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Texas Court of Appeals Reverses $3 Million TD Ameritrade Customer Victory
April 15, 2020
Jin Song and Paul Sung Uh Kang had known each other for about 20 years, and after Song had opened a TD Ameritrade brokerage account in 2013, he hired Kang to manage the account. Kang was to be paid $20,000 as a first-year-consulting-fee and 10% of any profits. In furtherance of their arrangement, Song gave Kang his TD Ameritrade account's User ID and Password. After some seven months of Kang's management, Song's account lost $800,000 (it had apparently started with $2 million), which prompted him to to direct Kang to close the account. A few months later, Song sued Kang in the District Court of Tarrant County, Texas for fraud, violations of the Texas Securities Act and the Deceptive Trade Practices Act, breach of fiduciary duty and of contract, and negligence. In April 2015, Song won Summary Judgment in the District Court and an award of $811,572.02 in damages plus $1,623,144.04 million in DTPA treble damages, and $730,414.81 in attorneys fees.
2016 TXCA Opinion
Following Kang's appeal, the Texas Court of Appeals ("TXCA") reversed and remanded. Paul Sung Uh Kang, Appellant, v. Jin Song, Appellee (Opinion, Court of Appeals, Second Appellate District of Texas, 15-CV-00148 / September 15, 2016) (the "2016 TXCA Opinion"). http://brokeandbroker.com/PDF/KangTXCtApp160915.pdf By way of background, TXCA offered this:
Song alleged in his petition that in 2013, Kang approached him about Kang's investment consulting and financial analysist services, claiming to be a highly successful founder of AltaCap Group, a private investment bank. Song alleged that Kang told him that he was acting on behalf of AltaCap; that he had a Series 7 and a Series 66 license; that he was a highly experienced securities broker who had managed third party accounts for many years; that he was an experienced investment adviser; and that he had successfully invested in the public markets without losses to his investment portfolios.Song further alleged that Kang told him that Kang's equity trading scheme "was grounded upon an 'event driven' investing strategy and guaranteed [Song] that he would not lose any of his principal investment." He stated that Kang "promised to only use shorts to hedge, not to speculate" and that he never explained the high risks associated with his investments. Song alleged that as of March 2013 -- a few months after Kang had approached him -- Kang was no longer registered as an investment adviser representative and was no longer registered as a broker with the Financial Industry Regulatory Authority (FINRA). He stated that contrary to Kang's representations, Kang had passed his exams for his Series 7 and Series 66 licenses only the year before.
At Pages 12 -11 of the 2016 TXCA Opinion
In finding that the trial court should not have granted Song summary judgment on his breach of contract claim, TXCA found in part that:
In Song's affidavit, he stated that Kang approached him in 2013 about using Kang's financial services, "guaranteed . . . that he would not lose any of [Song's] principal investment," and promised him that he "would definitely receive a profit." Song also averred that Kang required a $20,000 consulting fee. This evidence does not establish as a matter of law the elements of a valid contract and the breach thereof. . . .
At Pages 22 - 23 of the 2016 TXCA Opinion
2018 Bench Trial
Alas, fortune is fickle. Back in the District Court for an August 2018 bench trial, the trial court issued a take-nothing judgment against Song and in favor of Kang. Which prompted a reversal of roles, and Song was now the Appellant arguing his case to TXCA.
2020 TXCA Opinion
On appeal to TXCA, Song raised three issues, Jin Song, Appellant, v. Paul Sung Uh Kang, Appellee (Opinion, Court of Appeals,Second Appellate District of Texas, 18-CV-0375) (the"2020 TXCA Opinion") http://brokeandbroker.com/PDF/SongTXCtApp200409.pdf:
(1) the trial court improperly withdrew Kang's deemed admissions; (2) the trial court was not impartial and openly expressed prejudice against Song and bias in Kang's favor; and (3) the trial court erred in rendering a take-nothing judgment because Song had proved his causes of action as a matter of law. . . .
At page 2 of the 2020 TXCA Opinion
No Timely Objections
TXCA held that Song did not preserve his first and second complaints; and, further, that his third complaint had no merit. Accordingly, TXCA affirmed the trial court's take-nothing judgment. Infinding that Song had failed to preserve his arguments, in part, TXCA noted that:
At page 11 of the 2020 TXCA Opinion[S]ong waited until his closing argument to object to the trial court's considering Kang's untimely response and, even then, failed to elicit an adverse ruling. And Song never presented his contention about requests 47-53 to the trial court at all. A timely objection and an adverse ruling are prerequisites to preserving error. Id. "Requiring parties to raise complaints at trial conserves judicial resources by giving trial courts an opportunity to correct an error before an appeal proceeds." In re B.L.D., 113 S.W.3d 340, 350 (Tex. 2003). Fairness between the litigants is also a consideration: a party should not be allowed to waive, consent to, or neglect to complain about an error at trial and then surprise his opponent on appeal by stating a complaint for the first time. Id. Having made no timely objection and having obtained no adverse ruling, Song failed to preserve his arguments . . .
Judicial Bias and Prejudice
In arguing that the trial court had demonstrated judicial bias and prejudice, Song, through counsel, apparently alleged that the trial court had favored Kang, in part, because the latter had appeared pro se. I would urge Securities Industry Commentator readers to get a large cup of coffee and at least two donuts and find a comfortable chair, and then to indulge themselves in an enjoyable appellate opinion spanning some 29 pages. For example, as to the issue of the trial court's alleged pro-se-bias, consider this excerpt:
Another example of alleged bias in Kang's favor came after Song had rested and Kang indicated that he wanted to testify. But before Kang took the stand, the trial court expressed concern that if Kang did so, he might expose himself to criminal prosecution:
THE COURT: Is it your testimony that when you don't have your license parked with a brokerage house, you can act as a securit[ies] advisor without violation of the law?[Kang]: I have to admit, I don't believe that I was serving as a securities advisor.THE COURT: You don't believe you were serving as a securit[ies] advisor when you advise people to hold a position longer because [the market] would turn up? I mean, how does that -- let me just tell you something, I'm unclear as to whether or not to read you your rights.[Kang]: Uh-huh.THE COURT: Because I believe that if you violate those laws, don't you have certain criminal exposure?[Kang]: I have to admit, I don't know that, sir. . . . .[THE COURT]: You can only do what your license permits you to do. I have now sworn you in. Any testimony you give now voluntarily, I want you to be -- take a few minutes and decide whether or not you -- I want to give you an opportunity to defend the case as much as you can, but I also don't want you to be in a situation where you think I -- that I'm requiring you to testify or I'm compelling you to testify.They have rested without calling you. And so, quite frankly, I'm not in a position of having to worry about it as a result of their questions. But I am a little bit concerned -- maybe I shouldn't be. You're the only one that can really tell me. I'm not certain -- I'm not certain it is -- I'm not sure if it is criminal activity or not if you act as a securit[ies] advisor in violation of [Financial Industry Regulatory Authority] regs or when you are not parked. I just want you to think about whether you have any concerns about testifying.
After a break, Kang opted not to testify
At pages 12 - 13 of the 2020 TXCA Opinion
In finding that the trial court had not crossed over the line into bias or prejudice, TXCA offers, in part, this context:
At pages 20 - 21 of the 2020 TXCA Opinion[A]lthough we can agree that the trial court expressed some impatience, dissatisfaction, annoyance, and perhaps even anger, the record falls short of demonstrating bias or partiality. See Liteky, 510 U.S. at 555-56, 114 S. Ct. at 1157. "Impartiality is not gullibility." Id. at 551, 114 S. Ct. at 1155 (quoting In re J.P. Linahan, Inc., 138 F.2d 650, 654 (2nd Cir. 1943)6 ). The record shows that the court was trying to determine the truth, to avoid wasting time, to protect Kang from perhaps unknowingly incriminating himself, and to curb Song's counsel's leading questions. . . .