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GOLDBERG v. KIDDER PEABODY & CO.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


March 31, 1997

HAROLD S. GOLDBERG, Plaintiff,
v.
KIDDER PEABODY & CO., INC. and MARK SERRUTO and JOHN DOES 1-10, Defendants.

The opinion of the court was delivered by: JONES

MEMORANDUM & ORDER

 BARBARA S. JONES

 UNITED STATES DISTRICT JUDGE

 After six years of discovery, plaintiff's case amounts to nothing more than the kind of "swearing contest" that Modern Settings, Inc. v. Prudential Bache, Inc., 936 F.2d 640 (2d Cir. 1991), seeks to prevent. For the following reasons, defendants motion for summary judgment pursuant to Fed.R.Civ.P. 56 is granted. Case dismissed.

 BACKGROUND

 Plaintiff is a millionaire physician who has held at least 15 different investment accounts with a dozen different securities firms. He has been familiar with investment terminology since 1956, and he has followed his broker's advice as a matter of course.

 In April 1986, plaintiff opened a brokerage account (the "Account") with defendant Kidder, Peabody & Co, Inc. ("Kidder"). Defendant Mark Serruto ("Serruto"), a Kidder account representative, oversaw trading in the account.

 In order to activate the Account, plaintiff signed Kidder's standard "Customer's Agreement," which states in part:

 

Reports of the execution of orders and statements of account made by [Kidder] shall be conclusive if not objected to by written notice delivered to [Kidder] within two business days or ten days, respectively, after delivery or communications of the reports or statements to [plaintiff] by [Kidder].

 After he opened his account with Kidder, plaintiff authorized Serruto to effectuate hundreds of trades. In this connection, plaintiff traded based on Serruto's recommendations, treating Serruto like his "son" and accepting his investment advice without hesitation.

 Pursuant to the Customer's Agreement, plaintiff regularly received (1) "reports of the execution of orders" ("Confirmations") and (2) "statements of accounts" ("Account Statements") concerning his Account. The Confirmations confirmed each trade the defendants undertook on his behalf and indicated the trade and settlement date of each transaction, the number and price of the shares traded, and the commissions earned. The Account Statements memorialized the accounts monthly activity.

  Plaintiff made various handwritten notes -- including calculations -- on both the Confirmations and the Account Statements. Additionally, he used the documents to prepare detailed, handwritten profit and loss ledgers.

 Three of the trades that appeared on both the Confirmations and Account Statements plaintiff received included a November 7, 1989 purchase of American Express shares, an April 10, 1990 purchase of L.A. Gear shares, and a December 18, 1990 purchase of Coca Cola shares (collectively, the "Disputed Transactions"). It is undisputed that plaintiff never made any written objections to these trades or to the subsequent handling of the stock. Rather, plaintiff executed these trades "without hesitation" pursuant to Serruto's suggestion.

 Due to market fluctuations, plaintiff lost over $ 300,000 on the Disputed Transactions. He then filed this suit, *fn1" complaining of irregularities and manipulation surrounding the transactions and asserting claims for common law fraud, negligence, breach of contract, and conversion, as well as violations of the federal RICO statute and the federal securities laws. *fn2"

 DISCUSSION

 I. Legal Standard

 Summary judgment may be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. To grant a motion for summary judgment, the Court must determine that a reasonable fact finder could not find in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Thus, the moving party bears the burden of proving the absence of a genuine issue of material fact. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). If the moving party meets this burden, the burden shifts to the non-moving party to present evidence of specific facts -- as opposed to mere allegations, denials, or ephemeral assertions -- showing that a genuine issue exists. Anderson, 477 U.S. at 252, 256. Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment. Anderson, 477 U.S. at 248.

 The procedural rules governing summary judgment cannot properly be applied without first examining the substantive law underlying the litigation. Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 572 (2d Cir. 1993). Thus, the Court turns to the law governing this case.

 II. The Customer Agreement's Written Notification Clause

 Defendants argue that the Customer Agreement bars all of defendant's claims. Plaintiff disagrees, stating that the agreement is inapplicable.

 The Customer Agreement provides that the confirmations and monthly statements regarding plaintiff's account "shall be conclusive" unless objected to in writing within ten days after transmittal. Such a clause insures that disputes concerning brokerage account activity are not relegated to "swearing contests" between broker and customer, Modern Settings, Inc. v. Prudential Bache, Inc., 936 F.2d 640, 645-46 (2d Cir. 1991), and prevents customers from "using unauthorized ... trades as a means to play the market with impunity, only repudiating the trades in question if they finally become losing propositions," Richardson Greenshields Securities v. Lau, 819 F. Supp. 1246, 1260 (S.D.N.Y. 1993). *fn3" Absent a broker's "own assurances or deceptive acts" forestalling the customer's filing of a required written complaint, the clause is enforceable, 936 F.2d at 645-46 (citing cases). *fn4"

 Here, plaintiff regularly received Confirmations and Account Statements memorializing the activity on his account. In this connection, he received a Confirmation and an Account Statement for each of the transactions about which he now complains. Plaintiff never objected in writing to any of them. In fact, he submitted an affidavit stating that he accepted each of the trades "without hesitation."

 Nonetheless, plaintiff advances a muddle of arguments urging this Court to find the Customer Agreement's written objection requirement inapplicable and insisting that his cause of action is meritorious. Parsing plaintiff's arguments into an organizable structure, the Court deals with each seriatim.

 1. Request for more discovery

 After nearly six years of discovery, plaintiff argues that he needs more time to gather material relevant to his case. Accordingly, he asserts a defense pursuant to Fed.R.Civ.P. 56(f), *fn5" claiming that summary judgment is inappropriate at this stage because he has yet to obtain facts essential to this opposition, namely, whether plaintiff's claims are foreclosed by Modern Settings, 936 F.2d 640. *fn6"

 Preliminarily, it should be noted that this is not the first time that plaintiff has sought more time for discovery. In March 1996 -- after the instant motion had been filed -- plaintiff filed a motion to extend the time for discovery. This Court denied that motion, recognizing that plaintiff had failed to comply with a series of discovery deadlines *fn7" and finding that plaintiff had failed to assert any cognizable basis for its request.

 Moreover, a party seeking additional discovery under Rule 56(f) must inform the court by affidavit "(1) what facts are sought and how they are to be obtained, (2) how those facts are reasonably expected to create a genuine issue of material fact, (3) what effort the affiant has made to obtain them, and (4) why the affiant was unsuccessful in those efforts." Meloff v. New York Life Ins. Co., 51 F.3d 372, 375 (2d Cir. 1995) (quotation omitted). Thus, mere hopes that more evidence will appear is insufficient to justify denying summary judgment.

 Applying this standard, plaintiff's request to transform discovery into an infinite process is denied. First, plaintiff failed to submit an affidavit regarding his need for more discovery. Rather, he asserts his Rule 56(f) defense in his memorandum of law in opposition to the instant motion. A memorandum, however, is not a substitute for an affidavit, Burlington Coat Factory Warehouse Corp. v. Esprit de Corp., 769 F.2d 919, 926 (2d Cir. 1985), and this failure is enough to reject the Rule 56(f) defense. Id. (citing cases).

 Additionally, plaintiff's memorandum provides no valid reason justifying his failure to obtain the necessary discovery in the six years this case has been pending. Plaintiff only makes broad claims regarding unresolved issues, boldly asserting -- without support -- that the defendants have stonewalled him in regard to certain discovery demands and that certain avenues of discovery were only recently revealed to him. Nowhere does he catalogue his attempts (if any) to obtain the discovery or explain how the material sought might prove relevant to the pending motion. Thus, his speculative request for further discovery is denied. See Baylis v. Marriott Corp., 906 F.2d 874, 878 (2d Cir. 1990) (rejecting plaintiff's contention that district court should have permitted more discovery where action had been pending since 1985); Aniero Concrete Co. v. N.Y. City Construction Authority, 1997 U.S. Dist. LEXIS 22, 94 Civ. 9111, 1997 WL 3268, at *5 (S.D.N.Y. Jan. 3, 1997) (rejecting plaintiff's Rule 56(f) defense where party submitted no affidavit and only broadly alleged that it had not had sufficient opportunity "to examine documents or conduct depositions").

 2. Plaintiff's general claims concerning the enforceability of the Customer Agreement

 Plaintiff argues that the Customer Agreement is not enforceable because (1) neither Serruto nor another Kidder representative signed it, (2) it contains ambiguous language, and (3) it purports to shorten the otherwise applicable limitations period.

 These arguments are utterly without merit. No party contemplated that Kidder had to sign the agreement; although printed by Kidder, the document does not contain a signature line for a Kidder representative. Rather, it is clear that Kidder intended the document to communicate its offer to open an account. Thus, only plaintiff's signature was required. *fn8" Moreover, the document's terms neither are ambiguous nor improperly shorten the applicable statute of limitations. In fact, the terms are nearly identical to those found enforceable in Modern Settings, 936 F.2d at 645-46.

 3. Plaintiff's claim that he is unsophisticated

 Plaintiff contends that, as a layperson, he lacked the skill to interpret the Confirmations and Account Statements and is thus relieved from the Customer Agreement's written objection requirement. See Karlen v. Ray E. Friedman & Co. Commodities, 688 F.2d 1193, 1200 (8th Cir. 1982) (discussing situations in which customers are unable to read confirmation slips or account statements). The documents, however, clearly set forth the trades. No knowledge of finance, investment, or the arcane is needed to read them; only basic literacy is required. Plaintiff is an educated man with 15 accounts at a dozen different firms. He not only understood the documents -- marking them with calculations and various notes -- but also used them to compose personal profit and loss statements. His claim, therefore, is entirely unconvincing. See Richardson Greenshields Securities, 819 F. Supp. at 1253 ("a commodities customer need not be an expert or a financial genius in order to trade on the commodities markets").

 4. Plaintiff's claim that equitable estoppel prevents the defendants from relying on the Customer Agreement's written objection requirement

 Plaintiff also contends that the doctrine of equitable estoppel excuses him from the Customer Agreement's written objection requirement. Thus, he attempts to shoehorn himself into Modern Settings warning that a broker's "assurances or deceptive acts" forestalling a customer's filing of a written complaint may estop the broker from raising the written objection requirement. Plaintiff's arguments, however, are convoluted and ephemeral.

 First, although plaintiff concedes that he accepted without hesitation Serruto's recommendations regarding the American Express, L.A. Gear, and Coca-Cola stocks, he claims that this acceptance was given involuntarily. Specifically, he states that Serruto exercised a strange control over him, convincing him to purchase and keep stock he did not really want. The only evidence plaintiff presents on this point are his own statements that he treated Serruto like a son and regularly accepted his investment advice. Obviously, these statements do not demonstrate that Serruto was plaintiff's Svengali. They merely show that plaintiff trusted his broker. *fn9" Additionally, it is clear that plaintiff was aware of and understood the activity in his Account; he composed meticulous profit and loss statements. Thus, plaintiff's argument that the trades were "involuntarily authorized" is unavailing.

 Second, plaintiff contends that Serruto guaranteed losses on other investments (which are nowhere mentioned in the Amended Complaint but which plaintiff now states were also unauthorized) that led him to believe that Serruto would guarantee losses on the Disputed Transactions and induced him not to complain. Despite six years of discovery, however, plaintiff presents nothing to support this contention other than his own vague affidavit attesting to a single transaction -- out of hundreds -- that Serruto allegedly guaranteed and which is in no way linked to the Disputed Transactions. Plaintiff thus fails to offer evidence that Serruto's alleged guarantees of other transactions lulled him into not complaining about those in issue. See In re Drexel Burnham Lambert Group, Inc., 157 B.R. 539, 545 (S.D.N.Y. 1993) (applying principles of equitable estoppel and refusing to find that broker's assurances regarding stock were the "type of 'assurances or deceptive acts'" contemplated by Modern Settings). Moreover, as stated infra, nothing demonstrates that plaintiff ever contemplated complaining in writing once he realized that the alleged guarantees were a sham.

 Third, plaintiff argues that the defendants are estopped from relying on the written objection requirement because their actions forestalled plaintiff from making the required complaints. The Court rejects this argument as it applies to each of the Disputed Transactions.

 a. The American Express stock

 With regard to the American Express transaction, plaintiff claims that Serruto failed (1) to make good on his promise to guarantee any loss on the trade and (2) to effectuate plaintiff's desire to sell the shares following their purchase. In other words, plaintiff complains of actions or omissions occurring after he acquired the stock.

 As a matter of law, these claims may be disposed of by the Customer Agreement's written objection requirement. Assuming that plaintiff's allegations are true, the Customer Agreement nonetheless required plaintiff to object in writing within ten days after receiving the Confirmations or Account Statements reporting the objectionable activity. There is no evidence that defendants impaired plaintiff's review of the Confirmations or Account Statements; plaintiff kept detailed records of his investments and knew whether Serruto had sold the stock or guaranteed any losses. See Richardson Greenshields Securities, 819 F. Supp. at 1260 ("This is not a case where the customers... are shocked to discover the trading in their account."). Similarly, there is no evidence that plaintiff ever contemplated complaining in writing, let alone that defendants forestalled the making of a written complaint. *fn10" As a result, the reports contained in the Confirmations and Account Statements are conclusive. See In re Drexel Burnham Lambert Group, Inc., 157 B.R. at 547 (broker's oral assurances that stock will be sold at a certain time does not excuse a customer's subsequent failure to file a timely written objection) (citing Modern Settings). *fn11" Accordingly, defendants are granted summary judgment on all claims based on the American Express stock.

 b. The L.A. Gear stock

 As with the American Express trade, plaintiff states that defendant's conduct following the purchase constituted fraud and negligence. Specifically, plaintiff states that Serruto managed the stock in an unauthorized manner and failed to institute a stop-loss order.

 Again, plaintiff's claims are easily discarded. Plaintiff received Confirmations and Account Statements memorializing the activity on his L.A. Gear stock. Plaintiff failed, however, to commit to writing any complaints regarding the L.A. Gear stock. In this connection, he presents no evidence demonstrating that defendants prevented him from making a written complaint, or even that plaintiff desired to make such a complaint.

 Accordingly, estoppel does not apply. As a matter of law, plaintiff ratified the transactions reported. *fn12" See Modern Settings, 936 F.2d at 645-46; In re Drexel Burnham Lambert Group, Inc., 157 B.R. at 547. Thus, summary judgment is granted against plaintiff on his claims based on the L.A. Gear stock.

 c. The Coca Cola stock

 In regard to the Coca Cola trade, plaintiff claims that Serruto (1) misled him into authorizing the trade, (2) negligently failed to monitor and to institute a stop-loss order on the stock, and (3) failed to fulfill a promise to guarantee certain losses on the stock.

 As with the American Express and L.A. Gear shares, plaintiff did not complain in writing about any activity with regard to the Coca Cola shares, despite the fact that he received the relevant Confirmations and Account Statements. Additionally, he presents no evidence suggesting that any defendant forestalled him from making a written complaint concerning the trade or the handling of the stock once it was in his portfolio. Accordingly, he fails to support any argument that the Confirmation Agreement's written objection requirement should not operate in regard to the purchase of the stock. *fn13" See Modern Settings, 936 F.2d at 645-46; In re Drexel Burnham Lambert Group, Inc., 157 B.R. at 547. Therefore, summary judgment is granted against plaintiff on his claims based on the Coca Cola stock.

 CONCLUSION

 For the foregoing reasons, the defendant's motion for summary judgment is granted.

 BARBARA S. JONES

 UNITED STATES DISTRICT JUDGE

 Dated: White Plains, New York

 March 31, 1997


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