If you read through the Complaint you will see a number of Counts. They explain the legal basis for brokerage liability for damages resulting from the false investment advice they induced through the undisclosed kickback conspiracy. Here are a few passages to read carefully:
Count II:
58.The Brokerage Defendants and Individual Defendants aided and abetted this unjust enrichment, and the Brokerage Defendants directly contributed to it by providing the kickback sums.
59. The Brokerage Defendants and Individual Defendants should therefore be found jointly and severally liable for plaintiff’s damages.
Count IV:
74. Moreover, these breaches of the duties of good faith and fair dealing led plaintiff to engage in securities transactions with dubious, if any, merit. These excessive trading recommendations led plaintiff to incur losses on these trades, where the recommendations were made without regard to the possible losses plaintiff would incur.
75. As a result, all defendants should be ordered to compensate plaintiff for the losses he incurred from his purchases of securities recommended to him by Trading Places.
Count V:
77. In committing the wrongful acts alleged, Defendants have conspired with known and unknown persons and/or entities (unnamed) who have or had a financial interest in the aforesaid entities and have pursued a uniform and common plan, design, and course of conduct, acted in concert with, aided and abetted, and otherwise conspired with one another, in furtherance of their common design or scheme.
78. The intended common purpose of this conspiracy was to deceive the plaintiff as to the true nature of Defendants’ uniform illegal practices.
79. The effect of this ongoing conspiracy was to violate State law.
80. As a direct and proximate result of Defendants’ conspiracy, plaintiff has been damaged in an amount to be determined at trial.
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COUNT I
UNJUST ENRICHMENT
AGAINST TRADING PLACES
44. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
45. Plaintiff paid monthly access fees to Trading Places.
46. In exchange for those fees, plaintiff reasonably expected to receive trading advice calculated to return to him profits from day trading activities.
47. Rather than provide the services which plaintiff purchased, Trading Places instead gave worthless advice which was not intended to benefit plaintiff.
48. Without making any disclosures to plaintiff, Trading Places entered into arrangements with the Brokerage Defendants firms, whereby Trading Places received a flat-rate payment for each round-trip securities transaction entered by a Trading Places member through the Brokerage Defendants’ websites.
49. By recommending far more transactions than were necessary or advisable, Trading Places generated substantial sums from these kickbacks, while plaintiff received no valuable service in return for his membership fees.
50. As a result, Trading Places was unjustly enriched by its receipt of the monthly membership fees which were tendered by plaintiff in expectation of good and valuable trading recommendations.
51. Furthermore, Trading Places was unjustly enriched by its receipt of kickback payments from the Brokerage Defendants at plaintiff’s expense, as those kickback payments comprised a portion of the commission payments paid by plaintiff to the Brokerage Defendants.
52. Trading Places must therefore be compelled to refund the membership fees paid by plaintiff as well as disgorge its kickback proceeds.
COUNT II
AIDING AND ABETTING UNJUST ENRICHMENT
AGAINST THE BROKERAGE DEFENDANTS AND INDIVIDUAL DEFENDANTS
53. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
54. The Brokerage Defendants and the Individual Defendants entered into the arrangements whereby Trading Places would receive kickbacks from each transaction entered through the Brokerage Defendants’ websites.
55. These kickback payments were received by Trading Places from the Brokerage Defendants.
56. As a result of this kickback arrangement, Trading Places gave trading advice to its members which was calculated to increase these kickback payments to Trading Places, as well as increase the commissions received by the Brokerage Defendants.
57. These kickback payments comprised an unjust enrichment of Trading Places at plaintiff’s expense.
58. The Brokerage Defendants and Individual Defendants aided and abetted this unjust enrichment, and the Brokerage Defendants directly contributed to it by providing the kickback sums.
59. The Brokerage Defendants and Individual Defendants should therefore be found jointly and severally liable for plaintiff’s damages.
COUNT III
UNJUST ENRICHMENT
AGAINST THE BROKERAGE DEFENDANTS
60. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
61. Trading Places’ members executed their securities transactions through the Brokerage Defendants’ websites.
62. As consideration for executing these transactions, plaintiff paid per-trade commissions to the Brokerage Defendants.
63. As a result of the kickback scheme, Trading Places gave its members excessive trading recommendations which were executed through the Brokerage Defendants’ websites.
64. These excessive trading recommendations led the Brokerage Defendants to receive excessive commissions from plaintiff’s elevated trading activities.
65. The receipt of these excess fees was solely a result of the kickback scheme orchestrated by defendants, and would not have been paid to the Brokerage Defendants absent the kickback arrangement.
66. The Brokerage Defendants were thus unjustly enriched by their receipt of these undeserved commissions.
COUNT IV
BREACH OF THE DUTIES OF GOOD FAITH AND FAIR DEALING
AGAINST ALL DEFENDANTS
67. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
68. Trading Places presented itself to its members as an organization dedicated to benefiting its members through providing them with valuable, legitimate trading advice solely in return for the payment of membership fees. As a result of the way Trading Places was dealing with its members, Trading Places was in a fiduciary relationship with its members, including plaintiff, who relied on Trading Places for its honest advice.
69. Similarly, the Brokerage Defendants portended to offer plaintiff securities trading services in exchange for commissions, which were to be paid solely to the executing brokerage. As a result of their dealings with plaintiff and Trading Places’ members, these brokerage firms owed similar fiduciary duties to its customers.
70. However, Defendants entered into kickback arrangements whereby Trading Places received a financial benefit each time plaintiff executed a transaction through one of the Brokerage Defendants’ websites, as a portion of the commissions ordinarily paid to the Brokerage Defendants.
71. Trading Places was therefore greatly benefited by increasing the volume of transaction entered by its members, as were the Brokerage Defendants.
72. By entering into these kickback arrangements, Trading Places and the Brokerage Defendants created for themselves a conflict of interest whereby Trading Places’ obligation to provide meaningful and useful trading advice to its members was supplanted by its desire to increase the trading volume both for its receipt of the kickback payments as well as the increased commission payments to the Brokerage Defendants.
73. As a consequence of this undisclosed conflict, Trading Places provided trading advice to its members which was not in their best interests. These actions constitute a breach of Trading Places’ obligation to act in good faith and to deal fairly with its members. As a result, Trading Places must refund the membership fees paid by plaintiff. Similarly, the Brokerage Defendants received excessive commissions which must be refunded to plaintiff.
74. Moreover, these breaches of the duties of good faith and fair dealing led plaintiff to engage in securities transactions with dubious, if any, merit. These excessive trading recommendations led plaintiff to incur losses on these trades, where the recommendations were made without regard to the possible losses plaintiff would incur.
75. As a result, all defendants should be ordered to compensate plaintiff for the losses he incurred from his purchases of securities recommended to him by Trading Places.
COUNT V
CIVIL CONSPIRACY
AGAINST ALL DEFENDANTS
76. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
77. In committing the wrongful acts alleged, Defendants have conspired with known and unknown persons and/or entities (unnamed) who have or had a financial interest in the aforesaid entities and have pursued a uniform and common plan, design, and course of conduct, acted in concert with, aided and abetted, and otherwise conspired with one another, in furtherance of their common design or scheme.
78. The intended common purpose of this conspiracy was to deceive the plaintiff as to the true nature of Defendants’ uniform illegal practices.
79. The effect of this ongoing conspiracy was to violate State law.
80. As a direct and proximate result of Defendants’ conspiracy, plaintiff has been damaged in an amount to be determined at trial.
COUNT VI
VIOLATION OF CIVIL CODE § 1750 ET SEQ.
CONSUMERS LEGAL REMEDIES ACT
AGAINST TRADING PLACES AND THE BROKERAGE DEFENDANTS
81. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
82. Trading Places is a “person” who provides “services” to “consumers” within the meaning of Civil Code §§ 1761(b), (c), (d) and 1770.
83. Plaintiff’s payment of membership fees to Trading Places constitutes a “transaction” within the meaning of Civil Code §§ 1761(e) and 1770.
84. Plaintiff’s payment of commissions to the Brokerage Defendants constitutes a “transaction” within the meaning of Civil Code §§ 1761(e) and 1770.
85. The policies, acts and practices of Trading Places, as described above, were intended to result in the payment for services by Plaintiff to Trading Places and the Brokerage Defendants. These actions violated the Consumers Legal Remedies Act because, as alleged in detail herein, Trading Places, inter alia, represented its service to be of a quality other than that delivered § 1770(a)(7).
COUNT VII
VIOLATION OF BUSINESS AND PROFESSIONS CODE § 17200 ET SEQ.
UNLAWFUL AND UNFAIR BUSINESS ACTS AND PRACTICES
AGAINST ALL DEFENDANTS
86. Plaintiff incorporates by reference and realleges all paragraphs previously alleged herein.
87. Defendants’ acts and practices as described herein constitute unlawful and unfair business acts and practices, in that (1) Defendants’ practices, as described herein, violate the statutes and Civil Code set forth above, and/or (2) the justification for defendants’ conduct is outweighed by the gravity of the consequences to plaintiff and the General Public, and/or (3) Defendants’ conduct is immoral, unethical, oppressive, unscrupulous or substantially injurious to plaintiff and the General Public, and/or (4) the uniform conduct of Defendants, as well as their advertising and written and oral promotional materials and all other written and oral promotional statements, advertising materials, and efforts undertaken and disseminated by Defendants constitute untrue or misleading advertising in that such conduct or advertising has a tendency to deceive plaintiff and the General Public. Such conduct violates Business and Professions Code § 17200 et seq., and other similar state unfair competition and unlawful business practices statutes.
88. Pursuant to Business and Professions Code §§ 17200 and 17203, plaintiff, on behalf of himself and on behalf of the General Public, seeks relief as prayed for below. |
