Eighth Circuit Affirms Dismissal of Securities Fraud Claim Against Merrill Lynch
The Eighth Circuit affirmed dismissal of claims based on the Arkansas Securities Act and fraud in Benton v. Merrill Lynch & Co., Inc., No. 07-2224 (5/5/08).
In 2001 and 2002, David Howell fraudulently obtained money from various investors. He then set up an institutional account at Merrill Lynch. By summer 2002 he had lost all the money in the account, and he committed suicide shortly thereafter. Plaintiffs filed suit against Merrill Lynch under a theory that it aided and abetted Howell's fraud. The district court dismissed for failure to state a claim.
The Eighth Circuit affirmed because the fraud occurred only when Howell took money from investors. Merrill Lynch never took part in taking the money and had no communications with the investors. Merrill Lynch simply cannot be liable for events that occurred before its relationship with Howell.
