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Brink v. Raymond James & Associates, Inc.

United States Court of Appeals, Eleventh Circuit

June 8, 2018

JYLL BRINK, on her own behalf, and on behalf of those similarly situated, Plaintiff - Appellant,
v.
RAYMOND JAMES & ASSOCIATES, INC., Defendant-Appellee.

          Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 0:15-cv-60334-WPD

          Before JORDAN and JILL PRYOR, Circuit Judges, and REEVES, [*] District Judge.

          JILL PRYOR, CIRCUIT JUDGE:

         Jyll Brink appeals the district court's dismissal of her putative class action complaint. She argues that the district court erred in determining that her state law claims for negligence and breach of contract against Raymond James and Associates, Inc. ("RJA") were precluded under Title I of the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), which prohibits class actions alleging state law causes of action based on conduct that constitutes federal securities fraud. Specifically, she disputes that her complaint alleged that RJA made a "misrepresentation . . . of a material fact in connection with the purchase or sale of a covered security." 15 U.S.C. § 78bb(f)(1)(A). After careful review, we reverse the district court's order and remand for further proceedings consistent with this opinion.

         I. BACKGROUND[1]

         As an alternative to a traditional commission-based investment account, RJA offered a "Passport Account" program that charged customers an annual advisory fee based on the total value of qualifying assets in the account instead of a commission based on each individual trade. In addition, Passport Account customers were charged a flat fee per transaction. In its written agreement with each Passport Account customer (the "Passport Agreement"), RJA described this flat fee as a "Processing Fee" for "transaction execution and clearing services" and stated that the Processing Fees were "not commissions." Compl. at 2 (Doc. 1).[2]

         RJA published a schedule of the Processing Fees in the Passport Agreement. Before October 1, 2013, RJA's Processing Fees ranged from $30.00 to $50.00 per transaction, depending on the type of security. Beginning October 1, 2013, RJA reduced the Processing Fees to range from $9.95 to $30.00. But the actual costs incurred in the execution and clearing of the transactions were much lower than the Processing Fees charged, allegedly no more than $5.00 per transaction. RJA kept as profit any amount above the actual costs associated with transaction execution and clearing.

         Brink filed this putative class action complaint alleging state law claims for breach of contract and negligence. Brink alleged that because Passport Account customers had agreed only to pay for "expenses incurred in facilitating the execution and clearing" of their trades, RJA's undisclosed profit built into the Processing Fees breached the Passport Agreement. Id. at 3. She also claimed that RJA breached its duty of care owed to its customers, which she alleged included a duty to charge customers a reasonable fee for its services.

         After class certification discovery, Brink moved for class certification, and RJA moved for summary judgment. While both of those motions were still pending, RJA filed a motion to dismiss for lack of subject matter jurisdiction, arguing that Brink's state law claims were disguised claims for federal securities fraud. Thus, RJA claimed, Brink's putative class action was precluded under SLUSA. As relevant here, SLUSA provides:

         No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging-

(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.

15 U.S.C. § 78bb(f)(1)(A). The district court concluded that Brink's claims were precluded because RJA's alleged conduct constituted "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security, " id., and granted RJA's motion to dismiss. This is Brink's appeal.

         II. STANDARD OF REVIEW

         "We review de novo . . . the district court's conclusion that SLUSA precludes [a plaintiff] from bringing . . . state law claims." Instituto de Prevision Militar v. Merrill Lynch, 546 F.3d 1340, 1344 (11th Cir. 2008).

         III. ...


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