Professional Documents
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VERSUS JUDGE
COMPLAINT
sometimes referred to as Trustee or Jerry Montgomery), who file this Complaint and
allege the following against RAYMOND JAMES & ASSOCIATES, INC. (Raymond
I.
PLAINTIFFS
1.
Mrs. Montgomery brings this action through her agent-in-fact and son, Jerry K.
Montgomery.
2.
Specifically, Jerry Montgomery is the authorized agent of Mrs. Montgomery pursuant to
a Power of Attorney executed by Mrs. Montgomery on or about September 21, 2005, a copy of
which is attached as Exhibit 1 to this Complaint and incorporated herein by reference. That
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Power of Attorney specifically authorizes Jerry Montgomery to file suit on behalf of his mother,
3.
4.
Mrs. Montgomery, a widow, is eighty-eight (88) years old and suffers from Alzheimers
disease.
5.
Jerry Montgomery is the Trustee of the Frazier J. Montgomery and Anne B.
Montgomery Irrevocable Trust (the Trust) and, in that capacity brings this action on behalf
of the Trust.
6.
The Trust was established by a trust instrument dated September 29, 1997 (the Trust
Montgomerys late husband, was the settlor of the Trust. Mrs. Montgomery was and has always
been the income beneficiary of the Trust. Mrs. Montgomery was also a former trustee of the
Trust. A copy of the Trust Agreement is attached to this Complaint as Exhibit 2 and
7.
Section 10.2 of the Trust Agreement grants certain powers to a committee that initially
8.
Following the death of Frazier J. Montgomery on February 25, 2000, and pursuant to an
Act of Appointment of Successor Trust Committee Members dated September 28, 2006, which
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is incorporated herein by reference, Mrs. Montgomery and Jerry Montgomery appointed J. Peter
9.
J. Peter Gaffney died on April 24, 2014, leaving Mrs. Montgomery, Jerry Montgomery
10.
Subsequently, Mrs. Montgomerys health declined and, as a result, she ceased to serve as
11.
Section 10.1 of the Trust Agreement provides that if the Trustee shall resign or cease to
act as Trustee for any reason, the successor Trustee shall be appointed by the Trust Committee.
Furthermore, Section 10.3 of the Trust Agreement provides that one or more individuals may be
appointed as successor Trustee(s) by a majority vote of the members of the Trust Committee.
12.
On or about February 11, 2016, Minnett Thornton resigned as a member of the Trust
Committee.
13.
On or about February 12, 2016, Jerry Montgomery (as agent for Mrs. Montgomery and in
Trustee by Written Consent of the Trust Committee of the Frazier J. Montgomery and Anne B.
Montgomery Irrevocable Trust, a copy of which is attached to this Complaint as Exhibit 3 and
incorporated into this Complaint by reference. The 2016 Appointment of Successor Trustee by
Written Consent of the Trust Committee of the Frazier J. Montgomery and Anne B. Montgomery
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14.
Both Jerry Montgomery and Mrs. Montgomery are majors and domiciliaries of
II.
DEFENDANTS
15.
Defendants are:
a. Raymond James, a Florida corporation with its principal place of business in St.
Petersburg, Florida. Raymond James may be served with process through its
Louisiana. Lyons was employed by Raymond James at the particular and relevant
III.
JURISDICTION & VENUE
16.
This Court has subject-matter jurisdiction over this action pursuant to 28 U.S.C. 1331
because Plaintiffs have claims against Defendants that arise under federal law. Furthermore, this
Court has supplemental jurisdiction pursuant to 28 U.S.C. 1367(a) over Plaintiffs state law
17.
Venue is proper in the Western District of Louisiana under 28 U.S.C. 1391(b)(2)
because a substantial portion of the events and omissions giving rise to Plaintiffs claims
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IV.
FACTS
18.
In or about 2002, Mrs. Montgomery contacted John Blocker Thornton, III (Blocker
19.
At that time, Blocker Thornton and Lyons were employed as investment advisors with
Morgan Keegan & Company, Inc. (Morgan Keegan). Further, Blocker Thornton and Lyons
20.
Based on her age (72) at the time, Mrs. Montgomerys primary investment objectives
were to preserve principal and earn interest by having her funds and the Trusts funds invested in
safe and secure investments. Mrs. Montgomery wanted to continue to maintain her current
standard of living and to provide some support for members of her family. Mrs. Montgomery
made it clear to Blocker Thornton and Minnett Thornton that she had an aversion to risk and
21.
Morgan Keegan, Blocker Thornton, and Minnett Thornton on numerous occasions, as evidenced,
in part, by the manner in which Blocker Thornton invested the assets in Plaintiffs accounts with
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22.
Mrs. Montgomery also made it clear that she did not have significant experience in
investing in securities.
23.
Therefore, Mrs. Montgomery trusted Morgan Keegan, Blocker Thornton and Minette
Thornton to manage her assets and the Trusts assets with the utmost skill and care and to make
24.
thousand dollars ($60,000.00) of her personal funds and over one million dollars ($1,000,000.00)
of Trust funds into two separate accounts with Morgan Keegan, namely a personal account in her
name (the Personal Account) and an account in the name of the Trust (the Trust Account),
both of which are sometimes collectively referred to as the Accounts. Mrs. Montgomery
25.
Mrs. Montgomery explained to Morgan Keegan, Blocker Thornton and Minnett Thornton
that the funds being invested encompassed a substantial portion of her life savings.
26.
Subsequently, and until the death of Blocker Thornton on February 17, 2011, Morgan
Keegan, through Blocker Thornton, consistent with Mrs. Montgomerys investment objectives
and prudent investment practices, invested funds in the Accounts primarily in government bonds
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27.
Following the death of Blocker Thornton, when Mrs. Montgomery was then over 80
years old, Lyons took control of the Accounts. Unfortunately, and to Mrs. Montgomerys severe
detriment, Lyons, in blatant disregard of Mrs. Montgomerys investment objectives and prudent
Specifically, Lyons placed a majority of the funds in the Accounts in energy and energy-related
28.
Upon information and belief, Lyons did not consult Mrs. Montgomery prior to
purchasing those equities and, thus, did not obtain her consent to execute those trades. At all
pertinent times, Lyons exercised complete control over the Accounts as if they were
discretionary accounts, which they were not, and utterly disregarded his duties to Mrs.
Montgomery, who, by the time Lyons took over the Accounts, was an elderly widow.
29.
Until 2012, Morgan Keegan, as the employer of Lyons, was a controlling party under 15
30.
In addition to other unpredictable factors, the oil and gas industry is dependent upon
world markets, which are inherently unstable and volatile. As such, Lyons investments of the
funds in the Accounts in speculative energy and energy-related equities were directly contrary to
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31.
trading in the Accounts by increasing the positions of energy and energy-related equities in the
Accounts.
32.
In or about 2012, Raymond James and Morgan Keegan entered into a transaction that
resulted in Raymond James becoming the successor to Morgan Keegan. By end of year 2012, the
Accounts were transferred to Raymond James in connection with that transaction. At all
pertinent times, Raymond James was a controlling party under 15 U.S.C. 78(t)(a) and any other
applicable law.
33.
However, neither Mrs. Montgomery, nor anyone on her behalf, has ever signed any type
of account agreement with Raymond James, with respect to either of the Accounts. That was
confirmed to Jerry Montgomery by (a) the manager of the Raymond James office in Shreveport,
Louisiana, where Lyons works, and (b) the records that the Plaintiffs have received from
Raymond James. Furthermore, there is no assignment provision in the Plaintiffs prior account
agreements with Morgan Keegan that provide that they may be assigned to any successor of
34.
Throughout the course of Mrs. Montgomerys relationship with Raymond James, Lyons
continued to engage in careless, reckless, excessive and unauthorized trading in the Accounts in
blatant disregard of Mrs. Montgomerys investment objectives and contrary to any elderly
widow, and Raymond James failed to monitor or supervise the actions of Lyons.
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35.
According to the Raymond James records of the Accounts in Plaintiffs possession, both
Mrs. Montgomery and the Trust consistently maintained that their investment objectives were
growth and income, both of which are described as carrying medium risk tolerances with a
time horizon less than 5 years. However, none of the records for the Accounts in Plaintiffs
possession include an account agreement for either of the Accounts with Raymond James.
36.
By December 31, 2012, when Mrs. Montgomery was 82 years old and 10 years after the
date that Mrs. Montgomery first entrusted her life savings to Morgan Keegan and approximately
2 years after Lyons assumed control over the Accounts, Lyons had invested approximately
38.99% of the funds in the Trust Account in equities. Not only was that percent of equities
completely at odds with Mrs. Montgomerys stated investment objectives, which never changed,
it was completely inappropriate for an elderly (80-year-old) widow with a substantial portion of
37.
Lyons careless, reckless, excessive and unauthorized trading continued and, in fact, got
progressively worse, and Raymond James continued to fail to monitor or supervise Lyons
egregious actions. Through December 31, 2013, Lyons had invested 49.66% of the funds in the
Trust Account in equities. By December 31, 2013, Lyons had invested 37.43% of the funds in
the Personal Account in equities. Incredibly, as Mrs. Montgomery aged, Lyons increased the
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38.
Lyons careless, reckless, excessive and unauthorized trading continued in the Accounts
through 2014. By December 31, 2014, Lyons had invested 56.22% of the funds in the Trust
Account in equities. By that same date, Lyons had invested 54.55% of the funds in the Personal
39.
trading in the Accounts continued through 2015, and Raymond James, inexplicably, continued to
fail to monitor or supervise Lyons actions. By December 31, 2015, Lyons had invested 73.91%
of the funds in the Trust Account in equities. By that same time, he had invested 55.05% of the
funds in the Personal Account in equities. At that time, Mrs. Montgomery was 88 years old.
40.
As of January 29, 2016, Lyons had invested 71.66% of the funds in the Trust Account
41.
Upon information and belief, Lyons executed careless, reckless, excessive and
unauthorized trades in both Accounts that significantly increased the risk of the Accounts
without advising or consulting with Mrs. Montgomery. It is clear that Lyons executed the trades
without regard to what was in the best interest of Mrs. Montgomery and in blatant disregard of
her investment objectives. At all pertinent times, Lyons traded in both Accounts as though they
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42.
Substantial portions of the equities in the Trust Account and the Personal Account were
in energy and energy-related stocks and other positions, which were at odds with Mrs.
Montgomerys investment objectives and any elderly widow. Regardless of Mrs. Montgomerys
investment objectives, even a marginally responsible broker would not have invested the funds in
43.
Lyons and Raymond James knew, or in the exercise of even the lowest standard of
reasonable care, should have known, that their placing significant portions of the funds in the
Accounts in equities were anathema to Mrs. Montgomerys investment objectives and to what
44.
Furthermore, and upon information and belief, Lyons and Raymond James executed
most, if not all, of the careless, reckless and excessive trades in the Accounts without Mrs.
Montgomerys consent or informing her of the risks associated with the trades. Lyons did not
have any authority whatsoever, either express or implied, to execute trades in the Accounts
45.
On or about December 3, 2014, Lyons and Raymond James were provided a copy of Mrs.
make investment decisions on her behalf. Notwithstanding that fact, Lyons and Raymond James
continued to execute careless, reckless and excessive trades in the Accounts without seeking the
consent of Jerry Montgomery or Mrs. Montgomery and without informing either one of them of
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the heightened risks associated with the trades. Again, notwithstanding that Lyons did not have
any authority whatsoever, express or implied, to execute trades in the Accounts without Jerry
46.
Despite Mrs. Montgomerys failing health, deteriorating mental condition and her
increasing age, neither Lyons nor Raymond James contacted Jerry Montgomery about the
careless, reckless and excessive trades in the Accounts. Lyons managed the Accounts as if he
had unfettered discretion to do whatever he wanted to do, without any regard to what was in Mrs.
Montgomerys best interest, her investment objectives or prudent investment practices, and
Raymond James utterly and completely failed to monitor or supervise the actions of Lyons.
47.
In fact, even after being provided a copy of Jerry Montgomerys Power of Attorney from
sales in the Personal Account in 2015, without Mrs. Montgomerys or Jerry Montgomerys
consent. In January 2016 alone, Lyons executed approximately $207,000.00 in purchases and
Montgomerys consent.
48.
However, on or about January 20, 2016, Lyons finally attempted to seek permission to
sell the Accounts oil and gas equities from Rebecca Hogan, an employee of Resource Louisiana.
However, Mrs. Hogan had no authority whatsoever to act for Mrs. Montgomery or the Trust.
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49.
Lyons and Raymond James also failed to take necessary steps to preserve Mrs. Montgomerys
principal investment and, in fact, the egregious actions (on the part of Lyons) and the gross
negligence (on the part of Raymond James) substantially reduced the value of the principal
50.
decline in one month), and a cumulative decline amount of $603,000.00 from 2013 through
January 2016.
51.
decline in one month, for a combined decline in both Accounts in the amount of $348,000.00 in
one month), and cumulative decline amount of $609,000.00 from 2013 through January, 2016.
52.
In other words, as a result of the egregious conduct of Lyons and the gross negligence of
53.
Upon information and belief, most of the decline in the Accounts was attributable to a
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54.
Rather than liquidating or, at the very least, minimizing the positions in those equities in
the Trust Account, Lyons consistently increased the investments in energy and energy-related
stocks and other equities in the Accounts through January, 2016. Lyons egregious actions only
compounded the decline in the value of the Accounts. Again, Raymond James failed to monitor
55.
On or about January 20, 2016, Rebecca Hogan informed Jerry Montgomery that Lyons
had contacted her about the Accounts. At that point, Jerry Montgomery contacted Lyons and
instructed him, in no uncertain terms, to cease all trading activity in the Accounts and, in
56.
Upon information and belief, and consistent with his prior course of conduct, Lyons
disregarded that instruction and continued his practice of executing unauthorized trades in both
57.
an elderly widow and contrary to Mrs. Montgomerys stated investment objectives, Lyons
engaged in excess trading in the Accounts as if they were discretionary and for the sole benefit of
Defendants.
58.
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sales in the Personal Account. In 2015, Lyons executed approximately $446,000.00 in purchases
and approximately $394,000.00 in sales in the Personal Account. In January 2016 alone, Lyons
Personal Account. At all pertinent times, Raymond James failed to monitor or supervise Lyons
59.
sales in the Trust Account. In 2014, Lyons executed over $1,100,000.00 in purchases and
Account. In January 2016 alone, Lyons executed approximately $116,000.00 in purchases and
$109,000.00 in sales in the Trust Account. At all pertinent times, Raymond James failed to
60.
Upon information and belief, Lyons engaged in excessive trading in order to generate
commissions and/or other financial incentives for himself and/or Raymond James, and Raymond
61.
Ultimately, in February 2016, Jerry Montgomery, acting as agent for his elderly mother
and as Trustee of the Trust, terminated Mrs. Montgomerys relationship with Lyons and
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62.
Thereafter, Jerry Montgomery liquidated many equities in the Personal Account and the
Trust Account. In doing so, Mrs. Montgomery and the Trust suffered substantial monetary
losses, all of which resulted from (a) Lyons careless, reckless and excessive trading in the
Accounts without consent, and (b) the abysmal failure of Raymond James to monitor or
supervise Lyons.
V.
COUNT I: BREACH OF DUTIES
63.
Plaintiffs hereby adopt all prior allegations in this Complaint and incorporate them in
64.
At all times material hereto, Defendants were brokers or broker-dealers, and/or associated
with brokers or broker-dealers, within the meaning of the securities laws of the United States and
the State of Louisiana and, therefore, Defendants owed duties to Mrs. Montgomery and the
a. the duty to recommend a stock only after studying it sufficiently to become informed as
b. the duty to carry out the customers orders promptly in a manner best suited the
customers interest;
c. the duty to inform the customer of the risks involved in purchasing or selling a particular
security;
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e. the duty to disclose any personal interest the broker may have in a particular
recommended security;
g. the duty to transact business only after receiving prior authorization from the customer;
and
65.
Mrs. Montgomery, individually and while she was trustee, and Jerry Montgomery, as
Trustee, trusted and relied upon Defendants in the management of her life savings.
66.
Mrs. Montgomery, an elderly widow, entrusted substantial sums of money to the
Defendants on the advice and recommendation of Defendants, and paid the Defendants
substantial fees to manage and monitor the funds in the Accounts with reasonable care,
67.
Defendants duties to Mrs. Montgomery, individually and as a trustee of the Trust,
required them to act at all times in good faith and with fair dealing toward Mrs. Montgomery,
68.
Defendants violated their duties to Mrs. Montgomery, individually and as trustee, and
Jerry Montgomery as Trustee, by placing their own financial interests ahead of those of Mrs.
Montgomery and the Trust. That is evidenced by Defendants failure to advise Mrs.
Montgomery and Jerry Montgomery of the true risk inherent in the trades executed in the
Accounts, the fact that those trades were unsuitable to Mrs. Montgomerys circumstances and
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goals, the fact that the trades were designed to benefit the Defendants at the expense of Mrs.
Montgomery and the Trust, and that Defendants actions or inactions were the only reasons why
her Accounts substantially declined in value from 2013 through January 2016.
69.
Furthermore, it was inappropriate for Minnett Thornton, an employee of Raymond James
and Lyons personal assistant, to serve as a member of the Trust Committee of the Trust. Under
no circumstances should Raymond James have allowed Minette Thornton to serve as a member
of the Trust Committee. Instead of placing the Trusts interests above her own, as she was
required to do, she encouraged Mrs. Montgomery to do business with her employer, Raymond
James, which failed to monitor or supervise Lyons actions. This created an irreconcilable
conflict of interest for Raymond James, and that irreconcilable conflict of interest contributed to
the substantial losses in the Trust Account while Raymond James profited through the careless,
70.
Consequently, Mrs. Montgomery, individually and as trustee, suffered losses which
include, but are not limited to, loss of past, present and future investment principal; loss of past,
present and future interest on investment principal; loss of opportunity for reasonable return on
investments, and other losses and damages for which Defendants are liable.
VI.
COUNT II: CHURNING
VIOLATION UNDER THE FEDERAL SECURITIES LAWS
71.
Plaintiffs hereby adopt all prior allegations in this Complaint and incorporate them in
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72.
Defendants actions or inactions resulted in excessive and unnecessary trading in the
Accounts.
73.
Lyons exercised control over the Accounts and engaged in careless, reckless,
unauthorized and excessive trading in the Accounts solely in order to generate commissions and
fees to Defendants and to the substantial detriment of Mrs. Montgomery and the Trust. At all
times, Lyons traded in the Accounts as if they were discretionary and in blatant disregard of his
74.
In engaging in excess trading in the Accounts over which he had control, Defendant
Lyons acted with the intent to defraud or with willful and reckless disregard of the interests of
75.
At all pertinent times, Lyons was employed by Raymond James, which failed to monitor
or supervise his actions, and accordingly, the actions of Defendants amount to churning under
76.
The result of the churning by Defendants, Lyons and Raymond James, was an
unwarranted increase of fee commissions and risk and substantial losses in the Accounts that
77.
As a result of the above, Mrs. Montgomery and the Trust suffered substantial losses
which include, but are not limited to, loss of past, present and future investment principal; loss of
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past, present and future interest on investment principal; loss of opportunity or reasonable return
on investments, and other losses and damages for which Defendants are liable, in solido.
VII.
COUNT III: FRAUDULENT OMISSIONS
78.
Plaintiffs hereby adopt all prior allegations in this Complaint and incorporate them in
their entirety into this Count, which Plaintiffs plead in the alternative to Count II.
79.
As described above, in connection with the purchase or sale of securities in the Accounts,
Lyons never consulted Mrs. Montgomery or Jerry Montgomery, and therefore failed to
communicate critical facts concerning the risks involved in the trades Lyons executed in the
Accounts. At all times, Raymond James failed to monitor or supervise the actions of Lyons.
80.
Mrs. Montgomery was at all times an elderly widow and an unsophisticated investor who
did not know of the omissions described above. Furthermore, Defendants failed to communicate
with Jerry Montgomery, in his capacity as agent or Trustee, about the Accounts or the gross
81.
Defendants knew, or in the exercise of reasonable diligence should have known, of the
omissions.
82.
Mrs. Montgomery, individually and as trustee, relied on Defendants fraudulent
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critical information described above in the form of fees and commissions earned through trading
83.
As a result of the above, Mrs. Montgomery and the Trust suffered losses which include,
but are not limited to, loss of past, present and future investment principal; loss of past, present
investments, and other losses and damages for which Defendants are liable, in solido.
VIII.
COUNT IV: FEDERAL SECURITIES LAW VIOLATIONS
84.
Plaintiffs hereby adopt all prior allegations in this Complaint and incorporate them in
85.
The Defendants knowingly, intentionally, and/or recklessly omitted material facts in their
handling of the Accounts. In engaging in such conduct, the Defendants acted with scienter, that
is, with an intent to deceive, manipulate or defraud or with a reckless disregard for the truth.
86.
By reason of the foregoing, the Defendants, directly and indirectly, have violated Section
10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17 C.F.R.
87.
As a result of the above, Mrs. Montgomery and the Trust suffered losses which include,
but are not limited to, loss of past, present and future investment principal; loss of past, present
investments, and other losses and damages for which Defendants are liable, in solido.
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IX.
COUNT V: LOUISIANA SECURITIES LAW VIOLATIONS
88.
Plaintiffs hereby adopt all prior allegations in this Complaint and incorporate them in
89.
Because the relationship here at issue was that of broker to client, the Defendants were
also subject to the requirements of Louisianas securities laws, La. Rev. Stat. 51:712 et seq.,
which require, among other things, full and truthful disclosure of all material facts related to a
sale or offer to sell a security and that the broker not engage in any schemes or artifice to defraud
90.
As described above, the Defendants, in connection with the offer to purchase or sell
securities, failed to state material facts necessary in order to make their statements not
misleading and intentionally engaged in a scheme to defraud and/or deceive Mrs. Montgomery.
91.
Defendants actions violated Louisianas securities laws, La. Rev. Stat. 51:712 et seq. and
92.
Mrs. Montgomery did not know of the untruths and omissions or the scheme to defraud
93.
Defendants knew or in the exercise of reasonable diligence could have known of the
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94.
Mrs. Montgomery and the Trustee relied on Defendants fraudulent misrepresentations or
95.
As a result of the above, Mrs. Montgomery and the Trust suffered losses which include,
but are not limited to, loss of past, present and future investment principal; loss of past, present
investments, and other losses and damages for which Defendants are liable, in solido.
X.
COUNT VI: LIABILITY OF RAYMOND JAMES
96.
Plaintiffs hereby adopt all prior allegations in this Complaint and incorporate them into
this Count.
97.
Defendant Raymond James and/or its predecessor Morgan Keegan, were at pertinent
times herein employer(s) and principals of Defendant Lyons and a controlling party under 15
98.
The above described wrongful acts and omissions, which caused damages to Mrs.
Montgomery and the Trust, were perpetrated by Lyons while in the course and scope of his
99.
As such, Raymond James is responsible for the wrongful acts and omissions of Lyons,
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100.
Furthermore, Raymond James had a duty to Mrs. Montgomery, individually and as
trustee, and to Jerry Montgomery, to monitor and supervise the actions of Lyons, and it breached
that duty.
101.
Upon information and belief, Raymond James, a controlling party, failed to properly
supervise, investigate, monitor, and regulate the actions of Lyons, its employee.
102.
Raymond James, a controlling party, failed to create, implement, and enforce procedures
to properly supervise, investigate, monitor, and regulate the actions of Lyons, its employee.
103.
Consequently, Mrs. Montgomery and the Trust suffered losses which include, but are not
limited to, loss of past, present and future investment principal; loss of past, present and future
interest on investment principal; loss of opportunity for reasonable return on investments, and
XI.
DEMAND FOR JURY TRIAL
104.
Plaintiffs request a trial by jury on all of their claims.
Montgomery, and Jerry K. Montgomery, also in his capacity as Trustee of the Frazier J.
Montgomery and Anne B. Montgomery Irrevocable Trust, pray that after all due proceedings
have been had, there be judgment rendered herein in their favor and against Defendants
Raymond James & Associates, Inc. and James Edward Lyons for all damages reasonable in these
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premises resulting from the violations alleged above, plus all costs of these proceedings, interest,
attorney fees and expenses, and all other amounts and damages that Plaintiffs are entitled to
recover. Plaintiffs further pray for all other relief to which they are entitled, whether or not
Respectfully submitted,
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