# City of Baton Rouge/East Baton Rouge Parish v. Bank of America, N.A.

> District Court, M.D. Louisiana · March 30, 2021

URL: https://www.frixlaw.com/law-library/cases/10191804

## Case

- **Court:** District Court, M.D. Louisiana
- **Decided:** March 30, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

CITY OF BATON ROUGE/EAST
BATON ROUGE PARISH,
CONSOLIDATED EMPLOYEES
RETIREMENT SYSTEM AND
POLICE GUARANTY FUND
CIVIL ACTION
VERSUS
19-725-SDD-RLB
BANK OF AMERICA, N.A., et al.

RULING
This matter is before the Court on the Motion to Dismiss1 filed by Defendant,
Raymond James & Associates, Inc. Throughout the Second Amended Complaint,
Plaintiffs refer to this Defendant variously as “Raymond James,” “Morgan Keegan,”
“Morgan Keegan/Raymond James,” and “Morgan Keegan, dba Raymond James.” For
purposes of this Ruling, the Court will refer to the Defendant as “Morgan Keegan.”2
Plaintiffs, the City of Baton Rouge/East Baton Rouge Parish, Consolidated Employees
Retirement System and Police Guaranty Fund (“Plaintiffs”), filed an Opposition3 to this
motion. For the following reasons, the Court finds that Morgan Keegan’s Motion should
be granted, and Plaintiffs’ claims against it dismissed with prejudice.

1 Rec. Doc. No. 189.
2 Defendant avers that Raymond James Financial, Inc. acquired Morgan Keegan & Co. in April 2012 via a
corporate merger, with Raymond James being the surviving entity. (Rec. Doc. No. 189, p. 1, n. 1).
3 Rec. Doc. No. 204.
I. BACKGROUND
The Complaint in this matter is essentially identical to the Complaint in another suit
before this Court, State of Louisiana v. Bank of America, N.A., et al,4 which itself is
essentially identical to In re GSE Bonds Antitrust Litigation,5 a 2019 class action complaint
in the Southern District of New York – a case in which Morgan Keegan is not a defendant.

Plaintiffs optimistically aver that the similarity is “not a weakness, it is a strength.”6 With
respect to this Defendant, and the other Defendants herein who were not present in the
In re GSE Bonds suit, the Court respectfully disagrees. Since Plaintiffs saw no need to
reinvent the wheel, neither shall the Court; portions of the factual background and
analysis that follows first appeared in this Court’s Rulings on the other Motions to Dismiss
in this case and the State of Louisiana case.
In their Second Amended Complaint, Plaintiffs allege that Defendants conspired
to fix the prices of government-sponsored entity (“GSE”) bonds after the bonds were
designated free-to-trade (“FTT”), in violation of § 1 of the Sherman Act. Per Plaintiffs,

Defendants colluded in multi-bank chatrooms to fix the FTT price before declaring the
bonds FTT and that the same traders continued to fix the price after the bonds were
declared FTT.7 In addition to their Sherman Act claim, Plaintiffs allege a violation of the
Louisiana Unfair Trade Practices and Consumer Protection Act (“LUTPA”), asserting that
each Defendant “engaged in deceptive business practices regarding the advertisement
of their brokerage services, including making false statement [sic] regarding the use of

4 Case No. 19-cv-638 (M.D. La. Sept. 23, 2019).
5 Case No. 19-cv-1704 (S.D.N.Y. Feb. 22, 2019).
6 Rec. Doc. No. 204-1, p. 7.
7 For further information about the GSE bond market, see this Court’s Ruling in Case No. 19-cv-638 at Rec.
Doc. No. 179.
their experience and skill in recommending investments.”8 Plaintiffs also bring a
negligence claim. Morgan Keegan moves to dismiss Plaintiffs’ claims against it pursuant
to Rule 12(b)(6).
II. LAW AND ANALYSIS

A. Rule 12(b)(6) Motion to Dismiss
When deciding a Rule 12(b)(6) motion to dismiss, “[t]he ‘court accepts all well-
pleaded facts as true, viewing them in the light most favorable to the plaintiff.’”9 The Court
may consider “the complaint, its proper attachments, ‘documents incorporated into the
complaint by reference, and matters of which a court may take judicial notice.’”10 “To
survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state
a claim to relief that is plausible on its face.’”11
In Twombly, the United States Supreme Court set forth the basic criteria necessary
for a complaint to survive a Rule 12(b)(6) motion to dismiss. “While a complaint attacked
by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a

plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.”12 A complaint is also insufficient if it merely “tenders ‘naked assertion[s]’ devoid
of ‘further factual enhancement.’”13 However, “[a] claim has facial plausibility when the

8 Rec. Doc. No. 134, p. 96.
9 In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin v. Eby Constr.
Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)).
10 Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011) (quoting Dorsey v, Portfolio
Equity, Inc., 540 F. 3d 333. 338 (5th Cir. 2008).
11 In re Katrina Canal Breaches Litigation, 495 F.3d at 205 (quoting Martin v. Eby Constr. Co. v. Dallas Area
Rapid Transit, 369 F.3d at 467).
12 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and brackets omitted)
(hereinafter Twombly).
13 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted) (hereinafter “Iqbal”).
plaintiff pleads the factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”14 In order to satisfy the plausibility
standard, the plaintiff must show “more than a sheer possibility that the defendant has
acted unlawfully.”15 “Furthermore, while the court must accept well-pleaded facts as true,
it will not ‘strain to find inferences favorable to the plaintiff.’”16 “[O]n a motion to dismiss,

courts ‘are not bound to accept as true a legal conclusion couched as a factual
allegation.’”17
B. Sherman Act Claims

Section 1 of the Sherman Act states: “Every contract, combination in the form of
trust or otherwise, or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal.”18 To establish a § 1 violation, a
plaintiff must prove that: (1) the defendants engaged in a conspiracy; (2) that restrained
trade; (3) in the relevant market.19 Regarding the conspiracy element, the Supreme Court
has observed that “the crucial question [in a § 1 claim] is whether the challenged
anticompetitive conduct stems from independent decision or from an agreement.”20
The plaintiff must present evidence that the defendants engaged in concerted
action, defined as having “a conscious commitment to a common scheme designed to
achieve an unlawful objective.”21 Concerted action may be shown by either direct or

14 Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 570).
15 Id.
16 Taha v. William Marsh Rice University, 2012 WL 1576099 at *2 (quoting Southland Sec. Corp. v. Inspire
Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir. 2004).
17 Twombly, 550 U.S. at 556 (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d
209 (1986)).
18 15 U.S.C. § 1.
19 Golden Bridge Tech., Inc. v. Motorola, Inc., 547 F.3d 266, 271 (5th Cir. 2008)(citing Apani Sw., Inc. v.
Coca–Cola Enter., Inc., 300 F.3d 620, 627 (5th Cir.2002)).
20 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007).
21 Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 764 (1984).
circumstantial evidence. Direct evidence requires an understanding between the alleged
conspirators, while circumstantial evidence calls for additional inferences in order to
support a conspiracy claim.22
Morgan Keegan contends that the Second Amended Complaint fails to state a
Sherman Act claim against it, and the Court agrees. As an initial matter, Morgan Keegan

disclaims any liability connected to a price-fixing scheme for GSE bonds since, it explains,
it sold Plaintiffs GSE discount notes, not fixed rate GSE bonds. The distinction is material
because, Morgan Keegan explains, the discount notes are “not offered or sold in the
manner alleged in the Complaint (they are purchased directly from the GSE, and not
underwritten by a syndicate of dealers), [and] their price is set by the issuing GSE and
not by Morgan Keegan or any other broker/dealer.”23 In Morgan Keegan’s view, Plaintiffs’
failure to recognize the distinction is a “critical oversight” and the inevitable result of their
copying from a separate lawsuit without bothering to review “the actual securities they
purchased through Morgan Keegan.”24 Plaintiffs, who are in the best position to assess

the accuracy of these assertions, do not refute them, or even address them.
Additionally, as Morgan Keegan points out, Plaintiffs continually make collective
allegations against “Defendants” in globo without specification. This can hardly suffice to
state a claim against any given Defendant.25 The references to Morgan Keegan,
specifically, read as follows:
 “Throughout 2009-2016, the City of Baton Rouge and CPERS Treasury and
component units participated in thousands of GSE Bond transactions,

22 See Tunica Web Advert. v. Tunica Casino Operators Ass'n, Inc., 496 F.3d 403, 409 (5th Cir. 2007).
23 Rec. Doc. No. 189-1, p. 3, n. 2.
24 Id.
25See, e.g., Paselk v. State, No. 4:12-cv-754, 2013 WL 4791417 at *13 (E.D. Tex. Sept. 5, 2013)(A
complaint that “lump[s] the Defendant[] in with various other parties, alleging no facts specific to any part in
most cases, and never specific to the . . .Defendant[],” should be dismissed as to that defendant).
including directly with some of the Defendants such as. . .Morgan Keegan.
. .”26

 “Morgan Keegan is a subsidiary of Raymond James. Raymond James is a
registered broker dealer with the SEC and FINRA and is licensed to do
business in the State of Louisiana. It is an approved dealer for Freddie Mac,
FRHLB and FNMA. Between 2009 and 2016, it made trades for billions of
dollars of GSE bonds and sold GSE bonds to the [Plaintiffs].”27

 “Morgan Keegan . . . also participated in this conspiracy through the
brokerage of bonds whose prices had been fixed by other defendants, and
by also participating in the fixing of prices of bonds sold to the Plaintiff
[sic].”28

 “[Plaintiffs] transacted billions of dollars’ worth of GSE Bonds in the United
States Between 2009 and 2016 directly with Defendants. . .Morgan Keegan.
. .and Morgan Keegan [sic].”29

 “For example, the following transactions involve purchases of GSE Bonds
which have been identified as among those whose FTT prices Defendants
agreed to fix between 2009 and 2016: $414,000,000.00 purchases of
FHLMC, FNMA, and FHLB fixed rate securities from Stifel Nicolaus, Capital
one, and Morgan Keegan. . . §342,075,000.00 purchases. . .from Stifel,
Wells Fargo, Capital One and Morgan Keegan.”30

 “In 2011 the amounts of bonds sold to the Plaintiff [sic] which were sold at
an inflated price as a result of the price fixing scheme as alleged herein,
included the following: . . . Morgan Keegan sold $24,924,116.67. . .”31

 “Between July 1, 2010 and June 30, 2011, Defendant, Morgan Keegan,
entered into contracts with the State of Louisiana to broker the purchase of
fixed rate securities with a face value amount of $50,000,000.00. It also
entered into contracts for the sale of said securities between July 1, 2012
and June 30, 2013 in the face value amount of $22,000,000.00.”32

 “Defendant Morgan Keegan, dba Raymond James, also touts its
experience in recommending investments to its clients. It states in its
publicly available information that ‘…Our advisors have the freedom to
recommend only what they think makes the most sense for each client in

26 Rec. Doc. No. 134, p. 10.
27 Id. at p. 30.
28 Id. at p. 82.
29 Id.
30 Id.
31 Id. at p. 84.
32 Id. at p. 91.
building a diversified investment portfolio designed for your specific
objectives. And those recommendations are powered by the expertise of
our industry-leading research…’”33

At best, these allegations establish that Morgan Keegan sold Plaintiff GSE Bonds
in its capacity as a broker/dealer. That is scarcely disputed. Absent, however, is any
specific and non-conclusory allegation tending to show that Morgan Keegan participated
in a conspiracy to fix the prices of those bonds. For that proposition, Plaintiffs rely on the
following alleged chatroom transcript from June 4, 2013, between a Morgan Keegan
trader and a trader from FTN Financial,34 calling it “direct evidence” of a conspiracy:
08:43:47 MORGAN KEEGAN & CO. trader 1, says:
WELL LOOKS LIKE FNMA JUST GOT US TODAY. SORRY GUYS. I THINK WE
NEED TO GO TO 99.90 ON OURS. WHAT DO YOU THINK?
08:44:42 MORGAN KEEGAN & CO. trader 1, says:
***[ WF] rang the bell
08:44:48 FTN FINANCIAL Trader 1 says:
ouch'
08:44:50 FTN FINANCIAL trader 1 says:
99.90 ftt35
Approximately two and a half hours later, the same parties had this exchange:
11:11:59 MORGAN KEEGAN & CO. trader 1 , says:
[FTN1] , CAN I GET 4780M FROM YOU ON THE 5YR STEP?
11:12:20 FTN FINANCIAL trader 1 says:
99.87 work? if so u can be dong
11:12:31 MORGAN KEEGAN & CO. trader 1, says:
YES, THANK YOU VERY MUCH36

33 Id. at p. 94.
34 As Morgan Keegan correctly points out, Plaintiffs repeatedly include FTN Financial when listing
Defendants in their Second Amended Complaint, but FTN Financial was not formally named as a Defendant
nor was it ever served.
35 Rec. Doc. No 134, p. 59-60.
36 Id. at p. 60.
Plaintiffs describe these interactions as “smoking gun evidence of the conspiracy
itself.”37 This certainty is belied by their statement that the issue before the Court this
Motion is “whether this transcript can be construed as participation in the conspiracy.”38
This evidence is far from a “smoking gun.” The legal standard for direct evidence of a
conspiracy requires much more than an exchange that might be construed as an
agreement; it requires plausible allegations of “a conscious commitment to a common
scheme designed to achieve an unlawful objective.”39 Although prices are clearly a topic

of discussion in the chat, the Court does not find evidence of an agreement based on the
quoted excerpts from the Second Amended Complaint.
Plaintiffs weakly offer that the transcript “establishes that they [the traders]
discussed prices” and suggest that the question of whether or not there was an actual
agreement on price is “best left for resolution at a later stage in the proceedings.”40
Considering that the Supreme Court has held that “the crucial question [in a § 1 claim] is
whether the challenged anticompetitive conduct stems from independent decision or from
an agreement,”41 the Court disagrees. Allegations of a mere “discussion” of prices, with
the possibility of an agreement that can perhaps be shown later, does not suffice to state

a Sherman Act claim, and falls woefully short of the plausibility standard required to
survive a 12(b)(6) Motion.
Moreover, the chat transcript gives no indication that the bonds being discussed
by the traders were the ones ultimately purchased by Plaintiffs; Plaintiffs never allege

37 Rec. Doc. No. 204-1, p. 6.
38 Id. (emphasis added).
39 Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 764 (1984).
40 Rec. Doc. No. 204-1, p. 6.
41 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007).
such, and Morgan Keegan persuasively explains that it would be impossible for that to be
the case, since the type of bonds Plaintiffs bought were not subject to syndication in this
manner. Thus, this transcript cannot serve as proof of Plaintiffs’ injury-in-fact, a necessary
element of antitrust standing; Plaintiffs must allege that the “antitrust violation . . . cause[d]
injury to the antitrust plaintiff.”42 Courts have found no injury where the plaintiff failed to

allege any specific transactions that they entered into that harmed them.43
Moreover, it is a tall order for the Court to conclude, based on a few lines of
inconclusive chat, that Morgan Keegan was part of a seven-year conspiracy spanning
dozens of financial institutions and billions of dollars in bonds. Courts have held as much;
in In re Optical Disk Drive Antitrust Litig., the District Court for the Northern District of
California granted a motion to dismiss a Sherman Act claim where allegations of a
conspiracy “involved only a small subset of defendants” and three alleged occasions of
anticompetitive conduct. That evidence, the court concluded, was “a far cry from
establishing plausibility for a broad six year continuing agreement among all defendants
to fix the prices of all [products] sold through innumerable other channels.”44 The same

reasoning applies with greater force here, where only one specific instance of allegedly
anticompetitive conduct has been identified and, as stated supra, Plaintiffs fail to allege
that the subject chat even concerned a bond that they actually purchased from Morgan
Keegan. Morgan Keegan sums up the deficiency well, stating:

42 Nichols v. Mobile Bd. of Realtors, Inc., 675 F.2d 671, 675 (5th Cir. 1982); Robinson v. Texas Auto.
Dealers Ass'n, 387 F.3d 416, 422 (5th Cir. 2004).
43 See In re SSA Bonds Antitrust Litig., No. 16 CIV. 3711 (ER), 2018 WL 4118979, at *6 (S.D.N.Y. Aug. 28,
2018); Harry v. Total Gas & Power N. Am., Inc., 244 F. Supp. 3d 402, 416 (S.D.N.Y. 2017) (“The plaintiffs'
failure to allege a single specific transaction that lost value as a result of the defendants' alleged misconduct
precludes a plausible allegation of actual injury.”), aff'd as modified on other grounds, 889 F.3d 104 (2d Cir.
2018).
44 In re Optical Disk Drive Antitrust Litig., No. 3:10-MD-2143 RS, 2011 WL 3894376, at *9 (N.D. Cal. Aug.
3, 2011).
[The chat transcript] evidences no agreement to fix or artificially inflate
prices on GSE Bonds, only a mention by FTN Financial of an FTT price.
Further, it contains no information concerning which GSE Bonds the parties
to the conversation were allegedly discussing; no allegations concerning
the price at which they were actually sold, assuming any were sold; and no
allegation that Plaintiffs actually purchased any of the GSE Bonds
discussed. Most importantly, however, there is no indication that the price
discussed was higher or lower than the price otherwise would have been or
that the Morgan Keegan trader was agreeing to sell certain bonds at that
higher price for mutual benefit. Indeed, the initial part of the chat alludes to
the alleged Morgan Keegan trader deciding to lower the price of the
unidentified bond at issue.45

As for any circumstantial evidence of conspiracy, the market analysis allegations
proffered in the Second Amended Complaint do not render plausible Morgan Keegan’s
participation in a conspiracy pervasive enough to affect some of Plaintiffs’ transactions.
Plaintiffs allege that they entered into billions of dollars in GSE bond transactions between
2009 and 2016 with Defendants.46 Plaintiffs also allege pricing data that shows artificially
inflated bid-ask spreads, a higher price charged by Defendants to Plaintiffs and others
similarly situated during the conspiracy period as compared to after, and price fixing on
bonds set to go off-the-run.47 While these allegations may point to the existence of a
market-wide conspiracy, as this Court has now repeatedly concluded, the market
analyses relied upon by the Plaintiffs fail to distinguish among Defendants. While the
pricing data surveyed may be suggestive of market-wide anticompetitive pricing, there
are no allegations which plausibly indicate that Morgan Keegan’s pricing was
anticompetitive (besides, allegedly, the sole chatroom transcript). Similarly, there are no
allegations to indicate that Morgan Keegan’s allegedly anticompetitive pricing injured
Plaintiffs because the blanket label of “Defendants” obscures the individuality of each

45 Rec. Doc. No. 189-1, p. 10-11.
46 Rec. Doc. No. 134, p. 82.
47 Id. at p. 82-84.
Defendant. The lack of an allegation as to Morgan Keegan’s market share exacerbates
this problem.48 Because Plaintiffs do not allege its market share, it is impossible to
determine the effect, if any, that Morgan Keegan’s alleged pricing behavior had on market
prices.
Overall, Plaintiffs’ well-pleaded allegations as to Morgan Keegan are limited to the

assertion that it fixed one unspecified bond and that Plaintiffs entered into bond
transactions with Morgan Keegan in the same year. Courts have held that allegations that
the plaintiff bought a bond from a defendant in the same 24-hour period the alleged price
fixing occurred were insufficient to infer plausible actual damages.49 That reasoning
applies with greater force here. Plaintiffs have failed to plausibly plead Morgan Keegan’s
participation in a conspiracy and their own antitrust standing. Therefore, Morgan
Keegan’s Motion is granted as to Plaintiffs’ antitrust claims.
C. Louisiana Unfair Trade Practices and Consumer Protection Act
(“LUTPA”) Claim

LUTPA prohibits “[u]nfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce . . . .”50 “Louisiana has left the
determination of what is an ‘unfair trade practice’ largely to the courts to decide on a case-
by-case basis.”51 “The courts have repeatedly held that, under this statute, the plaintiff
must show the alleged conduct ‘offends established public policy and ... is immoral,
unethical, oppressive, unscrupulous, or substantially injurious.’”52 The Louisiana

48 Id. at p. 38 (setting forth the market share of other Defendants but not Morgan Keegan).
49 In re SSA Bonds Antitrust Litig., No. 16 CIV. 3711 (ER), 2018 WL 4118979, at *7 (S.D.N.Y. Aug. 28,
2018).
50 La. R.S. § 51:1405(A).
51 Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir. 1993); Cheramie Services, Inc. v. Shell
Deepwater Production, Inc., 35 So.3d 1053, 1059 (La. 2010) (“It has been left to the courts to decide, on a
case-by-case basis, what conduct falls within the statute's prohibition”).
52 Cheramie, 35 So.3d at 1059 (citations omitted).
Supreme Court has explained that “the range of prohibited practices under LUTPA is
extremely narrow.”53 Further, the United States Court of Appeals for the Fifth Circuit has
held that “the statute does not provide an alternate remedy for simple breaches of
contract. There is a great deal of daylight between a breach of contract claim and the
egregious behavior the statute proscribes.”54

The parties’ LUTPA arguments play out in lockstep with the other Motions to
Dismiss in this case and the related case. Morgan Keegan asserts that the LUTPA claim
should be dismissed because LUTPA does not apply to the transactions at issue herein.
Indeed, LUTPA contains an exception for:
Any federally insured financial institution, its subsidiaries, and affiliates or
any licensee of the Office of Financial Institutions, its subsidiaries, and
affiliates or actions or transactions subject to the jurisdiction of the Louisiana
Public Service Commission or other public utility regulatory body, the
commissioner of financial institutions, the insurance commissioner, the
financial institutions and insurance regulators of other states, or federal
banking regulators who possess authority to regulate unfair or deceptive
trade practices.55

Morgan Keegan argues that this exception applies because, as alleged in the Second
Amended Complaint, it is “a registered broker dealer with the SEC and FINRA and is
licensed to do business in the State of Louisiana.”56 Moreover, the GSE Bonds “fall
squarely within the definition of ‘security,’ and therefore, the transactions that form the
basis of the City’s claims are subject to regulation by the Louisiana Commissioner of
Financial Institutions.”57 In other words, by the plain language of LUTPA, Morgan Keegan

53 Id. at 1060.
54 Turner, 989 F.2d at 1422; Innovative Sales, LLC v. Northwood Mfg., Inc., 07-30598, 2008 WL 3244114,
at *6 (5th Cir. 2008) (slip copy)(quoting Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir.1993)).
55 La. R.S. 51:1406(1).
56 Rec. Doc. No. 189-1, p. 21, quoting Rec. Doc. No. 134 at p. 30.
57 Id.
and its alleged conduct related to these transactions are exempt and the statute does not
apply.
Plaintiffs argue that the exception does not apply because Morgan Keegan is
regulated by the Financial Industry Regulatory Authority (“FINRA”).58 This argument is
supported by citation to Grant v. Houser.59 Unfortunately for Plaintiffs, Grant does not hold

what they say it does. In Grant, the court considered the defendant’s argument that
because it was registered with FINRA, it was exempt from LUTPA.60 The court concluded
that FINRA is an independent regulator and that an agency licensed by FINRA did not
qualify for an exemption under the terms of LUTPA. However, the court did not conclude
that FINRA registration categorically bars the application of the exemption if an entity
otherwise meets the criteria of the exemption, which is what Plaintiff asks this Court to
hold.61
There is nothing in the exception to LUTPA provided by La. R.S. § 51:1406(1) that
excludes FINRA-regulated entities from its scope. In contrast, § 51:1406(1) contains

broad language excluding from LUTPA’s application “[a]ny federally insured financial
institution, its subsidiaries, and affiliates or any licensee of the Office of Financial
Institutions, its subsidiaries….” As the Fifth Circuit has stated, “[t]he Louisiana Legislature
has decided that LUTPA should not apply to ‘[a]ny federally insured financial institution,
its subsidiaries, and affiliates,’ and has not set out any exception to this broad rule.”62 For

58 Rec. Doc. No. 204-1, p. 17.
59 Grant v. Houser, No. CIV.A. 10-0805, 2013 WL 2631433, at *4 (E.D. La. June 11, 2013).
60 Id.
61 Id.
62 Truong v. Bank of Am., N.A., 717 F.3d 377, 387 (5th Cir. 2013).
the reasons stated above, LUTPA does not apply to Morgan Keegan and the LUTPA
claim against it shall be dismissed with prejudice.
D. Negligence Claim
Plaintiffs must allege five elements to state a claim for negligence:
(1) the defendant had a duty to conform his conduct to a specific standard
(the duty element); (2) the defendant's conduct failed to conform to the
appropriate standard (the breach element); (3) the defendant's substandard
conduct was a cause in fact of the plaintiff's injuries (the cause-in-fact
element); (4) the defendant's substandard conduct was a legal cause of the
plaintiff's injuries (the scope of liability or scope of protection element); and
(5) the actual damages (the damages element).63 . . . A negative answer to
any of the inquiries of the duty-risk analysis results in a determination of no
liability.64

First, the Court must consider if Plaintiffs have adequately alleged that Morgan
Keegan owed them a duty.65 “In deciding whether to impose a duty in a particular case,
Louisiana courts examine ‘whether the plaintiff has any law (statutory, jurisprudential, or
arising from general principles of fault) to support the claim that the defendant owed him
a duty.’”66 Plaintiffs assert that Morgan Keegan had the duty to “ensure that the
investments that they offered or brokered were suitable for the Plaintiffs as a client,” “avoid
unreasonable behavior which puts a client at risk of financial harm,” and “use reasonable
care in recommending investments to the Plaintiffs,” and “avoid recommending
investments which it knew or should have known would constitute a fraud or scam.”67
Plaintiffs contends that because Morgan Keegan is regulated by FINRA, it must abide by
FINRA regulations, and those regulations create Morgan Keegan’s duties to Plaintiffs.68

63 Audler v. CBC Innovis Inc., 519 F.3d 239, 249 (5th Cir. 2008) (citing Lemann v. Essen Lane Daiquiris,
923 So.2d 627, 633 (La. 2006)).
64 Id. (citing Mathieu v. Imperial Toy Corp., 646 So.2d 318, 321 (La.1994)).
65 Id. (citing Meany v. Meany, 639 So.2d 229, 233 (La.1994)).
66 Id. (citing Faucheaux v. Terrebonne Consol. Gov't, 615 So.2d 289, 292 (La.1993)).
67 Rec. Doc. No. 204-1, p. 15 (citing Second Amended Complaint, p. 91-92).
68 Id.
Plaintiffs argue that FINRA requires its members to disclose material information
about investments to investors, to only recommend “suitable” investments to customers,
and to provide the customer with the most favorable price under prevailing market
conditions.69 However, it is not at all clear that FINRA regulations can support a duty to
Plaintiffs. Plaintiffs provide no authority to support their claim that FINRA regulations give

rise to a duty, and Morgan Keegan cites to persuasive authority that FINRA regulations
do not give rise to a duty.70 Morgan Keegan maintains that its sales to Plaintiffs were
“arm’s length transaction[s], from which no general tort duty could arise.”71 And, while
Plaintiffs allege that Morgan Keegan failed to steer them away from bonds that were price-
fixed by other Defendants, “Louisiana law is clear that no duty to protect against or control
the actions of a third party exists unless a special relationship exists to give rise to such
a duty.”72 Plaintiffs have not pled facts to support a finding of such a duty.
Even assuming FINRA regulations could give rise to a duty, Plaintiffs have failed
to sufficiently allege a breach of that duty. Morgan Keegan argues as much in its Motion,

contending that the Second Amended Complaint “does not contain any allegations that
Morgan Keegan breached that duty. . .The Complaint alleges nothing regarding Plaintiffs’
interactions with Morgan Keegan other than general allegations that Morgan Keegan sold
Plaintiffs GSE Bonds.”73 Plaintiffs’ Opposition does not address the issue of breach
beyond this conclusory and confusing passage:

69 Id. at 16.
70 Rec. Doc. No. 189-1, p. 19, n. 68 and 69, citing Fox v. Lifemark Sec. Corp., 84 F. Supp. 3d 239,245
(W.D.N.Y. 2015)(“Plaintiff cannot recover for negligence based on the alleged violation of [a FINRA rule
because] FINRA does not provide a private right of action”); In re VeriFone Sec. Litig., 11 F.3d 865, 870
(9th Cir. 1993)(“It is well established that violation of an exchange rule will not support a private claim”).
71 Rec. Doc. No. 189-1, p. 19.
72 Lowery v. Wal-Mart Stores, Inc., 42,465 (La. App. 2 Cir. 9/19/07), 965 So. 2d 980, 983.
73 Rec. Doc. No. 189-1, p. 20.
Morgan Keegan’s arguments against the existence of a breach are founded
on one incorrect principle: that due to the self-concealing nature of the
breach, that it could not have discovered the conspiracy. Now that Plaintiffs
have uncovered evidence, as stated in the Second Am. Complaint that
demonstrates that Morgan Keegan and Raymond James were themselves
parties to the chat room conspiracy, while simultaneously brokering GSE
bonds as well as a member institution regulated by FINRA, this argument
fails resoundingly.74

In short, Plaintiffs argue that Morgan Keegan breached its duty by being a party to
the conspiracy. Although Plaintiffs report that they have “uncovered evidence” of Morgan
Keegan’s membership in a conspiracy, this Court found exactly the opposite above where
it concluded that the Sherman Act claim against it cannot survive this motion to dismiss.
An anemic and possibly nonexistent duty, combined with a conclusory allegation of
breach that is unsupported by the allegations in the Complaint, does not a successful
negligence claim make. As Plaintiffs failed to state a Sherman Act claim against Morgan
Keegan, they cannot now maintain that Morgan Keegan is liable in negligence for
participating in an antitrust conspiracy. Holding to the contrary would allow Plaintiffs to
skirt the requirements of antitrust standing and assert an antitrust claim without following
the doctrinal prerequisites. Morgan Keegan’s Motion shall be granted as to the negligence
claim against it. Because it finds that Plaintiffs have failed to state a claim, the Court does
not reach Morgan Keegan’s arguments regarding prescription of the LUTPA and
negligence claims.

74 Rec. Doc. No. 204-1, p. 16-17.
III. CONCLUSION
For the reasons stated above, Morgan Keegan/Raymond James’ Motion75 is
hereby granted and the claims against Raymond James & Associates, Inc. dismissed
with prejudice.
IT IS SO ORDERED.

Signed in Baton Rouge, Louisiana on March 30, 2021.

S
JUDGE SHELLY D. DICK
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

75 Rec. Doc. No. 189.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10191804. Public record. Not legal advice.