Haynes v. Anderson & Strudwick, Inc.

Stuart Haynes, Jr. and Stuart Haynes, Sr. (the Haynes family) (plaintiffs) traded stock through a broker-dealer, Anderson & Strudwick, Incorporated (defendant). Thomas Blanton, Jr. (defendant) worked for Anderson & Strudwick as an employee and dealt with the Haynes family’s account. In September 1978, the Haynes family placed an order for Shoney’s, Incorporated stock. When they received their trading statements, the Haynes family saw that Blanton had purchased C.H.B. Foods, Incorporated stock without permission. Blanton persuaded the Haynes family to keep the C.H.B. Foods stock because Blanton claimed he had inside information regarding a certain price increase due to an imminent takeover of C.H.B. Foods by General Foods Corporation. Blanton convinced the Haynes family to purchase additional shares of C.H.B. Foods stock. In January 1979, the Haynes family instructed Blanton to sell their shares of C.H.B. Foods stock because the sale had not yet occurred. Blanton reassured the Haynes family and disclosed that he owned thousands of shares of C.H.B. Foods stock. The Haynes family claimed that Blanton refused to sell their shares at that time. In February 1979, the Securities and Exchange Commission suspended trading in C.H.B. Foods stock, causing the stock price to drop significantly. The Haynes family sued Anderson & Strudwick and Blanton under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (1934 act) in federal district court. Anderson & Strudwick moved for dismissal, arguing that only Blanton had violated the 1934 act and that the Haynes family had failed to allege any culpable behavior on its part as the brokerage firm.