United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON DEFENDANT WELLS FARGO
ADVISORS' MOTION TO DISMISS (DOCUMENT NO. 614)
TIMOTHY S. HILLMAN DISTRICT JUDGE.
Fargo Advisors, LLC (“WFA”), a defendant in the
TelexFree multi-district securities litigation, moves to
dismiss all counts against them in the Fourth Consolidated
Amended Complaint (“FCAC”) pursuant to
Fed.R.Civ.P. 12(b)(6). TelexFree, Inc.
(“TelexFree”) was a pyramid scheme that operated
from February 2012 to April 2014 and involved approximately
two million participants worldwide, nearly a million of whom
suffered a net financial loss. The Plaintiffs filed actions
in federal district courts across the United States seeking
to recover their losses against dozens of defendants, ranging
from financial service providers, including banks, payment
processing companies, investment services providers such as
WFA, and the principals of the fraudulent scheme. As the
actions involved common questions of fact, the Judicial Panel
on Multi-district Litigation joined the actions into a
multidistrict litigation and ordered transfer of all actions
to the District of Massachusetts for coordinated or
consolidated pretrial proceedings.
Plaintiffs allege that Mauricio Cardenas, (also a Defendant)
was a financial advisor and an employee of WFA who was
responsible for hiding and/or laundering illicit funds for
TelexFree principal Carlos Wanzeler. Cardenas was primarily
responsible for handling Wanzeler's WFA investment
accounts, knowing full well that he was running an illegal
discharged Cardenas in April 2014 as a direct result of his
involvement with TelexFree and Wanzeler, and it is alleged
that WFA, through their Regulatory Account Monitoring
Department, knew that Cardenas was laundering money for
Wanzeler. It is alleged that WFA oversaw Cardenas investment
activities and maintained a detailed account of profits made
on behalf of his client. (FCAC ¶ 1136). When WFA
terminated Cardenas in 2014 it filed the following disclosure
with the “Financial Industry Regulatory
“The firm determined that it would not do business with
certain business entities due to potential AML risks.
Thereafter, FA (Financial Advisor Cardenas) opened two
brokerage accounts for individuals directly related to the
entities. The FA stated that he did not know the relationship
existed. Management determined that representative
demonstrated a lack of judgment in recognizing and managing
the potential AML risks.”
Plaintiffs further allege that WFA was aware of the TelexFree
pyramid scheme and determined not to do business with
TelexFree due to the AML risks. However, Cardenas continued
to establish brokerage accounts with WFA for the purposes of
secreting funds from TelexFrees' illegal operation.
withstand a Rule 12(b)(6) motion to dismiss, a complaint must
allege a claim that plausibly entitles the plaintiff to
relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Plausibility
does not require probability but “it asks for more than
a sheer possibility the defendant has acted
unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662,
678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing
Twombly, 550 U.S. at 556). “If the factual
allegations in the complaint are too meager, vague, or
conclusory to remove the possibility of relief from the realm
of mere conjecture, the complaint is open to
dismissal.” Rodriguez-Reyes v.
Molina-Rodriguez, 711 F.3d 49, 53 (1st Cir. 2013)
(quoting SEC v. Tambone, 597 F.3d 436, 442 (1st Cir.
2010) (en banc)). “[A] conclusory allegation …
does not supply facts adequate to show illegality [whereas]
[a]n allegation … much like a naked assertion …
gets the complaint close to stating a claim, but without some
further factual enhancement it stops short of the line
between possibility and plausibility of entitlement to
relief.” Twombly, 550 U.S. at 557.
9(b) imposes a heightened pleading standard for claims based
on fraud. When an aiding and abetting claim sounds in fraud,
it must be plead with particularity as set forth in Rule
9(b). In re State Street Cases, 2013 WL
5508151 at *16 (D. Mass. Aug. 21, 2013).
Claim for Relief: Aiding and Abetting General Laws Chapter
93§12 and 69 and Chapter 93A §2 and 11.
respect to the issue of whether a Cause of Action exists for
aiding and abetting M.G.L. C.93 § 12 and 69, and M.G.L.
C. 93A § 2 and 11, there are a limited number of cases
in this district where courts have discussed whether aiding
and abetting a violation of these statutes states a claim for
relief. See Green v. Parts Distribution Xpress,
Inc., 2011 WL 5928580 at *4 (D. Mass. Nov. 29, 2011)
(“[A] non-party to an employment relationship can be
held liable under chapter 93 A for aiding and abetting the
wrongdoing of a party to an employment relationship . .
.”); Professional Services Grp., Inc. v. Town of
Rockland, 515 F.Supp. 2Nd 179, 192 (2007)
(“Aiding and abetting a breach of fiduciary duty may
provide the basis for a Chapter 93A violation”). But
see Reynolds v. City Exp., Inc., 2014 WL 1758301
(Mass. App. Div. Jan. 8, 2014) (declining to extend the
holding in Green). The court in Green did
not devote much attention to the theory of an aiding and
abetting claim under C. 93A but spoke at length of a
statutory aiding and abetting claim under M.G.L. C. 149.
Similarly, the Reynolds court was not deciding
whether a party could aid and abet a C. 93A claim, but
whether a party could aid and abet statutory violations of
M.G.L. C 149 and 151B pertaining to labor and discrimination
respectively. That court held one could not aid and abet C.
149 and 151B violations because the legislature “could
have specifically provided for aiding and abetting liability
in G.L.C. 149 § 148B and chose not to.” Reynolds
Supra at *8.
93A, which is based upon the Federal Trade Commission Act (15
U.S.C. 45(a)(1)), also does not recognize a separate aiding
and abetting cause of action. “A defendant acting with
knowledge of deception who either directly participates in
that deception or has the authority to control the deceptive
practice of another, but allows the deception to proceed,
engages, through its own actions, in a deceptive act
or practice that causes harm to consumers.” FTC v.
LeadClick Media, LLC, 838 F.3d. 158, 170 (2d. Cir. ...