JOHNNY’S ENTERPRISES, INCORPORATED, d/b/a Johnny’s Truck v. Prudential Securities Incorporated

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1003
JOHNNY’S ENTERPRISES, INCORPORATED, d/b/a
Johnny’s Truck and Auto Center,
Plaintiff - Appellant,
versus
PRUDENTIAL SECURITIES INCORPORATED,
Defendant - Appellee,
and
SM&E ADMINISTRATORS, INCORPORATED; THE
DELTAGROUP; AMERICAN PRIME ASSETS; YAMAGATA
ENTERPRISES,
Defendants.
Appeal from the United States District Court for the District of
South Carolina, at Charleston. David C. Norton, District Judge.
(CA-03-2287-2-18)
Argued: December 1, 2005 Decided: January 12, 2006
Before LUTTIG and MICHAEL, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.

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ARGUED: Jeffrey Abram Schwartz, JUSTIN O’TOOLE LUCEY, P.A., Mount
Pleasant, South Carolina, for Appellant. Phyllis Walker Ewing,
MOORE & VAN ALLEN, P.L.L.C., Charleston, South Carolina, for
Appellee. ON BRIEF: Justin Lucey, JUSTIN O’TOOLE LUCEY, P.A.,
Mount Pleasant, South Carolina, for Appellant. Wm. Howell
Morrison, MOORE & VAN ALLEN, P.L.L.C., Charleston, South Carolina,
for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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*Several of the Deltagroup’s affiliates played a part in the
events at issue. The differences between them are inconsequential
for this appeal. For the sake of simplicity, all of the affiliates
are referred to as the Deltagroup.
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PER CURIAM:
Appellant, Johnny’s Enterprises, Inc., sued appellee,
Prudential Securities, for breach of fiduciary duty, aiding and
abetting breach of fiduciary duty, and unfair trade practices. The
district court granted summary judgment to Prudential, and Johnny’s
appealed. We affirm.
I.
Johnny’s Enterprises is a used car dealer in Moncks Corner,
South Carolina. In March 2001, Johnny’s signed a contract with the
Deltagroup* that allowed Johnny’s to sell the Deltagroup’s vehicle
service contracts to car buyers. J.A. 46. The vehicle service
contracts provided car buyers with warranty coverage for some
repairs. Id. Under the contract between the Deltagroup and
Johnny’s, Johnny’s would remit the money from the service contract
sales to the Deltagroup. Id. According to a second contract known
as “the Addendum,” the Deltagroup would deposit the money from
Johnny’s service-contract sales (less some administrative fees)
into a money-market account with Prudential Securities. Id. at 48.
The Deltagroup would pay claims made by the car buyers under the
vehicle service contracts with the money in the Prudential account.

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Id. at 46. Each year, the Deltagroup would also distribute to
Johnny’s any profits generated from the Prudential account -- that
is, any money not spent paying claims. Id. at 48.
On July 10, 2001, an agent of one of the Deltagroup’s
affiliates signed the documents to open the Prudential account
intended to hold the money from service contract sales made by
Johnny’s. Id. at 92. In late 2002, the Deltagroup encountered
financial trouble. As a result, the Deltagroup ordered Prudential
to transfer the money from the Johnny’s service-contract sales to
a consolidated account containing money from several of the
Deltagroup’s clients. Id. at 117. On December 30, 2002, the
Deltagroup ordered Prudential to transfer what remained of that
money from the consolidated account at Prudential to a bank account
at Wells Fargo. Id. at 128. By spring of 2003, the Deltagroup
could no longer pay service-contract claims regularly, and the
Deltagroup affiliate responsible for paying claims ultimately filed
for bankruptcy in the Cayman Islands. Id. at 579.
In May 2003, Johnny’s learned that the money in the Prudential
account had been transferred and that the Deltagroup could no
longer be relied upon to pay claims. Id. at 416. With the
Deltagroup unable to pay claims, Johnny’s paid for repairs to the
cars of service-contract purchasers. Id. at 419. Johnny’s sued
the Deltagroup and its involved affiliates on a number of theories.
Id. at 14-19. Johnny’s also sued Prudential for its role in

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transferring the money intended to pay claims under the service
contracts Johnny’s sold. Against Prudential, Johnny’s asserted
claims of breach of fiduciary duty, aiding and abetting breach of
fiduciary duty, and unfair trade practices. Id. at 18-19. This
appeal concerns only the claims against Prudential.
II.
The district court granted summary judgment to Prudential. It
held that there was “no theory under which Prudential owes a
fiduciary duty to” Johnny’s. Id. at 580. Specifically, it
concluded that state banking law’s “special account” doctrine did
not give rise to a fiduciary duty because Prudential is not a bank
and Johnny’s was not a depositor. Id. at 580-82. It also
concluded that no duty arose from a trust or bailment relationship
between Prudential and Johnny’s because no such relationship
existed and that Prudential owed Johnny’s no duty under the
Investment Advisors Act. Id. at 582-85.
The district court also held that South Carolina had not
adopted a cause of action for aiding and abetting breach of
fiduciary duty, and accordingly the court dismissed those claims
against Prudential. Id. at 586-89. Finally, the district court
concluded that no liability could attach to Prudential under the
South Carolina Unfair Trade Practices Act because Prudential was
required by statute to transfer the money in question as a

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“securities intermediary” taking direction from an “entitlement
holder” -- namely, an agent from the Deltagroup listed as a
fiduciary on the account. Id. at 591.
III.
At the summary judgment stage, we view the facts in the light
most favorable to the non-moving party, which in this case is
Johnny’s. We review the district court’s grant of summary judgment
de novo. See Dawkins v. Witt, 318 F.3d 606, 610 (4th Cir. 2003).
Having thoroughly reviewed the district court’s opinion and
the parties’ briefs and submissions on appeal and having heard
argument in this case, we conclude that the district court did not
err in its grant of summary judgment to Prudential. There is no
legal or factual basis upon which to conclude that Prudential owed
a fiduciary duty to Johnny’s. We therefore affirm on the reasoning
of the district court.
AFFIRMED

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