Mosley v. American Express Financial Advisors, Inc.

April 13 2010

DA 09-0023

IN THE SUPREME COURT OF THE STATE OF MONTANA

2010 MT 78

GREGG MOSLEY, JOY FARRELL MOSLEY,
FRED FELLOWS, DEBORAH FELLOWS,
GARY BAUER, and JANA BAUER,

Plaintiffs, Appellants, and Cross-Appellees

v.

AMERICAN EXPRESS FINANCIAL ADVISORS, INC.,
BRITT B. DAVIS, GARY WEXLER, WEX WHEELS, INC.,
and KEEP IT SIMPLE STUPID, LLC,

Defendants and Appellees,

and

AMERICAN EXPRESS FINANCIAL ADVISORS, INC.,

Cross-Appellant.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and For the County of Gallatin, Cause No. DV-2002-151
Honorable John C. Brown, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Larry Jent, Williams & Jent, LLP, Bozeman, Montana

Christopher Harris, Attorney at Law, Bozeman, Montana

For Appellee:

J. Devlan Geddes, Trent M. Gardner, Goetz, Gallik & Baldwin, P.C.,
Bozeman, Montana
 Submitted on Briefs: January 13, 2010

Decided: April 13, 2010

Filed:

__________________________________________
Clerk

2
Justice James C. Nelson delivered the Opinion of the Court.

¶1 This case concerns a multi-million dollar financial scheme involving Britt Davis,

who was employed with American Express Financial Advisors, Inc., now known as

Ameriprise Financial, Inc. (hereinafter, Ameriprise). A jury in the Eighteenth Judicial

District Court, Gallatin County, found that Davis had offered or sold unregistered

securities to Gregg and Joy Farrell Mosley (the Mosleys) and Fred and Deborah Fellows

(the Fellows). The jury awarded $70,000 to the Mosleys. (The Fellows had previously

settled with Davis.) However, following the jury’s verdict, the District Court dismissed

the Mosleys’ claim against Davis based on his statute-of-limitations defense. As for the

Mosleys’ and the Fellows’ claims against Ameriprise, the jury found that Ameriprise was

not a “control person” of Davis with respect to any of the Mosleys’ and the Fellows’

purchases of unregistered securities. The Mosleys and the Fellows now appeal, and

Ameriprise cross-appeals. We affirm.

ISSUES

¶2 The Mosleys and the Fellows articulate seven appeal issues, while Ameriprise

articulates four cross-appeal issues. We conclude, however, that the following two

issues, restated here, are dispositive of this appeal:

1. Did the District Court err in dismissing the Mosleys’ claim against Davis based

on his statute-of-limitations defense?

2. Was Ameriprise liable as a “control person” of Davis with respect to the

Mosleys’ and the Fellows’ purchases of unregistered securities?

BACKGROUND

3
¶3 This story begins with the advent of what the Mosleys and the Fellows term a

“Ponzi scheme” 1 known as Wex Wheels, Inc. Under this scheme, Gary Wexler, who

owned car dealerships in San Diego, California, and Las Vegas, Nevada, sold

automobiles by way of installment sales contracts, which he then sold as assignments to

third parties. In November 1998, Davis, who at the time worked for Ameriprise as a

financial advisor, persuaded the Fellows to make an initial investment of roughly $33,000

in Wexler’s automobile-financing scheme, indicating that the investments would yield

rates of return in excess of 12 percent. The Fellows’ first investment went well and they

received the promised return. In January 2000, Davis retired from Ameriprise. In

May 2000, the Fellows sold their home in Montana for around $900,000 and invested all

but $80,000 of the proceeds in Wex Wheels assignments.

¶4 The Mosleys also invested in Wex Wheels. Gregg Mosley, a boyhood friend of

Davis, invested $70,000 in Wex Wheels during a Thanksgiving visit with Davis in 1999.

While this was the only investment the Mosleys made in Wex Wheels before Davis

retired from Ameriprise, they continued to invest after Davis’s retirement.

1
A Ponzi scheme is a fraudulent investment arrangement in which returns to
investors are paid not from any “profits” of an underlying business venture, but from
monies obtained from later investors. The fraud consists of funneling proceeds received
from new investors to previous investors in the guise of profits from the alleged business
venture, thereby cultivating an illusion that a legitimate profit-making business
opportunity exists and inducing further investment. As a result of the absence of
sufficient (or any) assets able to generate funds necessary to pay the promised returns, the
success of such a scheme guarantees its demise because the operator must attract more
and more funds, which thereby creates a greater need for funds to pay previous investors,
all of which ultimately causes the scheme to collapse. See In re Taubman, 160 B.R. 964,
978 (Bankr. S.D. Ohio 1993); In re United Energy Corp., 944 F.2d 589, 590 n. 1 (9th Cir.
1991); Cunningham v. Brown, 265 U.S. 1, 7-8, 44 S. Ct. 424, 425 (1924).

4
¶5 As it turned out, Wexler was selling assignments to third parties, including the

Fellows and the Mosleys, which were backed by fictitious automobile loans. The scheme

collapsed and the Fellows, the Mosleys, and other investors lost millions of dollars.

When Davis discovered Wexler’s unlawful actions, he turned Wexler in to the FBI.

Wexler ultimately pleaded guilty in United States District Court in Nevada to wire fraud

(for faxing 41 fraudulent vehicle loan contracts to Davis in Montana).

¶6 On March 14, 2002, the Mosleys and the Fellows commenced the present action in

District Court. Their Third Amended Complaint, filed March 7, 2003, alleged seven

counts; however, as trial approached, the Mosleys and the Fellows began dismissing

some of their claims. Ultimately, they maintained claims against Davis and Wexler for

the sale of unregistered securities (in the form of Wex Wheels assignments) and claims

against Ameriprise based on the theory that the company had “control person” liability

for Davis’s sale of unregistered securities.

¶7 In May 2006, the District Court entered a default judgment against Wexler in the

amount of $3,162,103.00. In November 2008, the case against Davis and Ameriprise

proceeded to a seven-day jury trial. Ultimately, the jury found that Davis’s sales of Wex

Wheels assignments to the Mosleys and the Fellows constituted the sale of unregistered

securities, but that Ameriprise was not a “control person” of Davis for any of those sales.

As noted, the District Court dismissed the Mosleys’ claim against Davis post-verdict,

based on his statute-of-limitations defense. 2 Accordingly, the District Court entered

2
Davis first raised this defense in his answer to the complaint, but the District
Court did not issue a final ruling on the defense until after trial.

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judgment as follows: the Mosleys take nothing against Davis, and the Mosleys and the

Fellows take nothing against Ameriprise.

¶8 Additional facts are set forth below where relevant.

DISCUSSION

¶9 Issue 1. Did the District Court err in dismissing the Mosleys’ claim against
Davis based on his statute-of-limitations defense?

¶10 We review de novo a district court’s interpretation and application of a statute. In

re J.D.N., 2008 MT 420, ¶ 8, 347 Mont. 368, 199 P.3d 189.

¶11 In their Third Amended Complaint, the Mosleys alleged that Davis had sold them

an unregistered security in violation of § 30-10-202, MCA, and that Davis had sold them

a security by means of fraud or misrepresentation. These claims were premised on

§ 30-10-307(1), MCA, which states:

Any person who offers or sells a security in violation of 30-10-202
or offers or sells a security by means of fraud or misrepresentation is liable
to the person buying the security from him, who may sue either at law or in
equity to recover the consideration paid for the security, together with
interest at 10% per annum from the date of payment, costs, and reasonable
attorneys’ fees, less the amount of any income received on the security,
upon the tender of the security, or for damages if he no longer owns the
security. Damages are the amount that would be recoverable upon a tender
less:
(a) the value of the security when the buyer disposed of it; and
(b) interest at 10% per annum from the date of disposition.

¶12 The applicable statute of limitations for these claims is set forth in § 30-10-307(5),

MCA, which states as follows:

(a) No action may be maintained under this section to enforce any
liability founded on a violation of 30-10-202 unless it is brought within
2 years after the violation occurs.

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 (b) No action may be maintained under this section to enforce any
liability founded on fraud or misrepresentation unless it is brought within
2 years after discovery of the fraud or misrepresentation on which the
liability is founded or after such discovery should have been made by the
exercise of reasonable diligence.
(c) In no event may an action be maintained under this section to
enforce any liability founded on fraud or misrepresentation unless it is
brought within 5 years after the transaction on which the action is based.

¶13 The Mosleys dismissed their fraud/misrepresentation claim before trial, which left

their claim that Davis had sold them an unregistered security in violation of § 30-10-202,

MCA, which states:

It is unlawful for any person to offer or sell any security in this state,
except securities exempt under 30-10-104 or when sold in transactions
exempt under 30-10-105, unless:
(1) the security is registered by notification, coordination, or
qualification under parts 1 through 3 of this chapter; or
(2) for a federal covered security, the security has been filed with the
commissioner pursuant to 30-10-211 and the fee prescribed in 30-10-209
has been paid.

¶14 The District Court dismissed this “30-10-202 claim” based on § 30-10-307(5)(a),

MCA (quoted above). The jury had found that the Mosleys purchased a number of

unregistered securities in 1999, 2000, and 2001; however, the jury had also found that of

these purchases, the only one in which Davis was an “offeror” or “seller” occurred on

November 27, 1999.3 Thus, because the Mosleys filed their initial complaint on

3
The Mosleys assert that the jury was wrong on this point. They claim that “[n]o
evidence whatsoever exists” that Wexler offered or sold them Wex Wheels assignments.
Thus, because “[t]he only other person that could have was Davis,” the Mosleys reason
that the jury’s verdict (finding that Davis sold to them only once, in November 1999) is
contrary to the evidence. As Ameriprise points out, however, there is evidence in the
record that the Mosleys’ subsequent purchases in 2000 and 2001 did not involve Davis,
but rather were from Wexler. The jury resolved this factual matter against the Mosleys,

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March 14, 2002, nearly two years and four months after Davis’s violation of § 30-10-202,

MCA, the District Court concluded that their 30-10-202 claim was untimely and

dismissed it with prejudice.

¶15 The Mosleys contend that the District Court erred because their 30-10-202 claim

did not accrue until August 2001. They rely on § 27-2-102(1), MCA, which states:

For the purposes of statutes relating to the time within which an
action must be commenced:
(a) a claim or cause of action accrues when all elements of the claim
or cause exist or have occurred, the right to maintain an action on the claim
or cause is complete, and a court or other agency is authorized to accept
jurisdiction of the action;
(b) an action is commenced when the complaint is filed.

The Mosleys also rely on Uhler v. Doak, 268 Mont. 191, 885 P.2d 1297 (1994), where

we held that a claim of professional negligence by an attorney did not accrue, and the

statute of limitations did not begin to run, until the client sustained damages. Based on

these authorities, the Mosleys argue that there can be no cause of action for a violation of

§ 30-10-202, MCA, and thus the statute of limitations does not begin to run, until

damages have occurred. Here, they maintain, there were no damages until Wex Wheels

collapsed in August 2001, making the filing of their complaint on March 14, 2002, well

within the statute of limitations.

¶16 We disagree with this approach for two reasons. First, as Ameriprise points out,

§ 30-10-307(5)(a), MCA, specifically requires a claim founded on a violation of

§ 30-10-202, MCA, to be brought “within 2 years after the violation occurs” (emphasis

based on the evidence, and the Mosleys have presented no factual or legal basis for
disturbing the jury’s verdict in this regard.

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added). The violation occurs when a person offers or sells an unregistered security—not,

as the Mosleys argue, when the unregistered security loses its presumed value or stops

paying the expected returns. See § 30-10-202, MCA. Second, and along these same

lines, § 27-2-102(1)(a), MCA, states that a claim or cause of action accrues “when all

elements of the claim or cause exist or have occurred, the right to maintain an action on

the claim or cause is complete, and a court or other agency is authorized to accept

jurisdiction of the action.” As just noted, a claim under § 30-10-307(1), MCA, that a

person offered or sold a security in violation of § 30-10-202, MCA, is complete when the

offer or sale occurs—again not, as the Mosleys claim, years later when the purchaser

decides that she made a bad investment.

¶17 The Mosleys argue, however, that where there has been a “concealment of injury,”

the limitations period does not begin until the injury is discovered. Here, they contend,

Wexler concealed the fact that the assignments were based on fictitious auto-loan

contracts and the Mosleys did not discover this concealment until July 2001. As support

for this theory, the Mosleys rely on § 27-2-102(3), MCA, which states:

The period of limitation does not begin on any claim or cause of
action for an injury to person or property until the facts constituting the
claim have been discovered or, in the exercise of due diligence, should have
been discovered by the injured party if:
(a) the facts constituting the claim are by their nature concealed or
self-concealing; or
(b) before, during, or after the act causing the injury, the defendant
has taken action which prevents the injured party from discovering the
injury or its cause.

¶18 There are two problems with the Mosleys’ reliance on this provision. First, while

the Mosleys assert that “[t]he trial evidence revealed that neither Davis nor the Mosleys

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knew that Gary Wexler was providing phony contracts to investors until July of 2001,”

they have failed to explain why the facts constituting their 30-10-202 claim could not

have been discovered “in the exercise of due diligence.” Section 27-2-102(3), MCA.

¶19 Second, and more fundamentally, the statutory scheme set out in § 30-10-307(5),

MCA, precludes application of § 27-2-102(3), MCA, to 30-10-202 claims. As

Ameriprise points out, an action founded on a 30-10-202 violation must be brought

“within 2 years after the violation occurs.” Section 30-10-307(5)(a), MCA (emphasis

added). Yet, in contrast, an action founded on fraud or misrepresentation must be

brought “within 2 years after discovery of the fraud or misrepresentation on which the

liability is founded or after such discovery should have been made by the exercise of

reasonable diligence,” though not later than “5 years after the transaction on which the

action is based.” Section 30-10-307(5)(b), (c) (emphasis added). In light of this differing

treatment of 30-10-202 claims and fraud/misrepresentation claims, Ameriprise argues

that the Legislature specifically intended that the limitations period for 30-10-202 claims

not be based on the date of discovery of the 30-10-202 violation. We agree.

¶20 When a general statute and a specific statute are inconsistent, the specific statute

governs, so that a specific legislative directive will control over an inconsistent general

provision. Mercury Marine v. Monty’s Enters., Inc., 270 Mont. 413, 417, 892 P.2d 568,

571 (1995). Here, we conclude that the specific statute (§ 30-10-307(5)(a), MCA)

controls over the general statute (§ 27-2-102(3), MCA). The Legislature addressed the

statutes of limitation for 30-10-202 claims and fraud/misrepresentation claims within the

same statutory provision—namely, § 30-10-307(5), MCA. The Legislature included a

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“discovery” clause for fraud/misrepresentation claims in subsection (5)(b) but did not

include a “discovery” clause for 30-10-202 claims in subsection (5)(a). The implication

of this is clear: The Legislature did not intend for the limitations period on 30-10-202

claims to run from the date of discovery of the 30-10-202 violation. Under these

circumstances, we will not apply § 27-2-102(3), MCA, to 30-10-202 claims. Nor may we

insert a “discovery” clause into § 30-10-307(5)(a), MCA, for 30-10-202 claims. 4 See

§ 1-2-101, MCA (“In the construction of a statute, the office of the judge is simply to

ascertain and declare what is in terms or in substance contained therein, not to insert what

has been omitted or to omit what has been inserted.”).

¶21 The Mosleys’ 30-10-202 claim was not brought within two years after Davis

offered or sold them an unregistered security. Accordingly, the District Court did not err

in dismissing their claim against Davis based on his statute-of-limitations defense.

Section 30-10-307(5)(a), MCA.

4
This interpretation of the statutory scheme could potentially lead to harsh or
inequitable results where, for example, the purchaser had no reasonable basis for
knowing or discovering that the security was unregistered. Indeed, § 30-10-307(5)(a),
MCA, as presently written, may allow unscrupulous brokers to escape liability for
violating § 30-10-202, MCA, if the consumer fails to discover the illegal nature of the
transaction until several years later. However, it is up to the Legislature, not this Court,
to address this issue. In this regard, the statute defining the underlying causes of action
and the available remedies (§ 30-10-307, MCA) is exceedingly convoluted and may
warrant reexamination by the Legislature and the Commissioner of Securities. For
instance, it is not clear whether a fraud/misrepresentation claim is in addition to, or
mutually exclusive of, a 30-10-202 claim, and it is likewise unclear whether the remedy
for both claims is exactly the same. Given that the Securities Act of Montana “is
intended to protect the investor, persons engaged in securities transactions, and the public
interest,” Knowles v. State ex rel. Lindeen, 2009 MT 415, ¶ 1, 353 Mont. 507, 222 P.3d
595 (citing § 30-10-102(1), MCA), clarifying this provision (and others in the Securities
Act, see e.g. Knowles, ¶ 37 n. 3) would be beneficial to sellers and investors alike.

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¶22 Issue 2. Was Ameriprise liable as a “control person” of Davis with respect to
the Mosleys’ and the Fellows’ purchases of unregistered securities?

¶23 The Mosleys’ and the Fellows’ claims against Ameriprise were premised on

“control person” liability. A “control person” shares the liability for violations of

securities laws with the primary violator it controlled. See § 30-10-307(2), MCA. This

statute states:

Every person who directly or indirectly controls a seller liable under
subsection (1), every partner, officer, or director (or person occupying a
similar status or performing similar functions) or employee of such a seller,
and every broker-dealer or salesperson who participates or materially aids
in the sale is liable jointly and severally with and to the same extent as the
seller if the nonseller knew, or in the exercise of reasonable care could have
known, of the existence of the facts by reason of which the liability is
alleged to exist. . . .

Section 30-10-307(2), MCA. Thus, to prevail on this claim, the Mosleys and the Fellows

had to show both (1) that Ameriprise directly or indirectly controlled Davis and (2) that

Ameriprise knew, or in the exercise of reasonable care could have known, of the

existence of the facts upon which Davis’s liability is premised. Generally, status as a

control person is a question of fact. See Sanders Confectionery Prods., Inc. v. Heller

Fin., Inc., 973 F.2d 474, 485-86 (6th Cir. 1992); Harrison v. Dean Witter Reynolds, Inc.,

974 F.2d 873, 881 (7th Cir. 1992).5 Here, the jury ultimately found that Ameriprise was

5
First enacted in 1961, the Securities Act of Montana is a substantial adoption of
the major provisions of the Uniform Securities Act promulgated by the Conference of
Commissioners on Uniform State Laws, though it contains some variations, omissions,
and additional matter. See Chapter Compiler’s Comments, Title 30, chapter 10, MCA
(Annotations 2008). Because our Securities Act is a Uniform State Law and is traceable
to federal law, federal cases and cases from other states adopting the Uniform Securities
Act are helpful in the interpretation of our Securities Act. State v. Duncan, 181 Mont.
382, 390, 393, 593 P.2d 1026, 1031, 1033 (1979).

12
not a “control person” for any of Davis’s sales of Wex Wheels assignments to the

Mosleys and the Fellows.

¶24 The Mosleys and the Fellows contend, however, that the jury was not adequately

instructed on the meaning of “control person.” For that matter, they argue that whether

an entity is a “control person” is a matter of law and that the status of Ameriprise as the

broker-dealer for Davis was sufficient to establish it as the “control person” for him. As

support for this argument, they cite Martin v. Shearson Lehman Hutton, Inc., 986 F.2d

242 (8th Cir. 1993). In Martin, the court held that Shearson Lehman Hutton’s status as

employer of the investment broker, who had unlawfully solicited the purchase of a

security by the plaintiff, was sufficient to establish it as a controlling person. Id. at 244.

In so doing, the court cited Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1573-78 (9th

Cir. 1990) (en banc), for the proposition “that a brokerage house is, as a matter of law, a

controlling person for purposes of the securities laws, but that the brokerage house is not

liable if it can prove good faith and a lack of inducement.” Martin, 986 F.2d at 244. In

response, Ameriprise argues that it was entitled to judgment as a matter of law on the

Mosleys’ and the Fellows’ control-person liability claims. 6 Citing Hauser v. Farrell, 14

F.3d 1338 (9th Cir. 1994), Ameriprise contends that the Wex Wheels assignments were

outside of its knowledge and control and that no reasonable juror could have reached a

different conclusion. For the reasons which follow, we reject the per se rule suggested by

6
On the fifth day of trial, Ameriprise moved under M. R. Civ. P. 50(a) for
judgment as a matter of law on the ground that it could not be held liable as a “control
person” of Davis with respect to the Wex Wheels assignments. The District Court denied
the motion on the ground that there were factual questions related to this issue which
needed to be resolved by the jury.

13
the Mosleys and conclude that on the record here, Ameriprise was not liable as a “control

person” of Davis regarding sales of Wex Wheels assignments.

¶25 In Hauser,7 the Ninth Circuit analyzed control-person liability for purposes of the

Securities Exchange Act of 1934. Under 15 U.S.C. § 78t(a),

[e]very person who, directly or indirectly, controls any person liable under
any provision of this chapter or of any rule or regulation thereunder shall
also be liable jointly and severally with and to the same extent as such
controlled person to any person to whom such controlled person is liable,
unless the controlling person acted in good faith and did not directly or
indirectly induce the act or acts constituting the violation or cause of action.

The Court of Appeals noted that under its holding in Hollinger, supra, a broker-dealer is,

as a matter of law, “a controlling person under that provision with respect to its registered

representatives,” since “the securities laws impose on broker-dealers a duty to supervise

their registered representatives, and the representatives need the dealers to gain access to

the securities markets.” Hauser, 14 F.3d at 1341 (citing Hollinger, 914 F.2d at 1573).

However, the court also noted that “a broker-dealer is not necessarily liable ‘for all

actions taken by its registered representatives,’ and is not an insurer of its

representatives.” Id. (quoting Hollinger, 914 F.2d at 1575). In this connection, the court

observed that some actions by a stockbroker may be outside the firm’s control:

“The broker-dealer may also, of course, rely on a contention that the
representative was acting outside of the broker-dealer’s statutory ‘control.’
For example, [the broker-dealer] could argue that when appellants entrusted
their money to [the representative] they were not reasonably relying upon
him as a registered representative of [the broker-dealer], but were placing
the money with [the representative] for purposes other than investment in

7
Hauser has since been impliedly overruled, on grounds not relevant to the
present discussion, by Central Bank of Denver v. First Interstate Bank of Denver, 511
U.S. 164, 114 S. Ct. 1439 (1994). See S.E.C. v. Fehn, 97 F.3d 1276 (9th Cir. 1996).

14
 markets to which [the representative] had access only by reason of his
relationship with [the] broker-dealer.”

Id. (brackets in Hauser) (quoting Hollinger, 914 F.2d at 1575-76 n. 26). Ultimately, the

court affirmed the district court’s grant of summary judgment against the plaintiffs

(Hauser and Acosta) on their control-person claim:

Considering all the circumstances of the transactions, Mr. Hauser and Mr.
Acosta were not reasonably relying upon the stockbrokers as registered
representatives of [the securities brokerage firm] Rauscher, Pierce. They
were placing the money with the stockbrokers for purposes other than
investment in markets to which stockbrokers had access only by reason of
their relationship with Rauscher, Pierce. As the district court pointed out,
the brokers did not need Rauscher, Pierce to promote [New Technologies in
Energy (NTE)], it was not the kind of investment for which a customer
typically relies on a broker with access through his firm to a stock
exchange, and Hauser bought into NTE before the brokers even went to
work for Rauscher, Pierce. Acosta knew that the brokers were planning to
quit working for Rauscher, Pierce so that they could devote more of their
efforts to NTE [which was not a Rauscher, Pierce promotion and which the
two stockbrokers owned themselves]. Rauscher, Pierce had no knowledge
of or financial interest in the NTE venture. In addition to the evidence
expressly alluded to by the district judge, we note that Mr. Hauser’s and
Mr. Acosta’s statements from Rauscher, Pierce did not list the NTE
investments. Mr. Hauser and Mr. Acosta did not, in the deposition excerpts
provided to the district court, contradict the brokers’ representations that
they told the customers that the NTE investment would not be through
Rauscher, Pierce and had nothing to do with Rauscher, Pierce.

Id. at 1342-43.

¶26 Although the language of 15 U.S.C. § 78t(a) is not identical to § 30-10-307(2),

MCA, the two provisions involve a similar approach: liability is imposed for directly or

indirectly controlling the primary violator, but the controlling person avoids liability

under § 30-10-307(2), MCA, if he did not know, or in the exercise of reasonable care

could not have known, of the facts upon which the violator’s liability is premised, and the

15
controlling person avoids liability under § 78t(a) if he acted in good faith and did not

directly or indirectly induce the act or acts constituting the violation or cause of action.

With respect to the first element (whether the person directly or indirectly controlled the

primary violator), we conclude that the approach of the court in Hauser is appropriate for

analysis under § 30-10-307(2), MCA. In other words, as a general rule a broker-dealer

controls its registered representatives, whether directly or indirectly. But at the same

time, certain actions by a stockbroker may be outside the firm’s control. Hauser

presented one such scenario, and we agree with Ameriprise that this case presents another

such scenario.

¶27 Here, Ameriprise argues, and the record confirms, that Davis did not act in his role

as a representative of Ameriprise when he sold the Wex Wheels assignments to the

Mosleys and the Fellows. Wex Wheels had no relationship with Ameriprise and was not

an Ameriprise product—facts of which the Mosleys and the Fellows were aware. The

sale of Wex Wheels assignments did not require access to a stock exchange or other

market through Ameriprise, and the assignments were not the kind of investment for

which a customer typically relies on a broker with access through his firm to a stock

exchange. The Mosleys and the Fellows never received an Ameriprise statement

indicating that Wex Wheels was condoned by Ameriprise, and they did not place their

money with Davis for investment in markets to which Davis had access only by reason of

his relationship with Ameriprise. In fact, the Mosleys were not Ameriprise investment

clients and never made a single investment with Ameriprise. Furthermore, Davis told the

Mosleys and the Fellows that Wex Wheels was not an Ameriprise product, and Fred

16
Fellows told Davis that this was what he found “attractive” about Wex Wheels. In short,

neither the Mosleys nor the Fellows relied on Davis’s relationship with Ameriprise to

gain access to the Wex Wheels assignments, Davis did not rely on Ameriprise to promote

these investments, and neither the Mosleys nor the Fellows based their decision to invest

in Wex Wheels on the fact that Davis was affiliated with Ameriprise. Rather, the record

establishes that the assignments were separate arrangements between Davis and the

Mosleys and between Davis and the Fellows. Lastly, Ameriprise had no knowledge of,

or financial interest in, Wex Wheels.

¶28 A broker-dealer “is not an insurer of its representatives.” Hauser, 14 F.3d at 1341.

On the facts and evidence presented here, we conclude that Ameriprise was not a “control

person” of Davis with respect to the Mosleys’ and the Fellows’ purchases of Wex Wheels

assignments. It appears that Davis was engaged in these sales as an entirely distinct and

separate venture from his employment with Ameriprise. Given this conclusion, we hold

that irrespective of whether the jury was adequately instructed on the meaning of “control

person,” the Mosleys’ and the Fellows’ control-person liability claims against Ameriprise

fail as a matter of law. This holding, in turn, renders moot the remaining issues raised by

the Mosleys and the Fellows and by Ameriprise.

CONCLUSION

¶29 The District Court did not err in dismissing the Mosleys’ and the Fellows’

30-10-202 claim against Davis based on his statute-of-limitations defense. Ameriprise

was not liable as a “control person” of Davis with respect to the Mosleys’ and the

Fellows’ purchases of unregistered securities.

17
¶30 Affirmed.

/S/ JAMES C. NELSON

We Concur:

/S/ MIKE McGRATH
/S/ W. WILLIAM LEAPHART
/S/ BRIAN MORRIS
/S/ JIM RICE

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