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Berkenfeld v. Lenet

United States District Court, D. Maryland

January 4, 2018



          Paula Xinis United States District Judge

         Plaintiffs Brandon Berkenfeld, Barbara Holland-Eytan, and Sandra Ricki Diamond bring this lawsuit against defendants Gary R. Lenet and Morgan Stanley & Co., LLC seeking damages for alleged negligence, breach of fiduciary duty, and professional negligence. Now pending is Defendants' Motion for Summary Judgment, ECF No. 47. The parties have fully briefed the motion, and no hearing is necessary. See Local R. 105.6. For the reasons set forth below, Defendants' Motion for Summary Judgment is GRANTED.


         This dispute arises out of Gary R. Lenet's (“Lenet”) and Morgan Stanley & Co., LLC's (“Morgan Stanley”) alleged negligence in advising Brandon Berkenfeld (“Berkenfeld”), Barbara Holland-Eytan (“Holland-Eytan”), and Sandra Ricki Diamond (“Diamond”) about their options for annuity disbursements. ECF No. 2 at ¶¶ 3-10. Defendant Lenet is an employee of defendant Morgan Stanley. ECF No. 47 at 4. Lenet was an investment advisor for plaintiffs Berkenfeld, Holland-Eytan, and Diamond. Id. At issue is Lenet's advice to Plaintiffs regarding their distribution options for two annuities of which Plaintiffs were equal beneficiaries. ECF No. 2 at ¶¶ 2-4.

         Plaintiffs are the daughters and grandson of Claire Blumberg (“Blumberg”), who passed away in February 2014. ECF No. 2 at ¶ 3. Prior to Blumberg's passing, Blumberg owned annuities issued by Lincoln Financial (“Lincoln”) and Commonwealth/Scudder (“Commonwealth”). ECF No. 47 at 3. When Blumberg died, each plaintiff elected a lump-sum distribution for the annuities. ECF Nos. 47-17 & 47-18. Each plaintiff also elected not to have federal income tax withheld from their lump sum distributions. ECF Nos. 47-17 & 47-18. If Plaintiffs had elected different distribution options, they could have saved in excess of $200, 000 in overall tax liability. ECF No. 2 at ¶ 9. Plaintiffs allege they elected lump-sum distributions because Lenet advised them that lump-sum distribution was the only distribution option. ECF No. 2 at ¶¶ 4-6.

         No contract or agreement existed between the parties obligating Defendants to give tax advice or an opinion concerning Plaintiffs' available distribution options. ECF No. 47 at 7. Plaintiffs, however, claim that Lenet lump-sum distribution advice was an opinion, the error of which is actionable. ECF No. 2 at ¶ 5. Plaintiffs also aver that Lenet advised Plaintiffs to seek independent tax advice concerning their distribution options. ECF Nos. 2 at ¶ 8. Plaintiffs did not seek such advice despite having financial advisors and tax experts at their disposal. See ECF Nos. 2 at ¶ 8 & 47-2, Berkenfeld Tr. at 243:4-10).

         Plaintiffs also did not contact Lincoln or Commonwealth to discuss their options. ECF No. 47-2, Berkenfeld Tr. at 197:21-22, 198:1-2, 228:16-22; ECF No. 47-5, Holland-Eytan Tr. at 151:21-22, 152:1-9, 184:9-13; ECF No. 47-9 at No. 17. Each plaintiff also signed a statement for each annuity electing a lump-sum disbursement which expressly notified them of all available distributions. ECF Nos. 47-17 & 47-18.[1] Id. Plaintiffs additionally elected not to have federal income tax withheld from their lump-sum distributions despite having been warned in writing, “If you opt out of tax withholding, you are still liable for applicable taxes on your distribution . . . .You may want to discuss your withholding election with a qualified tax advisor.” ECF No. 47-17 at 7.

         Plaintiffs filed suit in the Circuit Court for Baltimore City on February 25, 2016, alleging against Lenet negligence (Count I), breach of fiduciary duty (Count II), and professional negligence (Count III), and vicarious liability against Morgan Stanley. ECF No. 2. Defendants removed the case to this Court on April 25, 2016. ECF No. 1. On May 2, 2016, defendants filed a motion to dismiss. ECF No. 6. This court denied that motion on January 23, 2017. ECF No. 37. Defendants moved for summary judgment on September 25, 2017. ECF No. 47.


         Under Federal Rule of Civil Procedure 56(c), a court must grant summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247 (1986). A genuine issue of material fact exists where “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When reviewing a motion for summary judgment, the court must take all facts and inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007).

         The party opposing summary judgment must, however, “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also In re Apex Express Corp., 190 F.3d 624, 633 (4th Cir. 1999). The non-movant “‘may not rest upon the mere allegations or denials of [his] pleadings, ' but rather ‘set forth specific facts showing that there is a genuine issue for trial.'” Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)); see also Adickes v. S. H. Kress & Co., 398 U.S. 144, 160 (1970). A court should enter summary judgment when a party fails to make a showing sufficient to establish elements essential to a party's case, and on which the party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 322.


         I. Negligence (Count I) and Professional Negligence (Count III)

         Defendants argue that summary judgment is warranted because no reasonable trier of fact could find in Plaintiffs' favor on these counts. Alternatively, Defendants argue that even if they were negligent, Plaintiffs' contributory negligence and assumption of the risk bar recovery. Although genuine disputes of fact exist regarding Defendants' negligence, the evidence construed in the light most favorable to Plaintiffs demonstrate that their claims ...

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