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Almond v. Jones

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

March 28, 2019

EDWARD D. JONES & CO., L.P., Defendant.



         Plaintiffs Kyle and Lynn Almond bring this action against Edward D. Jones & Co., L.P. (Edward Jones). Plaintiffs assert various claims arising from defendant's alleged securities fraud.

         Before the court is defendant's motion to dismiss the complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Dkt. No. 9.) In it, defendant argues that many of plaintiffs' claims are barred by the applicable statute of limitations or repose, 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 defendant's motion to dismiss.

         I. BACKGROUND[1]

         The Almonds make several allegations against Edward Jones in its capacity as a principal for Dawkins, an agent who “was acting within the ordinary course of the business and the apparent authority for which he was an agent.” (Compl. ¶ 23, Dkt. No. 1.) The Almonds allege violations of the Virginia Securities Act, federal securities fraud, common law fraud, constructive fraud, unsuitability (under law, insurance regulations, and Financial Industry Regulatory Authority (FINRA) conduct rules), negligence, negligent supervision, breach of fiduciary duty, and breach of contract. (Compl. ¶¶ 25-76.)

         Plaintiffs allege that, in 2007, they met with Hardy Dawkins, a registered securities representative and advisor with Edward Jones, to discuss investing $425, 000 for their retirement. Per Dawkins's recommendation, the Almonds invested in a Hartford variable annuity. Dawkins told them “that they would receive $1, 726.00 a month for the rest of their lives from the annuity, and if either one died, the other would continue to receive the $1, 726.00 a month.” (Compl. ¶ 6- 7.) The annuity application is dated December 2006, and it contained two options for a rider-a “Single Life” and a “Joint/Spousal.” (Request for Variable Annuity, Ex. C, Dkt. No. 9-2.) The application noted that only one option could be selected and that the prospectus should be consulted for details. (Id.) Mr. Almond selected, in section 7, “The Hartford's Lifetime Income Builder II - Single Life.” He also selected “The Hartford's Lifetime Income Builder” on another line. (Id.) Mr. Almond signed an election form stating that he received the prospectus. (Optional Guaranteed Withdrawal Benefit Rider Election Form, Ex. D, Dkt. No. 9-2.)

         In January 2007, Mr. Almond completed another application selecting only “The Hartford's Lifetime Income Builder II - Single Life.” (Request for Variable Annuity, Ex. F, Dkt. No. 9-2.) Plaintiffs allege that, after receiving initial documents for the annuity in February 2007, Mr. Almond emailed Dawkins on February 2 to ask about the reference to “Single” in the annuity and to confirm they would receive $1, 726 as long as he lives and that, when he dies, Lynn would receive at least $1, 726 as long as she lives. In handwritten notation under the body of this email, Mr. Almond wrote “Hardy's answer to [his] first email” to be “1770 min for me and same amt for Lynn.” (Compl. ¶ 8; February 2 Email, Ex. 1, Dkt. No. 1-2.)

         On February 27, 2007, Mr. Almond emailed Dawkins again to ask about a benefit statement he received for the annuity. He pointed out to Dawkins that “the big awful word ‘SINGLE' is still coming out on the form” and asked for “confirmation that this will run for Lynn [for] her lifetime after [his] at no less than the $ 1770 [they] discussed.” (February 27 Email, Ex. 2, Dkt. No. 1-3.) Edward Jones claims it did not receive this email in 2007, and it appears that it was sent to a different email address (hardy.dawkins v. hardydawkins). (Id.; Compl. ¶ 10.)

         In any event, defendant issued a new policy, either in response to Mr. Almond's concerns (per plaintiffs) or to correct it from Income Builder to Income Builder II (per defendant), and Dawkins sent a handwritten letter to Mr. Almond on February 28, 2007, in which he stated: “Here's the revised annuity contract from Hartford. Looks like they got it right this time!” (Dawkins Letter, Ex. 3, Dkt. No. 1-4.) After the Almonds received the revised annuity and this letter, they met with Dawkins. In their meeting, Dawkins “confirmed his prior statements that the annuity would pay the minimum amount through both lifetimes.” (Compl. ¶ 11.)

         On March 5, 2007, Mr. Almond signed an acknowledgement of receipt of his policy. (Delivery Receipt, Ex. G, Dkt. No. 9-2.) The effective date of the contract is January 29, 2007, and Mr. Almond is listed as the annuitant, with no contingent annuitant. (Annuity Contract Summary, Ex. E. at 49, [2] Dkt. No. 9-2) Moreover, the contract includes a rider entitled, “Lifetime Income Builder II Rider (Single Life).” (Variable Annuity Contract, Ex. E at 87, Dkt. No. 9-2.) Mr. Almond began receiving quarterly statements, listing him as the owner and annuitant, and noting his election of “Lifetime Income Builder II sngl.” (Variable Annuity Quarterly Statement, Ex. H at 102, Dkt. No. 9-2.)

         In November 2011, Mr. Almond received a letter from defendant stating, “The letter is in reference to your The Hartford's Lifetime Income Builder II - Single rider that is part of your annuity contract referenced above.” (November 25 Letter, Ex. I, Dkt. No. 9-2.) Then, in 2013, Mr. Almond discussed the annuity with Dawkins again. Dawkins told him “that the variable annuity would pay the set income payments for both of the Almonds' lives.” (Compl. ¶ 12.)

         The Almonds received monthly annuity payments. They allege that in October 2016, they received a letter from Edward Jones asking them to sign documents related to the annuity in order to effectuate a custodial ownership change to Edward Jones. There is a letter from defendant, dated December 15, 2015-which defendant concedes is a typographical error and should read December 15, 2016-wherein plaintiffs were notified that Department of Labor rules required the listing of defendant as custodian on the annuity and required a response by February 1, 2017. (December 15 Letter, Ex. J, Dkt. No. 9-2.) Mr. Almond called Dawkins to inquire why the documents made a reference to a “Joint Rider.”[3] Dawkins responded “and told Mr. Almond, for the first time, that the contract was only written as a single life contract and only guaranteed income for Mr. Almond's lifetime.” Mr. Almond asked Dawkins about his prior statements, and he responded: “How can I remember what I said ten years ago.” Mr. Almond then asked Dawkins to have someone from Edward Jones call him so he could formally complain. Dawkins later notified Mr. Almond that Edward Jones's legal department decided not to take action. Mr. Almond and Dawkins could not resolve the matter. (Compl. ¶¶ 13-14.)

         In 2017, the Almonds retained counsel to write Edward Jones, inquiring about the misrepresentations Dawkins made about the annuity. In its response, Edward Jones did not adhere to Dawkins's promises or fix the error in the annuity. The Almonds contend that Edward Jones is jointly and severally liable for the acts of Dawkins. (Compl. ¶¶ 15-17.)

         The Almonds filed a FINRA arbitration claim against Edward Jones on March 24, 2017. The arbitration panel granted Edward Jones's motion to dismiss without prejudice based on a FINRA rule regarding time limits which states: “No claim shall be eligible for submission to arbitration under the Code where six years have elapsed ...

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