                         COURT OF APPEALS
                          SECOND DISTRICT OF TEXAS
                               FORT WORTH

                              NO. 02-10-00229-CV

MICHAEL MURPHY                                                       APPELLANT

                                          V.

ERNEST REYNOLDS III                                                    APPELLEE


                                      ------------

          FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY

                                      ------------

                         MEMORANDUM OPINION1

                                      ------------

                                   I. Introduction

      In five issues, a media defendant, Appellant Michael Murphy, brings this

interlocutory appeal, asserting that the trial court erred by partially denying his

motion for summary judgment.          See Tex. Civ. Prac. & Rem. Code Ann.

§ 51.014(a)(6) (West 2008). We are constrained to reverse and render.




      1
       See Tex. R. App. P. 47.4.
                       II. Factual and Procedural History

      Appellee Ernest Reynolds, III sued Murphy, a technology-sector stock

analyst and author of a newsletter, book, and telephone ―hotline,‖ for losses

incurred from investments Reynolds made based on recommendations in

Murphy‘s newsletter, Technology Investing. The parties have appeared before

this court on three prior occasions related to different aspects of the underlying

lawsuit. See Reynolds v. Murphy (Reynolds III), 266 S.W.3d 141 (Tex. App.—

Fort Worth 2008, pet. denied); In re Reynolds (Reynolds II), No. 02-07-00256-

CV, 2007 WL 2460279 (Tex. App.—Fort Worth Aug. 31, 2007, orig. proceeding);

Reynolds v. Murphy (Reynolds I), 188 S.W.3d 252 (Tex. App—Fort Worth 2006,

pet. denied) (op. on reh‘g) (containing a detailed factual history of the case), cert.

denied, 549 U.S. 1281 (2007).

      In April 2010, after our opinion in Reynolds III, Reynolds filed his fourth

amended petition in which he sought damages and attorneys‘ fees and claimed

that Murphy (1) violated Texas Business and Commerce Code section 27.01,

articles 581-33 and 581-33-1 of the Texas Securities Act (TSA), and National

Association of Securities Dealers (NASD) rules; (2) breached a fiduciary duty to

Reynolds; (3) committed common law fraud (the surviving claim from our

disposition of Reynolds I); and (4) committed negligence, gross negligence, and

negligence per se. After the parties conducted discovery, Murphy filed a motion

for a traditional and a no-evidence summary judgment and a supplemental

summary judgment motion on all of Reynolds‘s claims, to which Reynolds


                                          2
responded.    After overruling each party‘s objections to summary judgment

evidence, the trial court granted Murphy summary judgment on Reynolds‘s

negligence and gross negligence claims but denied summary judgment on

Reynolds‘s first three claims. This interlocutory appeal followed,2 with Murphy

asserting that his motions should have been granted as to all of Reynolds‘s

claims.

                            III. Summary Judgment

      In his third and fourth issues, Murphy argues that the trial court erred by

denying his motion for summary judgment on Reynolds‘s nonnegligence claims

because (1) Murphy was not an investment advisor and was not a primary

violator or aider and abettor in the sale or purchase of stock, thus, he did not

violate business and commerce code section 27.01, TSA articles 581-33 or 581-

33-1, or NASD rules; (2) Murphy did not owe a fiduciary duty to Reynolds, and

(3) Reynolds‘s fraud claims were barred by limitations or, in the alternative,

Reynolds‘s fraud claims fail as a matter of law because Reynolds neither met his

burden to show that Murphy made any material misrepresentations or his burden

to show that Murphy‘s actions caused him damage.3


      2
      Although Reynolds challenges our jurisdiction to hear Murphy‘s appeal,
we have previously ruled on this matter by denying his prior motion to dismiss the
appeal.
      3
       In his eighth issue, Murphy complains that the trial court erred by
overruling his objections to Reynolds‘s affidavit as summary judgment evidence,
which we review under an abuse of discretion standard. Nat’l Liab. & Fire Ins.
Co. v. Allen, 15 S.W.3d 525, 527–28 (Tex. 2000). However, we need not

                                        3
A. Standard of Review

      In this summary judgment case, the issue on appeal is whether Murphy

met the summary judgment burden by establishing that no genuine issue of

material fact existed and that he was entitled to judgment as a matter of law.

Tex. R. Civ. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding,

289 S.W.3d 844, 848 (Tex. 2009). We review his summary judgment de novo.

Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010).

      We consider the evidence presented in the light most favorable to

Reynolds, crediting evidence favorable to him if reasonable jurors could, and

disregarding evidence contrary to him unless reasonable jurors could not. Mann

Frankfort, 289 S.W.3d at 848.      We indulge every reasonable inference and

resolve any doubts in Reynolds‘s favor. 20801, Inc. v. Parker, 249 S.W.3d 392,

399 (Tex. 2008).     Murphy, as defendant below, was entitled to summary

judgment on an affirmative defense to Reynolds‘s claims if he conclusively

proved all the elements of his asserted affirmative defense. Frost Nat’l Bank v.

Fernandez, 315 S.W.3d 494, 508–09 (Tex. 2010), cert. denied, 131 S. Ct. 1017

(2011); see Tex. R. Civ. P. 166a(b), (c). To accomplish this, Murphy must have

presented summary judgment evidence that conclusively established each




determine if the trial court abused its discretion because, as we set forth herein,
Reynolds did not raise a fact issue on Murphy‘s summary judgment grounds
even with the trial court admitting that evidence. See Tex. R. App. P. 47.1; see
also Reynolds I, 188 S.W.3d at 261–62 (summarizing Reynolds‘s affidavit).


                                        4
element of his affirmative defense. See Chau v. Riddle, 254 S.W.3d 453, 455

(Tex. 2008).

      In the no-evidence motion, Murphy, as defendant below and the party

without the burden of proof, moved for summary judgment on the ground that

there was no evidence to support an essential element of Reynolds‘s claims.

See Tex. R. Civ. P. 166a(i). The motion was required to specifically state the

elements for which there was no evidence, and the trial court was required to

grant the motion unless Reynolds produced summary judgment evidence that

raised a genuine issue of material fact as to those issues. See id. & cmt.; Timpte

Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009); Hamilton v. Wilson, 249

S.W.3d 425, 426 (Tex. 2008).

      When reviewing this no-evidence summary judgment, we examine the

entire record in the light most favorable to Reynolds, indulging every reasonable

inference and resolving any doubts against the motion. See Sudan v. Sudan,

199 S.W.3d 291, 292 (Tex. 2006).         We review this no-evidence summary

judgment for evidence that would enable reasonable and fair-minded jurors to

differ in their conclusions. See Hamilton, 249 S.W.3d at 426 (citing City of Keller

v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005)). We credit evidence favorable to

Reynolds if reasonable jurors could, and we disregard evidence contrary to

Reynolds unless reasonable jurors could not. See Timpte Indus., 286 S.W.3d at

310 (quoting Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)). If

Reynolds brought forward more than a scintilla of probative evidence that raised


                                        5
a genuine issue of material fact, then a no-evidence summary judgment was not

proper. Smith v. O’Donnell, 288 S.W.3d 417, 424 (Tex. 2009); King Ranch, Inc.

v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003), cert. denied, 541 U.S. 1030

(2004).

B. Article 581-33-1: Investment Advisor

      In his third issue, Murphy asserts that because he is not an ―investment

advisor‖ as defined by TSA article 581-4(N), the trial court erred by denying his

motion for summary judgment on Reynolds‘s article 581-33-1 claim.4                In his

motion, Murphy asserted that he was an author of a bona-fide publication and not

an ―investment advisor‖ for purposes of the TSA.

      1. Applicable Law

      Article 581-33-1 outlines the civil liability that investment advisors have to

their clients. See Tex. Rev. Civ. Stat. Ann. art. 581-33-1 (West Supp. 2010).

Article 581-4(N), added in 2001, mirrors the federal Investment Advisors Act‘s

(IAA) definition, and defines ―investment advisor‖ to

      [i]nclude[ ] a person who, for compensation, engages in the business
      of advising another, either directly or through publications or writings,
      with respect to the value of securities or to the advisability of
      investing in, purchasing, or selling securities or a person who, for
      compensation and as part of a regular business, issues or adopts


      4
        Although we usually address the no-evidence motion first when both no-
evidence and traditional summary judgment motions are filed, see Ford Motor
Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004), we will review the propriety of
granting the traditional summary judgment on Murphy‘s article 581-33-1 claim
first because it is dispositive. See Tex. R. App. P. 47.1.


                                         6
      analyses or a report concerning securities, as may be further defined
      by Board rule. The term does not include:

               ....

      (4) the publisher of a bona fide newspaper, news magazine, or
      business or financial publication of general or regular circulation[.]

Id. art. 581-4(N) (West 2010); see also 15 U.S.C.A. § 80b-2(a)(11) (West 2009);

House Research Org., Bill Analysis, Tex. H.B. 2255, 77th Leg., R.S. (2001)

(indicating that the addition codified, but did not alter, the Texas Securities

Board‘s existing rules and exemptions regarding the regulation of investment

advisors). Oversight of investment advisors is split between state and federal

authorities.    See 15 U.S.C.A. § 80b-3a (West 2009).      Any entity or person

qualifying for an exemption under the federal definition of investment advisor is

statutorily exempt from state registration. See id. § 80b-3a(b)(1)(B) (noting that

an entity exempt under § 80b-2(a)(11) is not subject to state registration,

licensing, or qualification).

      Consistent then with article 581-4(N)(4), we will examine whether Murphy

(a) was a publisher (b) of a bona fide financial publication (c) of general

circulation.5 We revisit Lowe v. Securities & Exchange Commission, 472 U.S.

181, 105 S. Ct. 2557 (1985), for guidance. See Reynolds I, 188 S.W.3d at 263

(quoting Lowe, 472 U.S. at 183, 105 S. Ct. at 2559). As we noted in Reynolds I,

the issue in Lowe ―was whether the Securities and Exchange Commission . . .

      5
        Reynolds I held that as a matter of law, Technology Investing is a general
circulation publication. See 188 S.W.3d at 266–67.


                                        7
could obtain a permanent injunction under the federal Investment Advisors Act

(IAA) . . . [against an unregistered publisher, in order to stop] publication of

securities newsletters containing ‗nonpersonalized investment advice and

commentary.‘‖6 See id. The Supreme Court concluded that Lowe‘s publications

met the statutory exemption, holding that they did ―not fit within the central

purpose of the [IAA] because they [did] not offer individualized advice attuned to

any specific portfolio or to any client‘s particular needs,‖ and that Lowe—a

publisher—was not an ―‗investment advisor‘ as defined by the act.‖ Lowe, 472

U.S. at 208–11, 105 S. Ct. at 2572–2573 (emphasis supplied). In reaching its

conclusion, the Supreme Court reviewed the publications to determine if they

were of ―general and regular circulation‖ and ultimately concluded that

impersonal, nonindividualized communications ―do not develop into the kind of

fiduciary, person-to-person relationships . . . that are characteristic of investment

advisor-client relationships,‖ and are thus presumed to be exempt and not

subject to registration under the IAA. Id., 105 S. Ct. at 2572–73. It is axiomatic

to say that we are required to follow this reasoning, and having previously held

that Murphy‘s newsletter was of general circulation like those found in Lowe, see

Reynolds I, 188 S.W.3d at 266–67, we must determine whether Murphy—an

author—falls under the IAA‘s definition of ―publisher‖ and whether Murphy‘s

newsletter qualifies as ―bona fide‖ within the meaning of the statute.

      6
      In Reynolds I, Reynolds acknowledged that Lowe was based solely on the
Supreme Court‘s construction of the IAA. See 188 S.W.3d at 265 n.19.


                                         8
            a. “Publisher”

      In his response, Reynolds argues that the denial of summary judgment

was proper because the exemption does not apply to Murphy.            Specifically,

Reynolds argues that we must strictly construe the statute, including the term

―publisher,‖ and therefore because Murphy admitted that he provided investment

advice and that he was an author, and hence not a publisher, he is an investment

advisor under the statute.

      We first note that in the ―admissions‖ Reynolds references, Murphy stated

that he provided ―general investment advice, . . . not personalized.‖ And, even

though in his deposition Murphy indicated that he was not a publisher, his

―admission‖ is not determinative of the legal effect of any distinction between

author and publisher.

      The Supreme Court has emphasized that ―Congress intended the [IAA] to

be construed like other securities legislation ‗enacted for the purpose of avoiding

frauds,‘ not technically and restrictively, but flexibly to effectuate its remedial

purposes.‖ SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 195, 84

S. Ct. 275, 284–85 (1963) (footnote omitted).       The TSA is both penal and

remedial, but when the TSA is invoked to enforce a remedy, it should be

considered as a remedial and not a penal statute. See Dempsey-Tegler & Co.,

v. Flowers, 465 S.W.2d 208, 211 (Tex. Civ. App.—Beaumont), rev’d on other

grounds, 472 S.W.2d 112 (Tex. 1971).        And, even if strict construction was

required as Reynolds asserts, strict construction of the statute does not mean


                                        9
isolating terms or phrases from the context in which they appear. Thomas v.

State, 919 S.W.2d 427, 430 (Tex. Crim. App. 1996); see also Bruner v. State,

463 S.W.2d 205, 215 (Tex. Crim. App. 1970) (concluding that the TSA‘s highly

penal nature requires that the act be strictly construed). Neither does a strict

construction mean that we ignore the plain meaning of terms. See Thomas, 919

S.W.2d at 430 (citing SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 355, 64

S. Ct. 120, 125 (1943) (―The rule of strict construction is not violated by

permitting the words of the statute to have their full meaning, or the more

extended of two meanings, as the wider popular instead of the more narrow

technical one . . . .‖) (quoting United States v. Hartwell, 73 U.S. (6 Wall.) 385, 396

(1867))).

      In Reynolds I, we discussed Ginsburg v. Agora, Inc., 915 F. Supp. 733 (D.

Md. 1995), a federal case applying Lowe to facts similar to ours. See Reynolds I,

188 S.W.3d at 264–67. In Ginsburg, which involved an author, the court applied

Lowe to determine that the IAA ―was designed to apply to those persons . . . who

provide personalized advice attuned to a client’s concerns, . . . [and] offer

individualized advice attuned to any specific portfolio or to any client’s particular

needs.‖ Ginsburg, 915 F. Supp. at 737. The court then concluded that because

a newsletter was generalized in nature, contained impersonal commentary, and

did not provide ―individualized advice attuned [to the plaintiff‘s] specific portfolio

[or his] particular needs,‖ the publication was not subject to the IAA, and that, by




                                         10
extension, the newsletter‘s author was not an ―investment advisor.‖ 915 F. Supp.

at 737; see Reynolds I, 188 S.W.3d at 264–65 & n.14.

      Here, Ginsburg‘s analysis and holding apply to the determination of

whether an author, such as Murphy, qualifies as an investment advisor under the

IAA.7 We must agree with Ginsburg’s analysis and holding, and we hold that an

author is included within the term ―publisher‖ found in the IAA‘s definition of

―Investment Advisor‖ when the author is not offering personalized advice to

individual investors. Accordingly, we conclude that if Murphy‘s Technology

Investing newsletter is a bona fide publication, it qualifies for the exemption found

in 15 U.S.C.A. § 80b-2(a)(11) pursuant to Ginsburg and Lowe, and therefore,

pursuant to 15 U.S.C.A. § 80b-3a(b)(1)(B), Murphy was not required to register

as an investment advisor under the TSA.

             b. Bona Fide

      In Lowe, the Supreme Court determined that the term ―bona fide‖ applied

to the publication and not to the publisher and that the term translated best to

―genuine.‖ It then assessed Lowe‘s publications to determine if they contained

false or misleading information or if they touted any security in which Lowe had

an interest. Lowe, 472 U.S. at 208, 105 S. Ct. at 2572. The Supreme Court

noted that to ―the extent that the [newsletters] contain[ed] factual information


      7
      In Reynolds I, we discussed and adopted Ginsburg relative to First
Amendment protection from negligence and negligent misrepresentation claims.
See 188 S.W.3d at 263–65.


                                         11
about past transactions and market trends, and the newsletters [commented] on

general market conditions, there can be no doubt about the protected character

of the communications.‖ Id. at 210, 105 S. Ct. at 2573. Federal law prohibits the

―touting‖ of securities, including promoting stock in exchange for compensation,

without disclosing the nature and amount of compensation paid.           See 15

U.S.C.A. § 77q(b) (West 2009); SEC v. Liberty Capital Grp., Inc., 75 F. Supp. 2d

1160, 1162 (W.D. Wash. 1999).

      In response to Murphy‘s summary judgment motion, Reynolds argued that

Murphy (1) misled Reynolds as to his credentials, analysis, methodology, and

past performance as a fund manager; (2) failed to disclose that he authored other

investing newsletters that contradicted his advice in Technology Investing; (3)

―touted‖ his professional expertise and the stocks he recommended; and (4)

failed to disclose his criminal background.

      Murphy‘s criminal background is not relevant to determining whether the

newsletter is a ―bona fide‖ publication. See Lowe, 472 U.S. at 208, 105 S. Ct. at

2572 (noting that the term ―bona fide‖ pertains to the publication, not the

publisher, and therefore the publisher‘s unsavory history would not prevent the

newsletter from being ―bona fide‖). Thus, we must determine (1) whether the

newsletter violated section 77q(b) by touting securities and (2) whether the

newsletter was disqualified from being bona fide because it contained false or

misleading    statements—either      about    Murphy‘s   credentials,   analysis,

methodology, or fund management performance or by failing to disclose


                                        12
Murphy‘s   authorship   of   other   investing   newsletters   containing   advice

contradicting the advice provided in Technology Investing.

      Although Reynolds alleged that Murphy ―touted‖ securities, nothing in the

record shows or allows an inference that Murphy received compensation from

the companies he recommended or that he personally gained by promoting the

companies discussed in the newsletter. See U.S.C.A. § 77q(b); see, e.g., U.S.

SEC v. Park, 99 F. Supp. 2d 889, 894–95 (N.D. Ill. 2000) (noting that ―touting‖

occurred when an investment newsletter publisher failed to disclose ownership

of, and subsequent profits on, the stocks he recommended); Liberty Capital Grp.,

Inc., 75 F. Supp. 2d at 1162 (finding ―touting‖ when publisher of electronic and

print stock recommendations failed to disclose compensation received from

companies he recommended). Therefore, Reynolds failed to raise an issue of

material fact to show that Murphy ―touted‖ securities in a manner sufficient to

bring him under the IAA‘s purview.

      In his petition, Reynolds alleged that the newsletter falsely represented

Murphy‘s expertise, methodology, success rates, and the security of investments

made based on Murphy‘s recommendations. The record contains copies of the

advertisements and newsletters that (1) outline Murphy‘s experience, (2) contain

investment result excerpts, (3) provide third-party quotations, recommendations,

and success stories, and (4) include articles authored by Murphy on various

topics related to technology sector investing. Although Reynolds asserted that

Murphy had an overall dismal record as a fund manager, nothing in the record


                                       13
refutes the validity of the performance summaries listed in the newsletters or

shows that the endorsements and third-party success stories were manufactured

or false. Additionally, Reynolds does not direct us to any specific claim of return

or guaranteed result to support his claim that Murphy‘s methodologies were

inaccurate. Rather, the record reflects that Murphy‘s newsletters stated that his

analysis incorporated a model accounting for and leveling technology company

research funding and that Murphy did in fact develop and utilize such a model in

his recommendations.

      Further, in his response to Murphy‘s summary judgment motion, Reynolds

asserted that Murphy‘s promotional materials falsely claimed that Murphy was a

―millionaire maker‖ and a ―hugely successful‖ investment fund manager, but

Reynolds cited no particular page or pages in which these statements could be

found in the ninety-page appendix attached to his response, which contained

copies of the newsletter and promotional materials. See Tex. R. Civ. P. 166(a)(i)

& 1997 cmt.; Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 81 (Tex. 1989)

(noting that neither the trial court nor reviewing courts are required to wade

through a voluminous record to marshal respondent‘s proof).           And, simply

pointing out these statements does not provide any evidence raising a fact issue

as to whether they were false. Reynolds also does not point to any instance in

which Murphy promised him individually a specific rate of return or that his

investments would be one-hundred percent secure; instead, the record shows

that Murphy made generalized assertions as to investment opportunities,


                                        14
performance, and expected or estimated returns—essentially, Murphy gave his

opinion as to future market events. Therefore, Reynolds‘s summary judgment

response evidence is insufficient to raise a fact issue on his section 581-33-1

claim. See Guthrie v. Suiter, 934 S.W.2d 820, 826 (Tex. App.—Houston [1st

Dist.] 1996, no writ) (noting that attaching entire document to a response and

referencing it only generally does not eliminate a party‘s responsibility to point out

to the trial court where in the document the issues set forth in the response are

raised).

      Reynolds also claimed that Murphy‘s failure to disclose authorship of other

investment publications that advised subscribers to sell short, while at the same

time he advised Technology Investing subscribers to avoid selling short, violated

section 581-33-1.    We previously addressed this same claim in Reynolds I,

wherein we noted that Murphy‘s recommendations were not misleading because

the investment approaches between the various newsletters differed and that

Technology Investing ―consistently emphasize[d] the long-term investment

approach . . . as opposed to more aggressive or short-term methods advocated

by Murphy in different contexts.‖       Reynolds I, 188 S.W.3d at 274.          Thus,

Reynolds has failed to produce a fact issue to support his section 581-33-1 claim

that Murphy‘s advice contradicted the long-term investment approach outlined in

Technology Investing.




                                         15
      For the reasons set out above, we conclude that Murphy‘s Technology

Investing newsletter is a bona fide publication as defined by the IAA, and by

extension the TSA. Therefore, because Reynolds did not show that there is a

genuine issue of material fact regarding whether Murphy is anything other than

an author entitled to the protection of a publisher of a bona fide publication of

general circulation in response to Murphy‘s summary-judgment evidence,

Murphy was entitled to a traditional summary judgment as a matter of law

because he proved that he is not subject to registration as an investment advisor

under the IAA, and by extension under the TSA.           See 15 U.S.C.A. § 80b-

3a(b)(1)(B); Ginsburg, 915 F. Supp. at 738. We sustain the portions of Murphy‘s

third issue relative to Reynolds‘s claims arising under TSA article 581-33-1.

C. Article 581-33 and NASD Rules Violation Claims

      Reynolds‘s petition alleged that Murphy was ―liable to [Reynolds] pursuant

to Art. 581-33, Texas Statutes (Texas Blue Sky Law), . . . . [And] [a]t all times

material, [Murphy] was also an ‗aider and abettor‘ under Art. 581-33 . . . .‖ We

construe Reynolds‘s petition to claim that Murphy was either primarily liable

under article 581-33A(2) or secondarily liable as an aider and abettor under

article 581-33F(2). See Tex. Rev. Civ. Stat. Ann. art. 581-33-1. In his fourth

issue, Murphy argues that the trial court erred by denying his motion for summary

judgment because there was no evidence to prove that Murphy made a material

misrepresentation or omitted a material fact or that a primary violation of




                                        16
securities laws occurred, necessary elements of both of Reynolds‘s article 581-

33 claims. See Tex. R. Civ. P. 166a(i).

      1. Applicable Law

      The Texas Securities Act establishes both primary and secondary liability

for securities violations. Sterling Trust Co. v. Adderley, 168 S.W.3d 835, 839

(Tex. 2005). Primary liability arises when a person ―offers or sells a security . . .

by means of an untrue statement of a material fact or an omission to state a

material fact necessary in order to make the statements made, in the light of the

circumstances under which they are made, not misleading.‖ Id. (quoting Tex.

Rev. Civ. Stat. Ann. art. 581-33A(2) (West 2010)).              Secondary liability is

derivative liability for another person‘s securities violation; it can attach to either a

control person, defined as ―[a] person who directly or indirectly controls a seller,

buyer, or issuer of a security,‖ or to an aider, defined as one ―who directly or

indirectly with [an] intent to deceive or defraud or with reckless disregard for the

truth or the law materially aids a seller, buyer, or issuer of a security.‖           Id.

(quoting Tex. Rev. Civ. Stat. Ann. art. 581-33F(1)–(2)). Both control persons and

aiders are jointly and severally liable with the primary violator ―to the same extent

as if [they] were the primary violator.‖ Id.

      The comments to the 1977 revisions to the TSA contain the notation that

article 581-33A(2) ―is a privity provision, allowing a buyer to recover from his

offeror or seller.‖ Tex. Rev. Civ. Stat. Ann. Art. 581-33, cmt. §§ 33A(1), (2) (West




                                           17
2010).    The comment also notes that ―some nonprivity defendants may be

reached‖ under section 33F. Id.

      To prove aider and abettor liability, the plaintiff must demonstrate:

      (1) that a primary violation of the securities laws occurred; (2) that
      the alleged aider had ―general awareness‖ of its role in this violation;
      (3) that the actor rendered ―substantial assistance‖ in this violation;
      (4) that the alleged aider either (a) intended to deceive [the] plaintiff
      or (b) acted with reckless disregard for the truth of the
      representations made by the primary violator.

Frank v. Bear, Stearns & Co., 11 S.W.3d 380, 384 (Tex. App.—Houston [14th

Dist.] 2000, pet. denied); see also In re Enron Corp. Sec., Derivatives & ERISA

Litig., 235 F. Supp. 2d 549, 568 (S.D. Tex. 2002).

      2. Analysis

      Reynolds‘s petition generally alleged that Murphy violated article 581-33

and that Reynolds purchased stock based on Murphy‘s violations. Reynolds did

not specify which transaction or transactions in the over 125 pages of his

brokerage account statements in the record qualified as the primary securities

law violation that supported his claim. See In re Perry, 404 B.R. 196, 219 (Bankr.

S.D. Tex. 2009) (noting that a failed investment is not necessarily a mark of

securities fraud actionable under the TSA). Reynolds‘s petition cited NASD Rule

96-608 and New York Stock Exchange Rule Interpretation 90-59 to support his

      8
      Although Reynolds generally alleged that Murphy violated NASD rules, he
mentioned only NASD Rule 96-60 in his pleadings.
      9
        Reynolds did not attach copies of NASD rule 96-60 or NYSE rule 90-5 to
either his petition or his response to Murphy‘s summary judgment motion.


                                         18
position that the contents of Technology Investing constituted Murphy‘s

recommendations on specific securities and that a recommendation of a specific

security qualifies as a transaction. However, because we have determined that

Murphy is not an investment advisor and because Reynolds has not alleged or

proven that Murphy is a registered securities dealer or broker, Murphy is not

subject to NASD or NYSE rules.10 See 15 U.S.C.A. §§ 78f, 78o, 78o-3 (West

2011) (providing statutory authority for the creation of registered securities

associations (such as NASD and NYSE) and rules to govern securities

exchanges and registered brokers and dealers).

      Second, Reynolds also generally alleged that he would not have

purchased stock ―but for‖ Murphy‘s advice, but he provided no evidence that

Murphy or another party qualified as a primary violator, that is, that Murphy or

another party, such as Reynolds‘s broker, brokerage firm, or the issuing

company, ―offered‖ or ―sold‖ Reynolds the stock in question by means of an

untrue statement or omission of a material fact, as required to invoke the

protections of article 581-33.   See Flowers v. Dempsey-Tegeler & Co., 472

S.W.2d 112, 113, 115 (Tex. 1971) (noting the TSA applies to persons and

corporations that offer or sell unregistered securities). Moreover, statements of


      10
       Moreover, even if Murphy were subject to the rules, we are uncertain
whether Reynolds would have a private right of action for violations of NASD or
NYSE rules. See Colman v. D.H. Blair & Co., 521 F. Supp. 646, 654 (S.D.N.Y.
1981) (noting that even though Appellant was within the class that Congress
intended to protect, Appellant did not have a private right of action for NASD and
NYSE rules violations).

                                       19
opinion, including opinions about a security‘s value, are generally not actionable

under article 581-33. See Aegis Ins. Holding Co., L.P. v. Gaiser, No. 04-05-

00938-CV, 2007 WL 906328, at *6 (Tex. App.—San Antonio Mar. 28, 2007, pet.

denied) (mem. op.) (stating that opinion of value of security is generally not

actionable); Tex. Capital Sec., Inc. v. Sandefer, 58 S.W.3d 760, 776 (Tex. App.—

Houston [1st Dist.] 2001, pet. denied) (noting that predictions of increased share

prices generally do not amount to actionable misrepresentations).           Thus,

Reynolds failed to carry his burden under rule 166a(i), and a no-evidence

summary judgment was proper on both of Reynolds‘s theories. See Kastner v.

Jenkins & Gilchrist, P.C., 231 S.W.3d 571, 579, 581 (Tex. App.—Dallas 2007, no

pet.) (affirming summary judgment in favor of ―aider and abettor‖ when

respondent failed to prove primary violation).

      We sustain that part of Murphy‘s fourth issue arising under TSA article

581-33 and NASD rules.

D. Fiduciary Duty

      Murphy also claims in his fourth issue that because he was not subject to

any laws giving rise to a fiduciary duty and because prior to filing his lawsuit,

―Reynolds had never met or spoken to Murphy[,]‖ the trial court erred by denying

his motion for no-evidence summary judgment on Reynolds‘s fiduciary duty

claims.




                                        20
      1. Applicable Law

      Fiduciary duties arise either from certain formal relationships that are

recognized as fiduciary as a matter of law, or from the existence of an informal,

―confidential‖ relationship between the parties. Ins. Co. of N. Am. v. Morris, 981

S.W.2d 667, 674 (Tex. 1998). An informal fiduciary duty may arise from a moral,

social, domestic, or purely personal relationship of trust and confidence,

generally called a confidential relationship. Hubbard v. Shankle, 138 S.W.3d

474, 483 (Tex. App.—Fort Worth 2004, pet. denied). A confidential relationship

exists when influence has been acquired and abused and confidence has been

extended and betrayed. Hoggett v. Brown, 971 S.W.2d 472, 488 (Tex. App.—

Houston [14th Dist.] 1997, pet. denied).          A person is justified in placing

confidence in the belief that another party will act in his best interest only when

he is accustomed to being guided by the other party‘s judgment or advice and

there exists a long association in a business relationship as well as personal

friendship. Id. Thus, the relationship must exist prior to and apart from the

agreement that is the basis of the suit. Hubbard, 138 S.W.3d at 483. Whether a

confidential or fiduciary relationship exists is ordinarily a question of fact, and the

issue only becomes a question of law when it is one of no evidence. Crim Truck

& Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992),

superseded by statute on other grounds as stated in Subaru of Am., Inc. v. David

McDavid Nissan, Inc., 84 S.W.3d 212, 225–26 (Tex. 2002) (op on reh‘g). A party

asserting breach of a fiduciary duty must establish the existence of a confidential


                                          21
or similar relationship giving rise to a fiduciary duty. See Bado Equip. Co. v.

Bethlehem Steel Corp., 814 S.W.2d 464, 475 (Tex. App.—Houston [14th Dist.]

1991,no writ) (op. on reh‘g).

      2. Statutory Fiduciary Duties

      Because we conclude above that Murphy was not subject to TSA articles

581-33 and 581-33-1, the laws giving rise to the statutory fiduciary duties that

Reynolds alleged Murphy violated, we sustain that part of Murphy‘s fourth issue

with respect to Reynolds‘s statutory-based breach of fiduciary duty claims.

      3. Informal, or Nonstatutory, Fiduciary Duties

      Based on the record before us, the only relationship between the parties

involves Reynolds‘s individual decision to subscribe to Technology Investing.

Thus, Reynolds failed to show that he had a confidential relationship with Murphy

prior to and apart from his subscription to Technology Investing. See Cotten v.

Weatherford Bancshares, Inc., 187 S.W.3d 687, 698–699 (Tex. App.—Fort

Worth 2006, pet. denied) (holding that no informal fiduciary relationship existed

when plaintiff did not prove confidential relationship prior to and apart from

contract giving rise to his lawsuit). Because Reynolds failed to meet his burden

under 166a(i) to show the existence of a fiduciary relationship between the

parties giving rise to a duty, we sustain Murphy‘s fourth issue with respect to

Reynolds‘s informal breach of fiduciary duty claim as well.




                                        22
E. Fraud Claims

      In his fourth issue, Murphy also argues that because causation is an

element of all of Reynolds‘s claims and because Reynolds cannot prove that

Murphy‘s actions caused Reynolds‘s injury, the trial court erred by denying his

no-evidence motion for summary judgment on all of Reynolds‘s claims. Thus, we

will determine whether a no-evidence summary judgment is proper on

Reynolds‘s remaining claims: common law fraud and fraud under section 27.01.

      To prevail on a common law fraud claim, a plaintiff must establish (1) the

defendant made a material representation, (2) the representation was false, (3)

the defendant either knew the representation was false when made or made it

recklessly without any knowledge of its truth and as a positive assertion, (4) the

defendant made the representation with the intention that it be acted upon, (5)

the representation was in fact relied upon, and (6) damage to the plaintiff

resulted. See Ins. Co. of N. Am., 981 S.W.2d at 674; DeSantis v. Wackenhut

Corp., 793 S.W.2d 670, 688 (Tex. 1990) (op. on reh‘g), cert. denied, 498 U.S.

1048 (1991); Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983). Section

27.01 provides for a statutory cause of action for fraud in real estate and stock

transactions. See Tex. Bus. & Com. Code Ann. § 27.01 (West 2009); Burleson

State Bank v. Plunkett, 27 S.W.3d 605, 611 (Tex. App.—Waco 2000, pet.

denied). The elements of statutory fraud under section 27.01 are essentially

identical to the elements of common law fraud except that section 27.01 does not

require proof of knowledge or recklessness as a prerequisite to the recovery of


                                       23
actual damages. See Brush v. Reata Oil & Gas Corp., 984 S.W.2d 720, 726

(Tex. App.—Waco 1998, pet denied); see also Poteet v. Kaiser, No. 02-06-

00397-CV, 2007 WL 4371359, at *5 (Tex. App.—Fort Worth Dec. 13, 2007, pet.

denied) (citing Robbins‘s conclusion that causation is an essential element of

fraud in a real estate transaction).   ―[R]eliance is a necessary element of a

statutory fraud claim under section 27.01.‖       Schlumberger Tech. Corp. v.

Swanson, 959 S.W.2d 171, 182 (Tex. 1997).

      Reynolds argues that he ―unequivocally testified that acting in reliance

upon the fraudulent investment advice provided by Murphy[,] he purchased and

held securities in his retirement portfolio that he would not have otherwise

purchased or held‖ and that he liquidated his holdings when he discovered the

truth of Murphy‘s fraudulent operations.       But as was noted in Reynolds I,

Reynolds caused his own losses when he sold stock in 2002 against Murphy‘s

advice to ―hold‖ the recommended stocks long-term.        See Reynolds I, 188

S.W.3d at 274. Thus, we hold that Reynolds failed to raise a fact issue to show

that his reliance on Murphy‘s statements caused his injury, an essential element

of both his section 27.01 and common law fraud claims. Accordingly, we sustain

the remainder of Murphy‘s fourth issue.

                                IV. Conclusion

      Having sustained Murphy‘s third and fourth issues, we reverse the trial

court‘s order denying Murphy summary judgment on Reynolds‘s remaining




                                          24
claims and render a final summary judgment in Murphy‘s favor on all of

Reynolds‘s remaining claims.11




                                                BOB MCCOY
                                                JUSTICE

PANEL: LIVINGSTON, C.J.; GARDNER and MCCOY, JJ.

DELIVERED: September 29, 2011




      11
        Based on our disposition of Murphy‘s third and fourth issues, we do not
reach his remaining issues. See Tex. R. App. P. 47.1.


                                      25
