Bryan v. Slothower
Posted on Categories Court Decisions, Securities Customers

By Christopher G. Lazarini

*The purpose of the doctrine of election of remedies is to prevent double recovery for a single wrong. **When a party with full knowledge of the facts elects between two inconsistent rights, he is bound by the remedy chosen and may not maintain an action on the inconsistent claim.

Bryan vs. Slothower, No. 65104/2018 (N.Y. Sup. Ct., NY Cty., 9/21/18).

After serving as Plaintiff’s broker for several years at Merrill Lynch, Defendant told Plaintiff he was leaving to form his own firm. Plaintiff gave Defendant money to invest at the new firm. Defendant periodically told Plaintiff his investments were doing well and sent him several small dividend payments. When Plaintiff asked to liquidate his holdings, however, Defendant admitted he had forged Plaintiff’s signature on an advisory agreement, had lost the money in options transactions not approved by Plaintiff, had made false representations regarding account performance, and had made the dividend payments from his own funds. The parties signed a $775,000 Settlement Agreement, but Defendant did not make the settlement payment. Plaintiff sued, alleging fraudulent inducement, fraud, negligent misrepresentations, breach of fiduciary duty, conversion, and breach of the Settlement Agreement.

Relying on the release in the Settlement Agreement, Defendant moved to dismiss all claims but the breach of contract claim. The Court grants the motion and allows Plaintiff leave to amend some claims depending on how he elects to treat the Settlement Agreement. The Court dismisses the fraudulent inducement claim with prejudice, because Plaintiff knew of the wrongdoing when he signed the Settlement Agreement and, therefore, was not fraudulently induced into signing it. Further, the release was “completely effective irrespective of any present lack of knowledge [of any claims].” The Court also dismisses the conversion claim with prejudice, finding the funds at issue are not “specific, identifiable funds” necessary to bring such a claim.

On the other claims, the Court explains that, when a party breaches a contract, the non-breaching party must elect his remedies and either terminate the contract or continue it. The election, the Court continues, controls the claims he might bring. Seeing no repudiation of the Settlement Agreement in the Complaint, the Court finds Plaintiff may pursue his breach of contract claim and dismisses the other claims. In dicta, the Court tells Plaintiff that, if he elects to terminate the Settlement Agreement and file an amended complaint, his fraud, negligent misrepresentation, and breach of fiduciary duty claims relating to activities pre-dating the Settlement Agreement might be sufficient to overcome a motion to dismiss.

(C. Lazarini) (EIC: BrokerCheck says that Jeffrey L. Slothower, CRD #3064784, was suspended via AWC for 15 days and fined $5,000 by FINRA in November 2017, for sharing in a client’s losses. He’s not currently registered.)

(SOLA Ref. No. 2018-45-08)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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