Seller’s Remorse

The United States Court of Appeals for the District of Columbia Circuit affirmed the dismissal of claims brought by an unhappy investor

Disruptions to supply chains and workforces in early 2020 squeezed financial markets in ways not seen since the 2008 crash. Feeling the angst of that disruption, Plaintiff–Appellant Robert Goodrich liquidated his stock portfolio in March 2020. That decision cost him millions. Goodrich now looks to recoup his losses.

After Goodrich requested the sale, his wealth advisor pulled the proverbial trigger, emptying Goodrich’s significant portfolio within hours. Goodrich says he never would have directed his advisor to sell had he appreciated the myriad risks. Unfortunately for him, his investment account contract with his advisor’s employer—U.S. Trust Bank of America Private Wealth Management, a division of Bank of America (“BOA”)—protects BOA and its agents from liability for actions taken pursuant to an account owner’s instructions. And it protects BOA and its agents from liability for breaching any implied duties.

Undeterred, Goodrich turned to the courts, waging an uphill battle against his contract’s plain terms: Goodrich sued his wealth advisor, Matthew Lettinga, and BOA (collectively, “Defendants”), in the U.S. District Court for the District of Columbia for gross negligence, breach of fiduciary duty, and violations of the D.C. Securities Act. Because Goodrich’s claims are either precluded by contract or implausibly pleaded, we affirm the District Court.

Facts

In 2014, Goodrich hired Defendants for private wealth management services. Goodrich signed an “Investment Services Agreement” (“the Agreement”), which gave BOA discretionary authority over his accounts. By signing the Agreement, Goodrich certified that he “received, read, understood, and agreed to” the “Investment Services Terms and Conditions Booklet” (“the Terms”), which the Agreement incorporated. The Terms shield Defendants from liability when acting at an account owner’s instruction and disclaim liability for any duties not outlined in the Agreement. Goodrich’s investment accounts served as collateral for two lines of credit with BOA, through which Goodrich covered business expenses.

In March 2020, Goodrich began to worry about how the COVID-19 pandemic’s effect on financial markets might negatively affect his accounts’ cash flow. BOA advised customers (including Goodrich) to patiently ride out the storm, but on Friday, March 20, 2020, the stock market closed at its worst performance since 2008. The following Monday, Goodrich called Lettinga and told him to liquidate his investment portfolio. “Lettinga explained to Goodrich that he would miss some of the upside of an equity market recovery if his portfolio was fully invested in cash and advised him against liquidating his portfolio.” Appellant’s Br. 9 (emphasis added) (citing J.A. 401–02). Lettinga did not, however, explain every potential downside or loss that Goodrich ultimately experienced. Unable to persuade him otherwise, Lettinga ultimately followed instructions and liquidated Goodrich’s portfolio.

The market bounced back almost immediately, much to Goodrich’s dismay. The day after the sale, he emailed Lettinga, “When you’re right, you’re right.” J.A. 335, 368. A few weeks later, Goodrich emailed another BOA advisor acknowledging regretfully that Lettinga had followed his instruction. Goodrich does not dispute that he told Lettinga to sell; instead, he disputes whether any such instruction relieved Defendants of liability for inadequately explaining the risks involved. Goodrich alleges that Defendants’ failure to explain “the ramifications and/or consequences of selling the investments” caused him to “agree[]” to liquidate his portfolio at great cost. Appellant’s Br. 9 (citing J.A. 380).

(Mike Frisch)