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Snapp v. Lincoln Financial Securities Corp.

United States District Court, W.D. Virginia, Harrisonburg Division

March 2, 2018




         Plaintiffs Alfred and Betty Snapp, together with their daughter-in-law, Sharon Snapp, bring this action against Lincoln Financial Securities Corporation (Lincoln), RiverSource Distributors, Inc., and RiverSource Life Insurance Company (together, RiverSource). Plaintiffs assert various claims arising from defendants' alleged securities fraud.

         Before the court is defendants' motion to dismiss the complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. In it, defendants argue that many of plaintiffs' claims are barred by the applicable statute of limitations, and that others fail to state a claim. The matter has been fully briefed and argued. For the reasons set forth below, the court will grant defendants' motion to dismiss.

         I. BACKGROUND

         In late 2007, Alfred and Betty Snapp met with Randy Watts, who was both a Financial Industry Regulatory Authority (FINRA) registered representative of Lincoln Financial and a professional authorized to sell RiverSource variable annuities. The Snapps told Watts that they wanted out of their prior investments that fluctuated with the market, and they wanted to put their life savings in an investment which was safe, like an annuity. Watts recommended that the Snapps invest their life savings in a RiverSource variable annuity. He told them that the investment “would never go below the initial amount they would be investing” and that “it would be paid out in full as a death benefit.” (Compl. ¶¶ 11, 14.) Before agreeing, the Snapps “read the paperwork and asked a lot of questions about the alleged guarantee.” (Id.)

         In 2008, Sharon Snapp met with Watts, who had previously recommended that she invest her late husband's life insurance proceeds in a Hartford variable annuity. Watts recommended to Ms. Snapp that she move her investment into a RiverSource variable annuity, and similarly assured her that “the original amount invested would never decline in value.” (Id. ¶ 18.)

         By November 2009, every quarterly and annual statement that the Snapps received from RiverSource contradicted Watts's representations that the value would never decline below the initial investment and that the death benefit would equal the initial investment. Mr. and Mrs. Snapp “would often question Mr. Watts about statements received showing a reduction in the annuity's value.” (Id. ¶ 13.) Likewise, Ms. Snapp “would receive statements indicating a decline in value, [and] she would ask Mr. Watts about them.” (Id. ¶ 19.) Watts repeatedly assured them that their investment would not decline. (Id.)

         In 2015, Watts purportedly committed suicide after he was contacted by an investigator regarding thefts from customers. (Id. ¶ 7.) After Watts's death, Mr. and Mrs. Snapp called his office “and found out for the first time” that their death benefit had declined by approximately $197, 000. (Id. ¶ 15.) Similarly, Ms. Snapp “learned that her account value” had declined by approximately $80, 000. (Id. ¶ 21.)

         The Snapps filed a FINRA arbitration claim against Lincoln and RiverSource on April 18, 2016. The arbitration panel granted Lincoln's and RiverSource's motion to dismiss based on FINRA's six-year “eligibility” rule for the submission of claims.


         A. Standard of Review

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff's allegations must “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This standard “requires the plaintiff to articulate facts, when accepted as true, that ‘show' that the plaintiff has stated a claim entitling him to relief, i.e., the ‘plausibility of entitlement to relief.'” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 678). The plausibility standard requires more than “a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

         In determining whether the plaintiff has met this plausibility standard, the court must accept as true all well-pleaded facts in the complaint and any documents incorporated into or attached to it. Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007). Further, it must “draw[] all reasonable factual inferences from those facts in the plaintiff's favor, ” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999), but it “need not accept legal conclusions couched as facts or ‘unwarranted inferences, unreasonable conclusions, or arguments, '” Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012) (quoting Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008)).

         As already noted, defendants argue that many of plaintiffs' claims are time-barred. Statutes of limitation and statutes of repose are affirmative defenses that may be raised in a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). United States v. Kivanc, 714 F.3d 782, 789 (4th Cir. 2013) (citing Dean v. Pilgrim's Pride Corp, 395 F.3d 471, 474 (4th Cir. 2005)). While a Rule 12(b)(6) motion “invites an inquiry into the legal sufficiency of the complaint, not an analysis of potential defenses to the claims set forth therein, dismissal nevertheless is appropriate when the face of the complaint clearly reveals the existence of a meritorious affirmative defense.” Brockington v. Boykins, 637 F.3d 503, 506 (4th Cir. 2011) (internal citations and quotations omitted).

         B. Consideration of Extrinsic Documents

         To their motion to dismiss, Lincoln and RiverSource attach 14 exhibits. Exhibit A, the only exhibit to which the Snapps object, is the FINRA dispute resolution order. Exhibits B through N are the Snapps' RiverSource annuity statements. To their memorandum in opposition to defendants' motion to dismiss, the Snapps attach one exhibit, to which defendants do not object, which includes a 2007 RiverSource welcome letter, RiverSource's “how to contact us” page, and the Snapps' 2007 contract verification record.

         Typically, when a defendant moves to dismiss under Rule 12(b)(6), a court is “limited to considering the sufficiency of allegations set forth in the complaint and the ‘documents attached or incorporated into the complaint.'” Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 597, 606 (4th Cir. 2015) (quoting E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011)). If a court goes beyond these documents during the pleading stage of litigation, then it “improperly converts the motion to dismiss into a motion for summary judgment.” Id. “Such conversion is not appropriate where the parties have not had an opportunity for reasonable discovery.” E.I. du Pont de Nemours & Co., 637 F.3d at 448.

         Accordingly, a court should generally focus its “inquiry on the sufficiency of the facts relied upon by the plaintiff[] in the complaint.” Zak, 780 F.3d at 606. It may, however, consider extrinsic documents attached to the pleadings that are “‘integral to and explicitly relied on in the complaint, '” when the documents' authenticity is unchallenged. Id. (quoting Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004)).

         Here, the only document attached to the pleadings that falls outside these parameters is defendants' Exhibit A, the FINRA dispute resolution order. All of the other documents meet the requirements for consideration at the motion-to-dismiss stage. The court thus considers the annuity statements and the Snapps' exhibit in deciding Lincoln's and RiverSource's Rule 12(b)(6) motion, and excludes Exhibit A.

         C. The Snapps' Virginia Securities Act Claims Are Time-Barred.

         Lincoln and RiverSource argue that the Snapps' Virginia Securities Act claims in Count I are time-barred under the two-year limitations period. The court agrees.

         The Virginia Securities Act imposes liability in connection with the purchase or sale of a security.[1] The Act provides: “No suit shall be maintained to enforce any liability under this section unless brought within two years after the transaction upon which it is based . . . .” Va. Code § 13.1-522. The Fourth Circuit has emphasized that this two-year limitation is “an absolute cutoff.” Caviness v. Derand Res. Corp., 983 F.2d 1295, 1305-06 (4th Cir. 1993) (holding that the limitations period is not subject to equitable tolling because “we conclude from the plain meaning of the statute that the Virginia legislature intended to provide unqualifiedly that a claim must be brought within two years”).

         The Snapps allege that Lincoln and RiverSource violated the Virginia Securities Act “by engaging in a course of deceptive schemes, devices, [and] misrepresentations . . . related to the sale of securities.” (Compl. ¶ 37.) But the relevant transactions-the Snapps' purchase of the annuities at issue-occurred in late 2007 and early 2008. (Id. ΒΆΒΆ 9, 18.) The parties agree that the operative date of the Snapps' assertion of their claims for statute-of-limitations purposes is April 18, 2016. Because the Snapps failed to assert their claims ...

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