McDonough v. Guyton, et al. (Lawyers Weekly No. 12-142-16)
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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2015-03655-BLS2
ELINOR MCDONOUGH,
Plaintiff
vs.
JOSEPH GUYTON, individually and d/b/a THE GUYTON GROUP,
THE BULLFINCH GROUP INSURNACE AGENCY, INC.,
THE BULLFINCH GROUP INSURANCE GROUP, LLC,
PARK AVENUE SECURITIES, LLC and
THE GUARDIAN LIFE INSURANCE COMPANY,
Defendants
MEMORANDUM OF DECISION AND ORDER
ON PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT
AND ON DEFENDANTS’ MOTION TO DISMISS
In this action, plaintiff Elinor McDonough alleges that the defendant Joseph Guyton, individually and as an agent of other entities also named as defendants, not only mismanaged her finances and assets but encouraged her to make investment decisions that served the interest of the defendants at McDonough’s expense. On March 24, 2016, this Court (Salinger, J.) dismissed certain tort-based counts of the Complaint on the grounds that they were time-barred. Judge Salinger reasoned that the three year statute of limitations applicable to those claims began to run as of 2010, when the plaintiff necessarily became aware that she suffered some harm, not as of 2014 when she learned that the investments were unsuitable. In so holding, Judge Salinger noted that, if the Complaint had alleged that McDonough had a fiduciary duty to Guyton, then the limitations clock would begin to run only when she had actual knowledge of the unsuitability of the investments, and that was not (according to the Complaint) until 2014.
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The plaintiff now moves to amend the Complaint to expressly allege the existence of a fiduciary relationship and has included facts which she contends are sufficient to support that. The defendants oppose the motion on the grounds that it adds no new allegations and also move, in the alternative, to dismiss the amended complaint pursuant to Rule 12(b)(6), Mass.R.Civ.P., if the plaintiff’s Motion is allowed. This Court concludes that the plaintiff’s Motion to Amend must be ALLOWED and the defendants’ Motion to Dismiss must be DENIED.
The Court reaches this conclusion in light of the standard that must be applied at this early stage in this case. Although the Complaint must contain something “more than labels and conclusions” so that her entitlement to relief rises above the speculative level, see Iannachino v. Ford Motor Co., 451 Mass. 623, 636 (2008), the standard is nevertheless a generous one: this Court must accept as true all factual allegations and draw all reasonable inferences in favor of the plaintiff. This Court is also guided by those Massachusetts cases which have discussed what is necessary in order to find a fiduciary relationship. Although there are certain considerations that are relevant to the determination, it is inevitably a fact driven one. Patsos v. First Albany Corp., 433 Mass. 323, 332 (2001) (reversing summary judgment allowance because there was a fact dispute as to whether a fiduciary relationship existed). Among other things, it depends on the degree to which the customer entrusts the broker to select and execute the transactions, the extent to which the broker encourages that trust, the customer’s lack of investment acumen and the broker’s capitalization on that, as well as any social or personal ties between the two. Clearly, these are issues not easily resolved by way of a 12(b) (6) motion.
With these principles in mind, this Court concludes that the Complaint alleges sufficient facts to show a fiduciary relationship between Guyton and McDonough. Guyton had been the financial adviser for McDonough’s husband for many years. When her husband died, Guyton,
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used this prior relationship and induced McDonough to rely on him not just as an insurance broker but also as her financial advisor, manager, and consultant. McDonough, in her 70s, had little or no experience in financial matters and Guyton knew that. Guyton encouraged McDonough to place her trust and reliance in him at the same time that he misrepresented to her that the investments that were made at his direction would accomplish her goal of protecting her retirement assets. These investments were clearly unsuitable for McDonough but did generate commissions which were beneficial both to Guyton and the entities who employed him as their agent. Although some of these facts were alleged in similar form in the original complaint, the proposed amendment makes it crystal clear that plaintiff is alleging a fiduciary relationship — something that was not so apparent when Judge Salinger issued his March 2016 decision.
The defendants argue that even if there were a fiduciary relationship between Guyton and McDonough, there is no factual basis to support liability of any other defendant, who did not independently assume any fiduciary duties of their own. That may be true. However, it seems clear that plaintiff is proceeding against the other defendants based on the theory that Guyton acted as their agent, in which case the acts of the agent are attributed to the principal. Whether an agency-principal relationship actually existed so as to allow a fiduciary duty to be imputed on these corporate defendants is a question best answered after discovery has been conducted.
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Janet Sanders
Justice of the Superior Court
Dated: October 14, 2016