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PRICE v. CRESTAR SECURITIES CORP.

March 31, 1999

WILLIE JAMES PRICE, PLAINTIFF,
v.
CRESTAR SECURITIES CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Urbina, District Judge.

MEMORANDUM OPINION

         Granting the Defendants' Motions to Dismiss the
            Plaintiff's Civil Rights Violation Claim;
      Allowing Ratification by, or Joinder or Substitution
                 of, the Real Party in Interest;
      Denying Without Prejudice the Plaintiff's Motions to
                      Amend the Complaint.

I. INTRODUCTION

This matter comes before the court on the motions to dismiss the complaint by Defendants Crestar Securities Corporation ("Crestar"), Thomas C. Kane, William B. Thompson, James Lindsay, Jr., and National Association of Securities Dealers ("NASD") and the motions to amend the complaint by the pro se plaintiff.*fn1 The plaintiff asserts claims of fraud, negligence, and civil rights violations. The court grants the defendants' motions to dismiss the plaintiff's civil rights violation claim for failure to state a claim upon which relief can be granted. The court will allow the plaintiff to join or substitute the real party in interest, Alice Price, or allow the real party in interest to ratify the commencement of this action. If one of these acts are not completed on or before April 30, 1999, the court will dismiss the complaint for failure to name a real party in interest. The court denies without prejudice the plaintiff's motions to amend the complaint for failure to cure a deficiency in the original complaint.

II. BACKGROUND

In May 1993, the plaintiff met with Defendant Stanczak, an Investment Officer for Crestar Securities, to discuss investment options for the plaintiff's wife, Alice Price. (Compl. at p. 3; Compl. Ex. 1.) Alice Price, who is not a party to this action, completed and signed a New Account Information form dated May 4, 1993, indicating that she was establishing an individual account with Crestar. (Id.) Alice Price also completed and signed a document entitled "Trading Authorization Limited to Purchases and Sales of Securities" that authorized the plaintiff to act as her agent or attorney-in-fact regarding transactions on the account. (Defs. Crestar and Kane's Mot. to Dismiss Ex. B.) The plaintiff alleges that at the meeting with Defendant Stanczak in May, the plaintiff told Defendant Stanczak not to purchase shares in the Eaton Vance Marathon Maryland Tax Free Fund ("the Fund"). (Compl. at p. 3.) Nonetheless, Defendant Stanczak purchased approximately $82,000 worth of shares in the Fund in Alice Price's name on May 4, 1993. (Compl. Ex. 1 at 2; Defs. Crestar and Kane's Mot. to Dismiss Ex. A.) One week after the initial purchase, the plaintiff purchased additional shares of the Fund totaling $25,000 in Alice Price's name. (Compl. Ex. 1 at 2.) Alice Price sold the fund in August 1995 and incurred early withdrawal penalties for selling shares of the Fund before seven years had elapsed. (Compl.Ex. 1.)

In September 1995, the plaintiff sent a letter expressing his concerns about the early surrender penalty. (Compl.Ex. 1.) On January 29, 1996, Defendant Kane responded to the plaintiff's letter by stating that the plaintiff received a prospectus explaining the early surrender penalty at the signing. (Id.) The plaintiff alleges that in the letter Defendant Kane intended to "cover up the wrongful act done by Mrs. Stanczak." (Compl. at p. 3.)

On December 31, 1996, the plaintiff filed a customer complaint with Defendant NASD. (Defs. NASD, Thompson and Lindsay's Mem. in Supp. of Mot. to Dismiss at 4.) Defendant Thompson, NASD's Vice President, forwarded the complaint to Defendant Lindsay, Supervisor of Examiners, for review. On January 30, 1997, NASD notified the plaintiff that NASD had exercised its regulatory discretion not to pursue the plaintiff's complaint regarding his wife's account because a significant amount of time had elapsed between the events the plaintiff complained of and the time he filed the complaint. (Id.; Compl. Ex. 2.)

The plaintiff filed this pro se action against Crestar and its employees Sharon Stanczak (appearing pro se) and Thomas Kane, and NASD and its employees William Thompson and James Lindsay. The plaintiff asserts claims of fraud, negligence, and civil rights violations. Specifically, the plaintiff alleges that Defendant Stanczak was negligent and reckless by selling shares of the Fund to the plaintiff. The plaintiff alleges that Defendants Stanczak and Kane made fraudulent misrepresentations about the early surrender penalty and about the Fund not being part of the stock market. The plaintiff also alleges that Defendants NASD, Thompson and Lindsay acted recklessly when they dismissed the plaintiff's complaint.

III. DISCUSSION

  A.  Defendants Crestar, Kane, NASD, Thompson and Lindsay's
      ...

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