Nesbit v. Mcneil

896 F.2d 380 (9th Cir. 1990)

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Nature of the Case

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Facts

P was a retired school teacher and the widow of W. Wallace Nesbit, a businessman. Upon his death, Mr. Nesbit left a portfolio of securities that were rather conservative although not necessarily highly successful. Those assets were divided between P and the W. Wallace Nesbit Trust (Trust). P was the trustee of the Trust. From then until 1974, the investments remained conservative and did not do very well. By 1974, there had been a significant loss of value. P then opened accounts for herself and the Trust at Black & Company, Inc. (D). They were opened through Steve McNeil (D), who was the son of a friend of P. The equity in P's account was then $ 167,463, and the equity in the Trust's account was $44,177. P, who was not knowledgeable in these matters, told the defendants that her investment objectives for herself and the Trust were stability, income, and growth. Ds claim that P told them she wanted to recoup the losses that had been suffered previously. By the time the accounts were closed out in October of 1985, the equity in P's account was $301,711, and the equity in the Trust's account was $92,844. P's account values did grow by $182,915 but Ds' commissions came to $250,000. Further, the investments chosen by Ds were not the kind of investments that one would purchase if one sought a stable, income-producing portfolio. They were often speculative in nature and were not income-producing. Ps brought a churning action against Ds. The district court ruled in favor of P. Ds appealed