Unpublished Disposition, 883 F.2d 1023 (9th Cir. 1989)

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US Court of Appeals for the Ninth Circuit - 883 F.2d 1023 (9th Cir. 1989)

Ernest R. ANDREGG, Plaintiff-Appellant,v.MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED, MobilCorporation, Defendants-Appellees.

No. 88-1935.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 29, 1989.Decided Aug. 16, 1989.

Before TANG, REINHARDT and WIGGINS, Circuit Judges.


Ernest R. Andregg appeals summary judgment for Merrill Lynch and Mobil on Andregg's various causes of action for securities law violations. Andregg also appeals summary judgment for Merrill Lynch on its counterclaim against Andregg for his stock trading debt. Andregg's pro se claims alleged fraudulent manipulation of stock prices (first cause of action) against Mobil; against Merrill Lynch for aiding and abetting said manipulation (second cause of action); against both defendants for breach of the covenant of good faith and fair dealing (third cause of action); and, against Merrill Lynch for fraud (fourth cause of action). Upon review we find the court properly held that Andregg failed to present evidence of requisite elements supporting his claims. The court also properly found that Andregg owes Merrill Lynch for his trading account's debit balance. The judgment is therefore affirmed.


The district court succinctly stated the relevant facts at the summary judgment hearing, and we need not restate them here. Standard of Review

A judgment entered in accordance with an order of summary judgment is reviewed de novo. California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987), cert. denied, 108 S. Ct. 698 (1988). Such review of the evidence and inferences based thereon should be in a manner favorable to the losing party. Levin v. Knight, 780 F.2d 786, 787 (9th Cir. 1986). However, if the pleadings and supporting material show the absence of a genuine issue of material fact then the moving party was entitled to judgment as a matter of law and the district court must be affirmed. Eichman v. Fotomat Corp., 871 F.2d 784, 789 (9th Cir. 1989).

When a defendant moves for summary judgment, the trial court must determine from the record whether "a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). A defendant may move for summary judgment on an issue where the plaintiff has the burden of proof by pointing to the absence of facts supporting the plaintiff's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); see United Steelworkers of America v. Phelps Dodge, 865 F.2d 1539, 1541-43 (9th Cir. 1989) (en banc).

(1) Andregg's first cause of action

The district court ruled that Andregg stated a Rule 10b-5 claim against Mobil but held that Andregg failed to show a material issue of disputed fact as to Mobil's knowledge that its takeover bid was illegal. Therefore, Andregg failed to carry his burden in moving for summary judgment, and failed to meet his burden under Celotex to respond to Mobil's motion with any evidence sufficient to show a material question of fact on the scienter element."1  Accordingly, the court denied Andregg's motion for summary judgment and granted Mobil's cross-motion.

Andregg argues that Mobil's prospectus reveals that "Mobil manipulated the market by Insider Trading [of] 178,400 shares of Marathon, and later manipulated the market by entering a hostile tender offer to buy controlling interest in Marathon, with foreknowledge that the merger would probable be enjoined for antitrust reasons." He claims that the prospectus proves that Mobil's Assistant General Counsel, Louis Hering, knew that the tender offer could be enjoined because it states that "there can be no assurance that a challenge to the offer on antitrust grounds will not be made, or that, if made, the Purchaser will prevail ..."

Andregg points to no evidence, except the prospectus, showing that Mobil knew its tender offer would violate the antitrust laws, or that Mobil acted recklessly. Therefore, the district court did not err in concluding that Andregg failed to meet his burden to produce facts meeting the scienter requirement of a 10b-5 action unless the prospectus adequately supports Andregg's claims.

We hold that the prospectus does not raise a triable issue of fact regarding Mobil's scienter. It does not tend to prove that Mobil intended to defraud or acted recklessly in its takeover attempt. On the contrary, the prospectus shows that Mobil was attempting to avoid anti-trust problems through litigation. Such candor does not show fraud or reckless deceit.

(2) Andregg's second cause of action.

Andregg alleged that Merrill Lynch aided and abetted Mobil's "fraudulent manipulation of the price of Marathon common shares ... pursuant to an unlawful acquisition." Aiding and abetting is itself a violation of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Exchange Commission. The elements for a cause of action for aiding and abetting a section 10(b) violation are: (1) the existence of an independent wrong, (2) actual knowledge by the alleged aider and abettor of the wrong and of his or her role in furthering it, and (3) substantial assistance in the wrong. Roberts v. Peat, Marwick, Mitchell & Co., 857 F.2d 646, 652 (9th Cir. 1988) (per curiam) citing Jett v. Sunderman, 840 F.2d 1487, 1495 (9th Cir. 1988). As the first element requires an independent wrong, Andregg's second cause of action was properly dismissed because the first cause of action was properly dismissed.

(3) Andregg's third cause of action

Andregg made six allegations in his third cause of action: (1) defendants "fraudulently induced the liquidation of securities in Plaintiff's CMA account;" (2) Merrill Lynch failed to investigate securities violations and concealed facts; (3) defendants failed to reasonably answer Andregg's S.E.C. complaint; (4) failed to submit to arbitration; (5) failed to give a reasonable basis for denying Andregg's claim; and, (6) deprived Andregg of his CMA income.

Judge Garcia found that Andregg failed to present any evidence of bad faith and accordingly granted summary judgment on this claim. Andregg characterizes his third cause of action as a "pendent California State Law Claim ... for breach of Common-Law Fiduciary Duty ..." His entire argument is as follows:

Since both the Second and Fourth Causes of Action are 10b-5 claims, involving R.I.C.O. violations, Andregg is entitled to damages from Merrill Lynch over and above that given for the Second and Fourth Causes of Action.

Andregg points to no evidence supporting his bad faith claim. Therefore the district court's dismissal is affirmed.

(4) Andregg's fourth cause of action

Andregg alleged that Merrill Lynch made an error in the execution of an option order and committed fraud in correcting the error. Judge Garcia ruled that Andregg presented no evidence that gives rise to a disputed question of fact on the fraud element, as is his burden in opposing defendant's motion. Accordingly, Judge Garcia granted Merrill Lynch's motion for summary judgment on this claim.

Andregg claims that Merrill Lynch did not repay him and that any offset against the money due Merrill Lynch is barred by res judicata. This argument assumes a favorable outcome on the other issues. Again, Andregg does not set forth specific evidence supporting his claim that Merrill Lynch intended to defraud. The order of summary judgment on this issue is therefore affirmed.

(5) Merrill Lynch's counterclaim

Judge Garcia found that:

the contract submitted by Merrill Lynch clearly states that plaintiff is required to pay obligations and indebtedness on the account should it be liquidated ... Plaintiff's only evidence in opposition to Merrill Lynch's motion regarding this claim is plaintiff's speculative affidavit in which he concludes that Merrill Lynch fabricated a phony unsecured debit balance. The affidavit cites no reason for why plaintiff knows or concludes this and asserts no evidence in support of his conclusion.

Andregg's meritless argument on this issue, in its entirety, is as follows: "the counterclaim of Merrill Lynch should be denied on the grounds that it is without merit, that substantial portions of it are barred by the Doctrine of Res Judicata, and that all of its false and misleading claims are prohibited by R.I.C.O." Again, Andregg erroneously assumes a favorable outcome on his 10b-5 claim. We affirm the district court's order on this issue as well.


The district court's judgment is affirmed. The record shows that Andregg failed to meet his burden as a nonmoving party facing summary judgment to produce evidence supporting his claims. Therefore, the court properly dismissed Andregg's first and second causes of action. The prospectus raises no triable issue of material fact regarding Mobil's scienter. Andregg points to no evidence supporting his third and fourth claims or rebutting Judge Garcia's award to Merrill Lynch of the balance due on Andregg's account. Therefore, the judgment is affirmed.

Merrill Lynch's request for attorneys' fees is denied.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


A plaintiff must satisfy the requirement of scienter under Rule 10b-5 through offering evidence of intent to defraud or recklessness. Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1311 (9th Cir. 1982)