United States District Court, E.D. Virginia, Richmond Division
FREDRICK W. HEROLD, JR., Plaintiff,
MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Defendant.
A. GIBNEY JR. UNITED STATES DISTRICT JUDGE.
matter comes before the Court on the plaintiffs motion for
leave to file an amended complaint. The plaintiff filed his
original complaint in May 2017, alleging gross negligence,
negligence, and fraud. The plaintiff voluntarily withdrew his
fraud claim, leaving only the two negligence claims. He now
moves for leave to file an amended complaint to add eight
additional counts and requests a hearing on this motion.
These counts do nothing more than reiterate his theory that
Merrill Lynch has somehow cheated him out of some of his
father's money. The plaintiff has unsuccessfully raised
these claims over and over before various tribunals, and they
do not succeed here anymore than they did anywhere else.
Court denies the motion for leave to amend because the
proposed amendments are futile.
case arises from financial accounts that Fredrick W. Herold,
Sr. ("Fredrick") opened in 2004 with Merrill Lynch.
A Customer Relationship Agreement ("CRA") governed
the accounts and named Fredrick's wife, Kristina C.
Herold, as the sole beneficiary. After Fredrick's death
in January 2014, Merrill Lynch transferred the accounts to
Kristina. Fredrick's son, Fredrick W. Herold, Jr.
("Skip"), says the CRA is a forgery. Skip claims
that the accounts belong in Fredrick's estate, of which
Skip is a beneficiary.
has complained in many fora about his father's assets. He
began in May 2014, by contacting Merrill Lynch about the
account transfer to Kristina. According to the amended
complaint, Merrill Lynch "failed to reasonably
scrutinize the [CRA]." (Dk. No. 38, Exh. 2, at ¶
2.) Skip then took his complaint to a Merrill Lynch Vice
President, Bradford E. Bugher, who oversaw the accounts.
Bugher found nothing out of the ordinary about the
transaction and said that Kristina was the sole beneficiary
on the accounts. Bugher also told Skip that he knew about the
legal dispute between Skip and Kristina and that he could
provide only limited information to Skip due to privacy laws.
Skip next brought his complaint to Bugher's supervisor,
to no avail.
then complained to the Securities Division of the Maryland
Attorney General's Office, which asked Merrill Lynch
about the transfer. According to the amended complaint,
Merrill Lynch's response to the Attorney General showed
that Merrill Lynch "either neglected to conduct a
reasonable inquiry" or "concealed
information." (Dk. No. 38, Exh. 2, at ¶ 6.) Skip
then contacted Merrill Lynch's customer service line to
request that they place a fraud alert on the accounts, but
they failed to do so.
filed a lawsuit in Maryland. In response to a subpoena,
Merrill Lynch provided Skip with "an incomplete, nearly
illegible copy of a fraudulent photocopied" CRA. (Dk.
No. 38, Exh. 2, at ¶ 10.) Skip says it was all wrong:
Merrill Lynch "accepted and processed" the CRA
through "unknown employees/agents, at an unknown time
and place, " failed to show that Merrill Lynch had the
original CRA on file, and provided "no signed
disclosures" and "no documents that were
countersigned by a registered representative of Merrill
Lynch." (Dk. No. 38, Exh. 2, at ¶ 13.) Finally, the
amended complaint alleges that Bugher lied in his declaration
in support of Merrill Lynch's motion for summary
STANDARD OF REVIEW
should "freely give" leave to amend "when
justice so requires." Fed.R.Civ.P. 15(a)(2). In making
this determination, courts may deny leave to amend in cases
of apparent or declared undue delay, bad faith, repeated
failure to cure pleading deficiencies, undue prejudice to the
opposing party, or futility. Foman v. Davis, 371
U.S. 178, 182 (1962). Courts have focused on prejudice, bad
faith, and futility as "the only legitimate concerns in
denying leave to amend, since only these relate to protection
of the judicial system or other litigants." Davis v.
Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980).
arises where an amendment cannot withstand a motion to
dismiss. Perkins v. United States, 55 F.3d 910, 917
(4th Cir. 1995) (citing Glick v. Koenig, 766 F.2d
268-69 (7th Cir. 1985)). Courts must grant a motion to
dismiss where a pleading fails to state a claim for relief
under the applicable Federal Rules of Civil Procedure
standards, including 12(b)(6) and 9(b). United States ex.
rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d
370, 376 (4th Cir. 2008). In this case, the plaintiffs
proposed amendments are futile because they could not
withstand a motion to dismiss as a matter of law.
first new claim, Count III, alleges that Merrill Lynch
breached a fiduciary duty it owed to Skip as a third-party
beneficiary to the contractual relationship between Merrill
Lynch and his father. "To state a claim for breach of a
fiduciary duty, a plaintiff must establish three elements:
(1) the existence of a fiduciary duty; (2) a breach of that
duty; and (3) subsequent damages attributable to the
breach." DCG & T ex rel. Battaglia/IRA v.
Knight, 68 F.Supp.3d 579, 586 (E.D. Va. 2014) (citing
Carstensen v. Chrisland Corp., 247 Va. 433, 443-46,
442 S.E.2d 660, 666-68 (1994)).
law recognizes a third-party beneficiary to a contract only
where "the parties to the contract clearly and
definitely intended to confer a benefit upon him."
Ward v. Ernst & Young,246 Va. 317, 330, 435
S.E.2d 628, 634 (1993) (quoting Prof I Realty v.
Bender,216 Va. 737, 739, 222 S.E.2d 810, 812 (1976)).
The courts generally look to the "four corners" of
the contract to determine whether a person is an intended
third-party beneficiary. Obenshain v. Halliday, 504
F.Supp. 946, 956 (E.D. Va. 1980) (citing Richmond
Shopping Or., Inc. v. Wiley N. Jackson Co.,220 Va. 135,
142, 255 S.E.2d 518, 523 (1979)). The amended complaint fails
to show that the contract between Fredrick and Merrill Lynch
"clearly and definitely intended" to establish Skip
as a third-party beneficiary. Ward, 246 Va. at 330,