing Corp., 400 F.3d 62, 68(1st Cir. 2005) (quoting Russell v. Cooley Dickinson Hosp.,Inc., 437 Mass. 443, 772 N.E.2d 1054, 1066 (2002), and omittingcitation and internal quotation marks). See also Rodi,389 F.3d at 13 (citing Zimmerman v. Kent, 31 Mass. App. Ct. 72,575 N.E.2d 70, 74 (1991)); Lawson v. Affirmative Equities Co.,L.P., 341 F. Supp.2d 51, 65 (D. Mass. 2004). Under Massachusetts law, it is"sufficient to show proof of a statement made, as of the party'sown knowledge, which is false, provided the thing stated is notmerely a matter of opinion, estimate, or judgment, but issusceptible of actual knowledge; actual intent to deceive on thepart of the defendants need not be shown." Russell,437 Mass. at 458-459, 772 N.E.2d at 1066 (internal quotations and citationsomitted).
The plaintiff has alleged that both McGittrick and Duchesneaumade various material misstatements or omitted to state materialfacts, and the defendants have specific complaints about each ofthem. The plaintiff alleges that "the defendants made untruestatements of material fact and omissions regarding, interalia, their professional experience and abilities, theirhandling of Ms. Pearce's retirement assets and their managementand oversight of her accounts, and their recommendations forappropriate investments." (#1 ¶ 64). The defendants' chiefargument is that the plaintiff has failed to plead theseallegedly fraudulent misrepresentations with the particularityrequired under Fed.R.Civ.P. 9(b). The Court considers thesufficiency of the various allegations seriatim.6 First, the plaintiff alleges that in or about February 2000,upon first contacting the company, McGittrick "held himself outto Ms. Pearce as a knowledgeable and experienced investmentadvisor who could provide professional expertise andrecommendations to her with respect to investing her retirementfunds." (#1 ¶ 6). She further avers that, despite theserepresentations, "he actually had been certified as a financialplanner for only about a month at the time he was first speakingwith Ms. Pearce." (#1 ¶ 23) The defendants argue that theplaintiff has failed adequately to allege the content ofMcGittrick's misrepresentation, (#6 at 11), and has failed toallege "fraudulent intent" with requisite particularity. TheCourt agrees that, as pled, the plaintiff has failed to allegewith particularity "the circumstances constituting fraud,"Fed.R.Civ.P. 9(b), i.e., circumstances that would permit theinference that McGittrick's representation about his experiencewas false. The plaintiff does not allege, for example, thatMcGittrick had specifically represented that he had been acertified financial planner for a period of years. Indeed, theplaintiff's own allegations state simply that the plaintiff "was seeking the assistance of an experienced investment advisor," (#1¶ 23), not that she required the services of an experiencedcertified financial planner. Nothing here suggests fraud, as, onthe face of the complaint, McGittrick may indeed have been anexperienced financial advisor. Because Rule 9(b) dictates thatthe plaintiff aver "the circumstances constituting fraud," theCourt determines that the defendants are entitled to know thespecifics of McGittrick's representation. To that extent, theCourt will recommend granting the defendants' motion for a moredefinite statement.
On the other hand, the Court disagrees with the defendants'argument that the plaintiff has failed to establish "fraudulentintent" with particularity. As noted above, "intent to deceive"is not required to establish fraudulent misrepresentation underMassachusetts law.7 Even so, the First Circuit hasrecently reiterated that under Rule 9(b), intent may be generallyaverred. Rodi, 389 F.3d at 15. The plaintiff has done so here.(#1 ¶¶ 65-66). Second, the plaintiff alleges that McGittrick misrepresentedthat he and the Company would carefully manage her retirementassets to ensure against losses (#1 ¶ 10). The plaintiff furtheralleges that neither McGittrick nor anyone else contacted her "todiscuss [her] losses, to reassess her investment positions, torecommend other, more suitable investments, or to reduce theserious risk exposure . . . created in the accounts." (#1 ¶ 25).Under Massachusetts law, "[a] statement of a promissory orpredictive nature is actionable [in fraud] if it can be shownthat the maker never intended to carry out the promise or knewthat the prediction was false when it was made." Lawson, 341 F.Supp.2d at 65 (and cases cited). See also Starr v. Fordham,420 Mass. 178, 187, 648 N.E.2d 1261, 1267 (1995) ("Statements ofpresent intention as to future conduct may be the basis for afraud action, if the statements misrepresent the actual intentionof the speaker and were relied upon by the recipient to hisdamage.") (internal quotations and citations omitted). Theplaintiff has sufficiently pled circumstances from which theCourt can infer the falsity of McGittrick's representation. And,because the plaintiff may aver "intent" generally here, theallegation based on this representation has been sufficientlypled.
Finally, the plaintiff alleges that McGittrick represented thathe would choose "investments in accordance with her conservativeobjectives." (#1 ¶¶ 10, 12). She alleges that McGittrickrecommended two funds that were inappropriate for her investmentobjectives: "both the TCW and the Insight Capital funds wererisky and volatile by nature and were comprised mostly of stocksin technology companies and companies with small capitalizationlevels". (#1 ¶ 19). "In addition to the time, place, and personrequirements under Rule 9(b), when alleging unsuitability theplaintiff must also `show that the quality of the stocks boughtwas inappropriate to his investment objectives.'" See, e.g.,Alton v. Prudential-Bache Securities, Inc, 753 F. Supp. 39, 43(D. Mass. 1990) (quoting Tiernan v. Blyth, Eastman, Dillon &Co., 719 F.2d 1, 5 (1st Cir. 1983)).) The plaintiff does notmerely allege that the stocks declined in value, cf. id. at 43,but also explains why the quality of the investments thatMcGettrick recommended were not appropriate for her investmentobjectives, viz., because they contained under-capitalizedtechnology companies and were risky and volatile in nature. (#1 ¶19). The plaintiff has also alleged that she made herconservative investment objectives plain to McGittrick and thatboth McGittrick and Duchesneau represented that the investmentswere consistent with her conservative investment objectives. (#1¶ 12, ¶ 27). These allegations are sufficient to state a claimfor fraud. Cf. Shamsi v. Dean Witter Reynolds, Inc., 743 F. Supp. 87, 91 (D.Mass. 1989) (allowing unsuitability claim under state law fraudclaim where plaintiff expressed wish to invest in conservativeinvestments, defendants assured plaintiff that stocks were lowrisk, and plaintiff set forth basis for stock's unsuitability);Cannistraci v. Dean Witter Reynolds, Inc., 796 F. Supp. 619,623 (D. Mass. 1992); Lawson, 341 F. Supp.2d at 65 (noting thata "statement of opinion may . . . be actionable where the maker'sknowledge of the subject matter is so superior that a reasonablerecipient would understand the opinion as an assertion of fact.")(citing Stolzoff v. Waste Systems Intern., Inc.,58 Mass. App. Ct. 747, 759, 792 N.E.2d 1031 (2003)).
Finally, the defendants complain that certain allegations, inwhich the plaintiff attributes representations to simply "thedefendants," fail to comply with Rule 9(b)'s strictures. Forexample, the plaintiff alleges that "the defendants reaffirmedthat her funds were properly invested in accordance with herinvestment objectives and risk tolerance." (#1 ¶ 24). The Courtagrees that such allegations are insufficient to meet Rule 9(b)'sstandards, see e.g., Rodi, 389 F.3d at 15 (stating thatrepresentations attributed to unidentified speakersunactionable).
The Court, having determined that this count contains "a hybridof allegations, some of which satisfy the strictures of 9(b) andsome of which do not . . ." Rodi, 389 F.3d at 15, "may sustainthe claim on the basis of those specific allegations that areproperly pleaded." Id. (citations omitted.) For these reasons,the Court will recommend denying the defendants' motion todismiss and will further recommend granting the defendants'motion for a more definite statement to the extent discussedabove.
b. Massachusetts Blue Sky Laws
The Court next addresses the defendants' argument that theplaintiff has failed to state a claim under Massachusetts BlueSky Law, Mass. Gen. L. c. 110A, §§ 101, 410(a). The defendants'only argument is that Count V "sound[s] in fraud" (#6 at 8 n. 3)and should therefore be held to the heightened particularityrequirement of Rule 9(b). Under this reasoning, the statutoryclaim would suffer from substantially the same infirmities asthose set out above.
The plaintiff has alleged that the defendants' actions violatedMass. Gen. L. c. 110A §§ 101 and 410, (#1 ¶ 61), and has quoted §101 in her complaint. (#1 ¶ 57). The problem for the plaintiff isthat there is no private right of action under Mass. Gen. L. c.110A, § 101. Fenoglio v. Augat, Inc., 50 F. Supp.2d 46, 58 (D.Mass. 1999) (and cases cited), aff'd, 254 F.3d 368 (1stCir. 2001). Only § 410(a) provides a private right of action. Id.(and cases cited). The Court, then, can certainly understand thedefendants' confusion when, under Count V, the plaintiff allegesviolations of § 101, which makes unlawful "any device, scheme orartifice to defraud" in the sale of securities or "any actpractice, or course of business which operates or would operateas a fraud or deceit upon any person." Further, the plaintiff hasalleged: "The defendants' actions and conduct set forth hereinconstitute material fraudulent mispresentations and omissionsthat were relied upon to her detriment." (#1 ¶ 60). There is noquestion that Count V "sounds in fraud."
Under § 410, however, it is enough for the plaintiff toestablish that "(1) the defendant `offers or sells a security';(2) in Massachusetts; (3) by making `any untrue statement of amaterial fact' or by omitting to state a material fact; (4) theplaintiff did not know of the untruth or omission; and (5) thedefendant knew, or `in the exercise of reasonable care [would]have known,' of the untruth or omission." Marram v. KobrickOffshore Fund, Ltd., 442 Mass. 43, 52, 809 N.E.2d 1017, 1026(2004). Thus, it is not that the plaintiff has insufficientlypled her claim with particularity; it is that the plaintiff hasmade allegations of fraud in this count where none are required:under § 410(a)(2), the plaintiff does not need to provenegligence, scienter or reliance. See Marram, 442 Mass. at 53, 809 N.E.2d at 1026-1027.
Were it not for this error in pleading, it seems likely thatthe plaintiff would have stated a claim under § 410, particularlyunder the notice-pleading requirements of Rule 8(a). Under thesecircumstances, the Court will recommend granting the defendants'motion to dismiss Count V to the extent that the plaintiff seeksto state a claim under § 101. The Court will further recommenddenying the defendants' motion to dismiss Count V to the extentthat it is premised on § 410(a). See Fed.R.Civ.P. 8(e)(2)(stating that "[w]hen two or more statements are made in thealternative and one of them if made independently would besufficient, the pleading is not made insufficient by theinsufficiency of one or more of the alternative statements.").See also 2 Moore's Federal Practice, § 9.03[d] (MatthewBender 3d ed.) (stating that "when averments of fraud are made ina claim in which fraud is not an element, an inadequate avermentdoes not mean that no claim has been stated. The court shoulddisregard the averments that do not comply with Rule 9 andexamine the remaining allegations to determine whether they statea claim."). Accord Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,1105 (9th Cir. 2003).
5. Respondeat Superior The defendants claim that the plaintiff has insufficientlyaverred that Duchesneau should be held individually liable underthe theory of respondeat superior. (#6 at 14). "`Broadlyspeaking, respondeat superior is the proposition that anemployer, or master, should be held vicariously liable for thetorts of its employee, or servant, committed within the scope ofemployment.'" Kavanagh v. Trustees of Boston University,440 Mass. 195, 198, 795 N.E.2d 1170, 1174 (2003) (quoting Dias v.Brigham Med. Assocs., Inc., 438 Mass. 317, 319-20,780 N.E.2d 447 (2002)) (other citation omitted). The plaintiff alleges thatDuchesneau was the principal and the president of the Company,(#1 ¶ 3), and that "[a]t all relevant times, McGettrick wasacting within the scope of his employment as an employee for theCompany." (#1 ¶ 75). Further, the plaintiff has alleged that"[a]s a result of this relationship and McGettrick's conduct andaction during this relationship, the Company and Duchesneau arejointly and severally liable for McGettrick's wrongful actionsand conduct set forth herein pursuant to the doctrine ofrespondeat superior." (#1 ¶ 76). These allegations aresufficient at this stage of the proceedings to give thedefendants notice of the claim. The Court therefore willrecommend denying the defendants' motion to dismiss and motionfor a more definite statement. IV. Conclusion
For all the reasons stated above, I RECOMMEND that theDefendants' Motion to Dismiss and, in the Alternative, for a MoreDefinite Statement (#5) be ALLOWED to the extent that thedefendants be ORDERED to file and serve a more definite statementas to Count VI (Fraud) regarding "the circumstances constituting[the alleged] fraud" claimed against McGittrick (see pp. 21-22,supra) and as to the identity of the defendants who are allegedto have made misrepresentations (see pp. 26, supra). IFURTHER RECOMMEND that said motion (#5) be ALLOWED to the extentthat Count V seeks to state a claim premised on Mass.Gen. L. c.110A § 101. I FURTHER RECOMMEND that in all other respects,Defendants' Motion to Dismiss and, in the Alternative, for a MoreDefinite Statement (#5) be DENIED.
VI. Review by the District Judge
The parties are hereby advised that pursuant to Rule 72, anyparty who objects to these recommendations must file a specificwritten objection thereto with the Clerk of this Court within 10days of the party's receipt of this Report and Recommendation.The written objections must specifically identify the portion ofthe recommendations, or report to which objection is made and thebasis for such objections. The parties are further advised thatthe United States Court of Appeals for this Circuit has repeatedly indicatedthat failure to comply with Rule 72(b), Fed.R.Civ.P., shallpreclude further appellate review. See Keating v. Secretary ofHealth and Human Services, 848 F.2d 271 (1 Cir., 1988); UnitedStates v. Emiliano Valencia-Copete, 792 F.2d 4 (1 Cir., 1986);Scott v. Schweiker, 702 F.2d 13, 14 (1 Cir., 1983); UnitedStates v. Vega, 678 F.2d 376, 378-379 (1 Cir., 1982); ParkMotor Mart, Inc. v. Ford Motor Co., 616 F.2d 603 (1 Cir., 1980);see also Thomas v. Arn, 474 U.S. 140 (1985).