Legal Newsline

Wednesday, February 26, 2020

Tenth Circuit: $358M case against Utah amounts to little

By John O'Brien | Jul 28, 2011


SAN FRANCISCO (Legal Newsline) - Only a recent Utah Supreme Court decision prevented the claims of two former financial advisers who say regulators ruined their professional lives from being dismissed entirely.

The U.S. Court of Appeals for the Tenth Circuit mostly ruled Thursday in favor of the state of Utah, dismissing almost all of the claims made by Henry Brock and Jay Rice in their $358 million lawsuit. Of 15 claims made by the two, the court said only three required its consideration.

Of those three, the court only ruled in favor of Brock and Rice on one, overturning the district court's decision that allegations that the State violated the Utah Constitution because the plaintiffs did not file a written notice of the claim.

"Subsequent to the district court's dismissal of Plaintiffs' state law claims for failure to file a notice of claim, the Utah Supreme Court issued Jensen v. Cunningham," Judge Terrence O'Brien wrote.

"There, the court reaffirmed that 'the Utah Governmental Immunity Act does not apply to claims alleging state constitutional violations.' Accordingly, we now know the district court erred in dismissing the state law constitutional claims based on Plaintiffs' failure to file a notice of claim."

Brock and Rice accused the State of an unconstitutional investigation into their business practices, but U.S. District Judge Tena Campbell disagreed with their accusations in granting Utah Attorney General Mark Shurtleff's motion to dismiss in July.

"Division of Securities' pattern of examinations of complaints and inspection of premises, methods of obtaining information, and actions against Brock and Rice, without a warrant were illegal, unreasonable and unconstitutional, using equipment that was not in public use, were violations of 4th and 14th amendment rights," says Brock's and Rice's reply brief, filed in January.

"The DOS examiner boastfully informed Brock that 'if you're forced into bankruptcy, that's your problem.'"

Their complaint was filed in December 2009 and sought $358 million in damages. As a result of the investigations into their work, Brock and Rice both lost their brokerage licenses.

The Securities Division made numerous allegations against Brock, such as guaranteeing customers against loss, using scare tactics at seminars for seniors and soliciting securities transactions while not licensed.

Rice says he was not told why his license was revoked, then a lengthy process kept him from being able to afford fighting it.

The Tenth Circuit was not buying their arguments.

"Plaintiffs raise numerous issues (15 to be exact), but even a generous reading of their briefs leaves only three requiring our consideration," O'Brien wrote.

The court found that certain claims made by the two were time-barred and that state officials, in their official capacities, are entitled to Eleventh Amendment immunity.

The case was remanded for proceedings consistent with the ruling on violations of the state constitution.

From Legal Newsline: Reach John O'Brien by e-mail at

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