Wang v. Bear Stearns Companies, LLC

Joey Zhou and Garrett Bland (defendants) worked for Bear Stearns Companies, LLC (BS) (defendant). Zhou provided investment advice to Vivine Wang (plaintiff) and her husband, Roger (the Wangs). Vivine opened a BS account in early 2008. The customer agreement provided that BS was acting as a broker-dealer and did not have the fiduciary duties an investment adviser had to its clients. On March 6, Roger placed an order for BS common stock. The following week, there were rumors about BS having liquidity problems. Roger ordered additional BS shares on March 10 and 11. Bland allegedly told Roger on March 11 that BS was a sound investment, its stock value should be at least $85 per share, and it was a great time to invest in BS. On March 14, BS announced it had received a $30 billion loan facility, and BS’s stock price fell $27. Later that day, Roger placed a 200,000-share order, half of which was filled at $34 per share. Two days later, BS announced that JPMorgan would purchase BS for the equivalent of $2 per share. The Wangs refused to pay for their stock. Vivine sued BS, Zhou, and Bland for securities fraud and breach of fiduciary duty, alleging that Zhou should have advised the Wangs not to buy additional BS stock on March 14 and was incentivized to commit fraud in order to earn commissions, and that Bland’s statements to Roger on March 11 were actionable fraud. Zhou and Bland moved to dismiss the claims.