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VAN SYCKLE v. C.L. KING & ASSOCS.

May 24, 1993

John R. Van Syckle and Jean L. Van Syckle, Plaintiffs,
v.
C.L. KING & ASSOCIATES, INC., and CANDACE KING WEIR, Individually and in her capacity as employee of C.L. KING and ASSOCIATES Defendants.


Scullin, Jr.


The opinion of the court was delivered by: FREDERICK J. SCULLIN, JR.

Frederick J. Scullin, Jr., D.J.:

MEMORANDUM-DECISION AND ORDER

 I. Background

 On July 22, 1985, plaintiffs Jean and John Van Syckle invested $ 732,312.32 in an investment account with defendant C.L. King & Associates, Inc. ("CLKA"). This account was managed by F. Torrance McKenna ("McKenna") until he left the company in the spring of 1987, at which time management of the account was transferred to defendant Candace King Weir ("Weir"), President and founder of CLKA.

 Plaintiffs' allege that their investment objectives as to this account were: security of principal, low risk investment, and having no more than approximately $ 50,000 of the portfolio invested in stocks. Affidavit of Jean L. Van Syckle (1/7/93) ("Van Syckle Aff.") at PP 11-13. McKenna similarly testified that plaintiffs' investment objectives were conservative, fairly low risk, and income oriented. Deposition of Francis T. McKenna (5/26/92) at 25-26.

 The plaintiffs claim that the defendant Weir pressured them into changing their investments, and that in August 1987 the plaintiffs agreed to have their account changed in the following manner:

 
(a) the Account could be gradually sold and its funds invested in and applied towards treasury bills, money market funds, certificates of deposit and other low risk investments;
 
(b) [the changes would be] slowly and gradually made so that Plaintiffs [could], on a monthly basis, monitor those changes to see if they were desirable;
 
(c) the aforementioned trade changes in the Account could be made on the condition that they would be subject to reduced commission rates; [and]
 
(d) the Account, after eventually being sold and placed in treasury bills, money market funds, certificates of deposit[], and other low risk investments, would be held in such investments until such time that the Plaintiffs decided upon, and then authorized, further trading.

 See Amended Complaint at P 54.

 In September 1987, plaintiffs claim they discovered that the assets in their account were being rapidly traded and that the defendants were investing substantially more than $ 50,000.00 of this account in stocks, rather than in treasury bills, money market funds or certificates of deposit as discussed in the August 1987 agreement. Jean Van Syckle ("Mrs. Van Syckle") has testified that she telephoned Weir in mid-to-late September and asked Weir about these trades. Weir allegedly told the plaintiff to "leave the investing to her" and that the plaintiffs "had to take some risks." Van Syckle Aff., P 55.

 On October 19, 1987, plaintiffs' portfolio lost approximately $ 112,000.00 in value. Plaintiffs claim that defendant Weir called Mrs. Van Syckle the following week and advised her not to panic and to refrain from doing anything drastic with the account.

 By letter dated November 5, 1987, plaintiffs directed the defendants to suspend all activity in the subject account pending their decision regarding its disposition. Thereafter, plaintiffs gradually transferred their holdings from CLKA to another investment firm.

 II. Procedural History

 Plaintiffs commenced the present action on August 14, 1989. Defendants thereafter moved to dismiss plaintiffs' complaint pursuant to Rule 12(b)(6). Plaintiffs opposed that motion and cross-moved to file an amended complaint in this action. In his decision of November 17, 1989, Senior Judge Howard G. Munson dismissed plaintiffs' state law claim which alleged breach of confidential relationship, and denied the remainder of defendants' motion. Judge Munson also granted the plaintiffs' cross-motion to file an amended complaint, which complaint was filed with the Court on January 18, 1990.

 Plaintiffs' amended complaint asserts numerous causes of action against the defendants, including: (i) a violation of section 10b of the Securities Act, 15 U.S.C. § 78j(b) ("Section 10b"), and rule 10b-5 (17 C.F.R. § 240.10b-5) promulgated thereunder ("Rule 10b-5"); (ii) violations of the Investment Advisors Act ("IAA"), (15 U.S.C. §§ 80b-6 & 80b-15(b)); (iii) breach of contract; (iv) breach of fiduciary duty; (v) common law fraud and (vi) conversion.

 On November 13, 1992, defendants moved for summary judgment on plaintiffs' complaint, which motion is based upon numerous grounds, including (i) plaintiffs' failure to mitigate their damages, (ii) failure to state a claim for a "churning" violation, 10(b) (iii) ratification of defendants' conduct on the part of the plaintiffs, (iv) the statute of limitations, (v) the statute of frauds, (vi) failure to establish a claim for conversion and (vii) law of the case concerning the claim relating to the confidential relationship.

 III. Discussion

 (A) Failure to ...


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