Nichols v. CITIGROUP GLOBAL MARKETS, INC.

364 F. Supp. 2d 1330, 2004 U.S. Dist. LEXIS 28034, 2004 WL 3264621
CourtDistrict Court, N.D. Alabama
DecidedNovember 10, 2004
DocketCIV.A. 04-PWG2424S
StatusPublished
Cited by2 cases

This text of 364 F. Supp. 2d 1330 (Nichols v. CITIGROUP GLOBAL MARKETS, INC.) is published on Counsel Stack Legal Research, covering District Court, N.D. Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nichols v. CITIGROUP GLOBAL MARKETS, INC., 364 F. Supp. 2d 1330, 2004 U.S. Dist. LEXIS 28034, 2004 WL 3264621 (N.D. Ala. 2004).

Opinion

ORDER PURSUANT TO PARAGRAPH 5, GENERAL ORDER OF REFERENCE

GREENE, United States Chief Magistrate Judge.

This matter is before the undersigned magistrate judge pursuant to the provisions of 28 U.S.C. § 636(b), Rule 72(b) of the Federal Rules of Civil Procedure, and the General Orders of Reference dated July 25, 1996, May 8, 1998, as amended July 27, 2000 for consideration of plaintiffs motion to remand this action to the Circuit Court of Jefferson County, Alabama. (Doc. # 2). 1

THE UNDERLYING ACTION

On June 24, 2004 William and Melba Nichols initiated this civil action with a complaint filed in the Circuit Court of Jefferson County, Alabama [CV 04-03870]. The complaint identified CitiGroup Global Markets, Inc. and Travelers. [Life & Annuity Company], both foreign corporations, as defendants. The complaint also averred that Fred Judd and Mike Scruggs were agents and employees of the defendant CitiGroup and its predecessor, Salo-mon Smith Barney, Inc. Both Judd and Scruggs are alleged to be citizens of the State of Alabama. (Doc. # 1, Exhibit 1, at p. 2). 2

The complaint avers that Scruggs and Judd “solicited to sell the funds, securities and contracts to fund William Nichols IRA account.” The complaint alleges, inter alia, that Judd sold Mr. Nichols a “variable annuity policy to fund [his] IRA account.” The complaint also avers that Scruggs, as the current broker of record for plaintiffs account, has maintained contact with plaintiffs on behalf of CitiGroup. The IRA roll over account was funded through a 1035 exchange of Mr. Nichols’ retirement savings. The complaint alleges that based upon the representation and assurances and omissions of the defendants, Mr. Nichols purchased a variable annuity. The annuity was apparently a product offered by Travelers Life & Annuity. Mr. Nichols alleges that the variable annuity product purchased from Traveler’s upon the representations of CitiGroup was not consistent with meet the goals of his IRA. Mr. Nichols complains that the annuity “contained worthless mortality fees and tax deferral fees” and prohibited “endlessly and continuously accumulat[ing] money *1332 in her retirement account.” 3 The Nichols contend that Judd was improperly trained by the defendant and, because of his improper training, sold annuity plans to individuals without a need for them. The complaint also averred that “the commissions and fees paid to agents in connection with deferred annuities are generally much higher than other investments,.... ”

The complaint alleged that CitiGroup had a duty to “sale [sic] suitable investments to the plaintiffs” (Complaint at p. 6, ¶ 17) but that CitiGroup, Judd and Scruggs recommended and/or sold shares “... of mutual funds invested heavily in technology stocks, emerging stock market stocks and international stocks for the plaintiffs for the IRA retirement account and their non-qualified accounts.” (Id. at ¶ 18). The complaint alleges that CitiGroup, Judd and Scruggs knew or should have known that such mutual funds were not suitable for plaintiffs’ retirement investment objectives and capital preservation. (Id. at ¶ 19). Finally, as an apparent subset of the numerous representations made by Judd, Scruggs and CitiGroup, the Nichols contend that “..., defendant CitiGroup issued fraudulent and misleading financial reports and recommendations for the holding of WorldCom, Inc. common stock” (Id. at ¶ 21) and that “defendant CitiGroup asserted undue influence on its investment banking interest or research analyst in the CitiGroup brokerage department.” (Id. at ¶22). Finally, that “defendants recommended and sold shares of World-Com to the plaintiffs for the IRA accounts and their non-qualified accounts.” (Id. at ¶ 24).

The complaint (1) does not name World-Com, Inc. as a defendant in this action and (2) asserts legal claims which sound exclusively in state law. Count one of the complaint alleges a fraudulent misrepresentation and suppression, count two alleges a violation of Alabama Code § 8-6-19(a) and § 8-6-19(c) of the Alabama Securities Act, count three asserts an unjust enrichment claim, count four asserts a claim for “money had and received,” count five asserts a conversion claim, count six contends that the defendant “negligently and/or wantonly trained its employees, count seven asserts a claim of negligent and/or wanton supervision, and count eight alleges a breach of a fiduciary duty.”

The Notice of Removal

On August 6, 2004 CitiGroup Global Markets, Inc. and the individual defendants together with Traveler’s Life & Annuity Company removed this action to the United States District Court for the Northern District of Alabama. (Doc. # 1). The removing defendants “... based removal on 28 U.S.C. § 1452(a), ...” (Doc. #1 at p. 2). The defendants aver that “this court has jurisdiction over this action under 28 U.S.C. § 1334(b) because, ... [the Nichols’] claims are related to a case under Chapter 11 under Title 11 of the .United States Code. That case was filed on July 21, 2002 by WorldCom, Inc.... and is pending in the United States District Court for the Southern District of New York.” (Id. at pp. 2-unnumbered p. 3). An exhibit to the Notice of Removal is a paper identified as “attachment to proof of claim of CitiGroup, Inc.” which appears to be a proof of claim filed by CitiGroup in some bankruptcy action which averred that

“WorldCom [WorldCom] [is] indebted and/ liable to [CitiGroup] for amounts *1333 yet to be liquidated, paid or incurred and based upon contingent claims arising from certain pending and threatened litigation and other proceedings, ..., against [CitiGroup] that are related to [WorldCom’s] financial condition and commercial relations with [CitiGroup].”
3. [CitiGroup’s] claims are for common law right of indemnity, contribution, set-off and liability against the defendants arising, among other things, [WorldCom’s] fraudulent and negligent misrepresentation to [Citi-Group] about matters — including, ..., the [WorldCom’s] financial condition and account practice....

(Doc. # 1, unnumbered exhibit 2).

The Notice of Removal asserts that the Nichols’ Jefferson County Circuit Court action is “related to” the bankruptcy action of non-defendant WorldCom because the Alabama law suit “affects the bankruptcy estate [of WorldCom].” (Notice of Removal, unnumbered p. 6 at ¶ 15) citing In Re Gypsum, Inc., 910 F.2d 784, 789 (11th Cir.1990).

APPLICABLE LAW

Federal Jurisdiction — General Principles

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Cite This Page — Counsel Stack

Bluebook (online)
364 F. Supp. 2d 1330, 2004 U.S. Dist. LEXIS 28034, 2004 WL 3264621, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nichols-v-citigroup-global-markets-inc-alnd-2004.