Bass, Berry & Sims attorney Chris Lazarini analyzed the summary judgment ruling in favor of Defendants in the recent Taddeo v. Bodanza selling away case for Securities Litigation Commentator. The case, affirmed by the Ohio Court of Appeals, considered the broker/dealer's potential liability under a theory of respondeat superior. The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the Securities Litigation Commentator, please click here to sign up for the newsletter.
Taddeo vs. Bodanza, No. 100704, 2014 Ohio 3719 (Ohio App., 8Dist., 8/28/14)
The Ohio Court of Appeals affirms summary judgment in favor of all Defendants in this selling away case. In January 2004, Plaintiff opened two securities accounts with Defendant Bodanza. At the time, Bodanza was a registered representative of Defendant O.N. Equity Sales Company ("ONESCO"). His local office was called Preferred Financial Services, Inc. ("PFS"). Defendant Takacs was also a registered representative of ONESCO working out of the same PFS office as Bodanza. In 2006, Bodanza formed Preferred Financial Holdings, Inc. ("PFH"), an oil and gas drilling company. When ONESCO refused to allow Bodanza to raise capital for PFH, Bodanza resigned from ONESCO and surrendered his securities license. In 2007, Bodanza told Taddeo that he had surrendered his securities license and that his ONESCO accounts had been converted to house accounts. He then solicited an investment in the PFH oil and gas venture. Taddeo believed that he had purchased bonds issued by PFH when, in fact, he had purchased promissory notes. Takacs, who was still registered with ONESCO and still working out of the PFS office, went to Taddeo's house to get his signature on the PFH documents and pick up the checks payable to PFH.
In 2010, PFH defaulted on the notes. Thereafter, Taddeo filed suit in state court against ONESCO, Bodanza, Takacs, PFH, PFS and others. Following discovery, the trial court granted summary judgment in favor of all defendants. Affirming, the Court of Appeals summarily overrules five of Plaintiff's six assignments of error on grounds that Plaintiff failed to cite legal authorities in support of his arguments, failed to link his arguments to viable causes of action and/or simply failed to make supporting arguments. On the lone remaining issue, the Court finds that no genuine issue of material fact exists that would allow Plaintiff to defeat summary judgment on his claim that ONESCO was liable for Bodanza's actions under a theory of respondeat superior.
The case seems to turn on the fact that Bodanza disclosed to Plaintiff that he was no longer affiliated with ONESCO before soliciting the investment in his oil and gas venture. While this may well have been the key dispositive fact, one has to wonder if the outcome would have been the same had the case been filed with FINRA, where Defendants could not have filed their summary judgment motions and would have been forced to take the matter through a full hearing to make their arguments.