Remington v. Newbridge Securities Corp.

Filing 119

ORDER denying 88 Newbridge's Motion In Limine to Exclude Testimony from Plaintiffs' Expert, Gene E. Carasick, Esq., denying 91 Newbridge's Motion for Summary Judgment, and granting 93 Plaintiffs' Motion to Voluntarily Dismiss Plaintiff Remington's Claim, and for Leave for Plaintiff Finkel to File Her Fourth Amended Complaint and Renewed Motion for Class Certification. Please see Order for details. Signed by Judge James I. Cohn on 2/7/2014. (ns)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 13-60384-CIV-COHN/SELTZER
RICHARD REMINGTON and URSULA
FINKEL, on their own behalf and on behalf of
those similarly situated,
Plaintiffs,
v.
NEWBRIDGE SECURITIES CORPORATION,
Defendant.
/
ORDER DENYING MOTION TO EXCLUDE, DENYING MOTION FOR
SUMMARY JUDGMENT, AND GRANTING LEAVE TO AMEND
THIS CAUSE is before the Court upon Newbridge's Motion In Limine to Exclude
Testimony from Plaintiffs' Expert, Gene E. Carasick, Esq. [DE 88] ("Motion to Exclude"),
Newbridge's Motion for Summary Judgment [DE 91] ("Motion for Summary Judgment"),
and Plaintiffs' Motion to Voluntarily Dismiss Plaintiff Remington's Claim, and for Leave
for Plaintiff Finkel to File Her Fourth Amended Complaint and Renewed Motion for
Class Certification [DE 93] ("Motion to Amend"). The Court has considered the Motions
and the submissions of the parties in connection therewith, and is otherwise advised in
the premises. For the reasons set forth herein, the Court will deny the Motion to
Exclude, deny the Motion for Summary Judgment, and grant the Motion to Amend.
I.

BACKGROUND
This action arises out of allegedly excessive fees charged by Defendant

Newbridge Securities Corp. ("Newbridge"), a securities broker-dealer. Plaintiffs Richard
Remington and Ursula Finkel are former customers of Newbridge. DE 86 ¶¶ 1, 7–10.

In 2008, Newbridge began to use a series of contracts with its customers which
included a customer agreement template central to this action. Id. ¶ 32; DE 86-4 at 4–6
("Customer Agreement"). Section 27 of the Customer Agreement provides that
Newbridge's customers shall pay commissions and fees at the "then prevailing rate."
DE 86-4 at 5. Plaintiffs allege that Newbridge breached this provision of the Customer
Agreement by charging excessive "handling fees" for processing transactions. DE 86
¶¶ 1–2, 27. Plaintiffs claim that the handling fees, which were as high as $59.95 per
trade, bore no reasonable relationship to actual processing costs, which never
exceeded $10.50 per trade. See id. ¶¶ 27, 37–38. Instead, Plaintiffs contend that the
handling fees were actually hidden commissions. Id. ¶ 66. Plaintiffs also allege that
Newbridge unfairly discriminated among its customers by charging different handling
fees across its branch offices without justification. Id. ¶¶ 2, 68–69.
On January 8, 2013, Remington filed a class-action suit against Newbridge in the
Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida,
bringing several state-law claims pertaining to the handling fees. See DE 1. Newbridge
removed the action to this Court on February 19, 2013, alleging federal-question
jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 78bb. Id. at 2–5. A series of
amended pleadings and motions to dismiss followed, substantially narrowing the issues
and adding Finkel as a plaintiff. On August 5, 2013, the time for filing of amended
pleadings established by the Court's Scheduling Order expired. See DE 38. The
operative pleading—Plaintiffs' Third Amended Class Action Complaint—contains a
breach-of-contract claim by both Plaintiffs and a negligence claim by Finkel. DE 86
¶¶ 48–71.

2

On November 12, 2013, however, the Court denied Plaintiffs' request for
certification of their proposed class. DE 89. The Court found that Remington's contract
claim was atypical of the class's claims, and that Finkel's negligence claim, to the extent
premised on allegations of discrimination, was also atypical of the class's claims. Id.
at 6–9. In response to the Court's denial of class certification, Plaintiffs filed the Motion
to Amend, seeking leave to file a Fourth Amended Class Action Complaint and to file a
Renewed Motion for Class Certification and to Appoint Class Counsel. DE 93. The
Fourth Amended Class Action Complaint would drop Remington as a plaintiff entirely
and remove all reference to discrimination from Finkel's negligence claim. DE 93-1.
In the meantime, Newbridge has filed its Motion to Exclude and Motion for
Summary Judgment. Newbridge argues that the opinion of Gene Carasick, Plaintiffs'
expert witness, has an insufficient basis in fact and constitutes an impermissible legal
conclusion. DE 88. Without Carasick's testimony or any other proof of an industry
standard dictating the permissible bounds of Newbridge's handling fees, Newbridge
argues that Plaintiffs' breach-of-contract and negligence claims fail as a matter of law.
DE 91.
The Court will first resolve Newbridge's Motion to Exclude, because the
admissibility of Carasick's testimony will impact the Court's analysis of the Motion for
Summary Judgment. Similarly, the disposition of the Motion for Summary Judgment
bears on Newbridge's argument that amendment of the pleadings should be denied,
thus the Court will address the Motion to Amend last.

3

II.

MOTION TO EXCLUDE
A. Legal Standard
Rule 702 of the Federal Rules of Evidence governs the admission of expert

testimony. See Fed. R. Evid. 702.1 In applying Rule 702, "district courts must act as
'gatekeepers' which admit expert testimony only if it is both reliable and relevant." Rink
v. Cheminova, Inc., 400 F.3d 1286, 1291 (11th Cir. 2005) (citing Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579, 589 (1993)). "District courts are charged with this
gatekeeping function to ensure that speculative, unreliable expert testimony does not
reach the jury under the mantle of reliability that accompanies the appellation 'expert
testimony.'" Id. (internal quotation marks omitted). To meet this obligation, courts "must
engage in a rigorous inquiry to determine whether: (1) the expert is qualified to testify
competently regarding the matters he intends to address; (2) the methodology by which
the expert reaches his conclusions is sufficiently reliable . . . ; and (3) the testimony
assists the trier of fact, through the application of scientific, technical, or specialized
expertise, to understand the evidence or to determine a fact in issue." Id. at 1291–92
(internal quotation marks omitted). "The party offering the expert has the burden of
satisfying each of these three elements by a preponderance of the evidence." Id.
at 1292.
1

Under Rule 702, a witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will
help the trier of fact to understand the evidence or to determine a fact in
issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts
of the case.
4

While Daubert mandates an "exacting analysis of the proffered expert's
methodology, it is not the role of the district court to make ultimate conclusions as to the
persuasiveness of the proffered evidence." Quiet Tech. DC-8, Inc. v. Hurel-Dubois UK
Ltd., 326 F.3d 1333, 1341 (11th Cir. 2003) (citation & internal quotation marks omitted).
"Vigorous cross-examination, presentation of contrary evidence, and careful instruction
on the burden of proof are the traditional and appropriate means of attacking shaky but
admissible evidence." Daubert, 509 U.S. at 596. "Indeed, 'in most cases, objections to
the inadequacies of a study are more appropriately considered an objection going to the
weight of the evidence rather than its admissibility.'" Rosenfeld v. Oceania Cruises,
Inc., 654 F.3d 1190, 1193 (11th Cir. 2011) (quoting Hemmings v. Tidyman's Inc., 285
F.3d 1174, 1188 (9th Cir. 2002)), reh'g denied, 682 F.3d 1320 (11th Cir. 2012).
Even if proposed expert testimony is admissible under Rule 702, that evidence
may be excluded if it is irrelevant or if "its probative value is substantially outweighed by
a danger of . . . unfair prejudice, confusing the issues, [or] misleading the jury." Fed. R.
Evid. 403; Allison v. McGhan Med. Corp., 184 F.3d 1300, 1309–10 (11th Cir. 1999).
Because "expert testimony may be assigned talismanic significance in the eyes of lay
jurors," a district court "must take care to weigh the value of such evidence against its
potential to mislead or confuse." United States v. Frazier, 387 F.3d 1244, 1263 (11th
Cir. 2004) (en banc).
B. Discussion
In its Motion to Exclude, Newbridge raises two arguments against the
admissibility of the testimony of Gene Carasick, Plaintiffs' expert. First, Newbridge
argues that Carasick's opinions are unsupported by knowledge or evidence of relevant
industry practices. Second, Newbridge argues that Carasick's opinions on the
5

requirements of FINRA's rules are impermissible legal conclusions. The Court
disagrees with each of Newbridge's assertions, and will deny the Motion to Exclude.
1. Carasick's Opinions Have Adequate Support
Newbridge argues that Carasick's opinion regarding the existence of an industry
standard limiting the amount of allowable handling fees is unsupported by any relevant
expertise or facts. In his Expert Report, Carasick writes that FINRA's Conduct
Rule 2430 imposes an industry standard requiring that all service fees charged by
broker-dealers be "reasonable."2 DE 88-1 at 4. In the context of handling fees,
Carasick opines that the rule mandates that "any fees or charges described as handling
fees must be related to . . . direct and actual handling costs." Id. at 6. Newbridge,
however, contends that the Expert Report cites no basis for Carasick's opinion other
than "his own flawed interpretation of FINRA Conduct Rule 2430." DE 88 at 6.
Because Carasick can point to "absolutely no evidence to support that such an industry
standard exists," id. at 3, Newbridge argues that his opinion lacks the necessary factual
foundation, and is therefore inadmissible. Id. at 6.
As a preliminary matter, Carasick is qualified to testify as an expert witness on
regulation of the securities industry. The advisory committee notes to Federal Rule of
2

The Financial Industry Regulatory Authority ("FINRA") is a non-profit
organization tasked with regulating the securities industry. See generally FINRA, About
FINRA, http://www.finra.org/AboutFINRA/ (last visited Jan. 27, 2014). FINRA's Conduct
Rule 2430 reads in its entirety:
Charges, if any, for services performed, including miscellaneous services
such as collection of moneys due for principal, dividends, or interest;
exchange or transfer of securities; appraisals, safe-keeping or custody of
securities, and other services, shall be reasonable and not unfairly
discriminatory between customers.
FINRA Manual, NASD Conduct Rule 2430.

6

Evidence 702 contemplate that a witness may qualify as an expert "relying solely or
primarily on experience." Fed. R. Evid. 702, advisory committee's note on 2000
amendment. An expert relying on his personal knowledge and experience—as
opposed to scientific training or certifications—may testify as long as he may reliably
apply his experience to assist the trier of fact. Whelan v. Royal Caribbean Cruises, Ltd.,
No. 12-22481, 2013 U.S. Dist. LEXIS 147851, at *3–5 (S.D. Fla. Aug. 15, 2013) (citing
Frazier, 387 F.3d at 1261).
Here, Carasick's experience provides a reliable basis for his proposed testimony.
Carasick has worked for approximately thirty-five years in regulation of the securities
industry, including over twenty years as an attorney for regulatory bodies. DE 88-1
at 12–13. In his 18 years working at FINRA, Carasick prosecuted over 400 disciplinary
actions relating to "virtually all aspects of FINRA and SEC rules and regulations."
DE 88-1 at 2. Newbridge's expert witness, David E. Paulukaitis, testified that he has the
"highest regard for Mr. Carasick" and indeed referred Carasick to Plaintiffs on that
basis. DE 102-1 at 9:22–10:7. Moreover, the realm of securities regulation is arcane
and inaccessible even to many legal professionals not versed in the subject. Carasick's
proposed testimony would doubtless assist the jury in understanding the concepts and
issues of this case. See In re Blech Sec. Litig., No. 94-7696, 2003 U.S. Dist. LEXIS
4650, at *53–54, *56–57 (S.D.N.Y. Mar. 27, 2003) (allowing expert testimony regarding
customs of securities industry to help "jury understand unfamiliar terms and concepts").
Newbridge nevertheless argues that Carasick possesses no "relevant"
experience because he has not specifically prosecuted FINRA enforcement actions
premised upon excessive handling fees. DE 88 at 4–5. The Court does not view

7

Carasick's lack of involvement with handling-fee cases as impacting the sufficiency of
his expertise. An expert may testify regarding narrow sub-topics within his broader
expertise—notwithstanding a lack of specific experience with the narrower area—as
long as his testimony would still assist a trier of fact. Whelan, 2013 U.S. Dist. LEXIS
147851, at *3–4. For example, in Maiz v. Virani, 253 F.3d 641 (11th Cir. 2001), the
Eleventh Circuit upheld a district court's decision to allow an economic expert to testify
on damages relating to real-estate fraud, though the expert had no specific real-estate
experience. The appellate court held that the issue of damages in the real-estate
context was sufficiently within his broader expertise. Id. at 665. Similarly, this Court
finds that the interpretation of Conduct Rule 2430 is sufficiently within Carasick's
expertise to allow him to assist the jury on the topic. Moreover, the court in Maiz held
that questions about the expert's lack of specific knowledge regarding real-estate
economics were more appropriately directed to whether he had developed a sufficient
foundation for his testimony. Id. Here, too, Newbridge's argument that Carasick has
"no knowledge" regarding applicable industry standards for handling fees is more
appropriately considered a challenge to the foundation for his opinion, not his
qualifications. The Court therefore finds Carasick qualified to testify as an expert on
regulation of the securities industry. See Whelan, 2013 U.S. Dist. LEXIS 147851,
at *3–5.
Turning to the basis for Carasick's testimony, the Court disagrees with
Newbridge that his interpretation of Conduct Rule 2430 lacks a foundation. Contrary to
Newbridge's contention that Carasick "has no evidence" of his proposed standard, he
has provided ample support for his opinion, including guidance from FINRA itself

8

regarding the interpretation of the rule. For example, Carasick references a FINRA
letter stating that it had commenced actions against broker-dealers assessing "handling
charges that were unrelated to actual costs, and [would] continue to investigate firms
that appear to be taking advantage of investors through fee schemes." DE 92-1 at 6
(quoting FINRA, 2012 Annual Letter 7 (Jan. 31, 2012)). Carasick draws upon the
resolution of a disciplinary action in which FINRA determined that Newbridge's
characterization of charges as "handling fees," where the charges were "not attributable
to any specific cost or expense incurred by [Newbridge] in executing the trade" and "not
directly related to any specific handling services . . . or handling-related expenses,"
violated Conduct Rule 2430. See id. at 4 (citing FINRA, Letter of Acceptance, Waiver
and Consent, No. 2012032048401, at 4 (Jan. 29, 2013)). Carasick also cites to a press
release in which FINRA announced fines against five other broker-dealers after an
investigation of "handling fees that far exceeded the actual cost of the direct
handling-related services the firms incurred in processing securities transactions." See
id. at 5 (quoting FINRA, News Release: FINRA Fines Five Broker Dealers for Improper
Handling Fees (Sept. 7, 2011), available at http://www.finra.org/Newsroom
/NewsReleases/2011/P124283). Newbridge's argument that Carasick's interpretation of
Conduct Rule 2430 lacks a foundation is thus without merit.
Carasick may also reliably testify to the existence of an industry standard derived
from the requirements of Conduct Rule 2430. FINRA's Conduct Rules "reflect the
standard to which all brokers are held." SEC v. Badian, No. 06-2621, 2010 U.S. Dist.
LEXIS 123990, at *4–5 (S.D.N.Y. Nov. 19, 2010) (quoting Mihara v. Dean Witter & Co.,
619 F.2d 814, 824 (9th Cir. 1980)). Reference to FINRA and NASD rules thus is an

9

accepted and oft-utilized means of establishing the applicable industry standard. See
Vucinich v. Paine, Webber, Jackson & Curtis, Inc., 803 F.2d 454, 461 (9th Cir. 1986);
Whitaker v. Wells Fargo Advisors, LLC, No. 11-380, 2011 U.S. Dist. LEXIS 111938,
at *15 (E.D. Va. Sept. 28, 2011) (holding that defendant's compliance with FINRA
regulations precluded finding that defendant had violated "industry standards").
Because FINRA rules may form the basis for an expert's testimony regarding industry
standards, the Court rejects Newbridge's contention that Carasick's "opinion that an
industry standard regarding handling fees exists is wholly unsupported," DE 88 at 2.3
2. Carasick's Interpretation of Conduct Rule 2430
Is Not an Impermissible Legal Conclusion
Newbridge also takes the position that Carasick's interpretation of Conduct
Rule 2430 is inadmissible because it is a legal conclusion. An expert witness may not
offer legal conclusions; only the Court may instruct the jury as to the state of the law.
Montgomery v. Aetna Cas. & Sur. Co., 898 F.2d 1537, 1541 (11th Cir. 1990).
Newbridge argues that Carasick's testimony regarding FINRA's rules is akin to an
expert witness impermissibly testifying to a broker-dealer's legal duties. DE 88 at 10–11
(citing SEC v. Big Apple Consulting USA, Inc., No. 09-1963, 2011 U.S. Dist. LEXIS
95292 (M.D. Fla. Aug. 25, 2011)). FINRA's rules, however, are not law, but rather the
rules of a private organization, thus an expert's interpretation of the rules does not
encroach upon the Court's domain. See Vucinich, 803 F.2d at 461 ("Not being civil law,
these [NASD] rules were proper matters for expert testimony."); United States v.
3

Newbridge also disagrees with the substance of Carasick's conclusion as to the
applicable industry standard. DE 88 at 6. Disagreement over an expert's conclusions,
however, is properly addressed through cross-examination and the presentation of
contrary evidence, and does not go to the admissibility of the expert's testimony. Quiet
Tech. DC-8, Inc., 326 F.3d at 1345.

10

Jensen, 608 F.2d 1349, 1356 (10th Cir. 1979) (holding interpretation of NASD rules
proper subject of expert testimony, and not legal conclusion). The Court accordingly
finds that Carasick's proposed testimony on FINRA's rules does not constitute an
inadmissible legal conclusion.
III. MOTION FOR SUMMARY JUDGMENT
A. Legal Standard
A district court "shall grant summary judgment if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law." Fed. R. Civ. P. 56(a). The moving party "always bears the initial
responsibility of informing the district court of the basis for its motion, and identifying
those portions of [the record] which it believes demonstrate the absence of a genuine
issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To satisfy
this burden, the movant must point out to the court that "there is an absence of evidence
to support the nonmoving party's case." Id. at 325.
After the movant has met its burden under Rule 56(a), the burden of production
shifts, and the non-moving party "must do more than simply show that there is some
metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986). As Rule 56 explains, "[i]f a party fails to
properly support an assertion of fact or fails to properly address another party's
assertion of fact . . . the court may . . . grant summary judgment if the motion and
supporting materials—including the facts considered undisputed—show that the movant
is entitled to it." Fed. R. Civ. P. 56(e)(3). Therefore, the non-moving party "may not rest
upon the mere allegations or denials in its pleadings," but instead must present "specific

11

facts showing that there is a genuine issue for trial." Walker v. Darby, 911 F.2d 1573,
1576–77 (11th Cir. 1990).
Essentially, so long as the non-moving party has had the opportunity to conduct
discovery, it must come forward with affirmative evidence to support its claim.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). "A mere 'scintilla' of
evidence supporting the opposing party's position will not suffice; there must be enough
of a showing that the jury could reasonably find for that party." Walker, 911 F.2d
at 1577. If the evidence advanced by the non-moving party "is merely colorable, or is
not significantly probative, summary judgment may be granted." Anderson, 477 U.S.
at 249–50 (citations omitted).
The Court's function at the summary-judgment stage is not to "weigh the
evidence and determine the truth of the matter but to determine whether there is a
genuine issue for trial." Id. at 249. In making this determination, the Court must discern
which issues are material: "Only disputes over facts that might affect the outcome of the
suit under the governing law will properly preclude the entry of summary judgment.
Factual disputes that are irrelevant or unnecessary will not be counted." Id. at 248. In
deciding a summary-judgment motion, the Court must view the facts in the light most
favorable to the non-moving party and draw all reasonable inferences in that party's
favor. Davis v. Williams, 451 F.3d 759, 763 (11th Cir. 2006).
B. Discussion
Newbridge moves for summary judgment on numerous grounds. Newbridge
argues mainly that Plaintiffs have produced no evidence of an industry standard
regarding the appropriate amount of a handling fee. Without evidence of an industry
standard, Newbridge contends that Finkel cannot prove it had a duty to charge handling
12

fees in line with its actual processing costs, thus her negligence claim must fail.
Similarly, Newbridge attacks Plaintiffs' allegations that it had a contractual obligation to
limit handling fees to its processing costs. Newbridge also argues that Finkel's contract
and negligence claims are duplicative, and that Plaintiffs' claims are barred by Florida's
claim-splitting doctrine. For the reasons discussed more fully herein, the Court finds
each of Newbridge's arguments without merit. The Court therefore will deny the Motion
for Summary Judgment.
1. Plaintiffs Have Provided Sufficient Evidence of an Industry
Standard to Support Finkel's Negligence Claim
A claim for negligence is premised upon a breach of a duty of care owed by the
defendant to the plaintiff. E.g., 57A Am. Jur. 2d Negligence § 71 (Westlaw 2013).4
Evidence of an industry standard is probative of the applicable duty of care owed by a
person in that industry. Id. § 164. Newbridge argues that Finkel's negligence claim fails
because Plaintiffs have provided no evidence of a relevant industry standard or any
other basis for Newbridge's alleged duty of care. DE 91 at 12–14. To the contrary, the
Court finds that Plaintiffs have provided evidence of an industry standard that brokerdealers such as Newbridge should not charge handling fees unrelated to actual
processing costs.
Plaintiffs' expert, Gene Carasick, testified that Conduct Rule 2430 precludes
broker-dealers from charging handling fees in excess of actual processing costs.
4

The Court need not address choice-of-law at this time because the basic
principle of negligence at issue here—that a plaintiff claiming negligence must establish
a duty of care owed by the defendant—is uniform across the potentially relevant
jurisdictions. See, e.g., Fla. Dep't of Corr. v. Abril, 969 So. 2d 201, 204 (Fla. 2007) (per
curiam); Afarian v. Mass. Elec. Co., 866 N.E.2d 901, 905 (Mass. 2007); Lamm v.
Bissette Realty, Inc., 395 S.E.2d 112, 115 (N.C. 1990); Gordon v. Muchnick, 579
N.Y.S.2d 745, 746 (App. Div. 1992).

13

DE 102-2 at 36:24–37:11; see also DE 88-1 at 7 (Expert Report). Newbridge's expert,
David Paulukaitis, appears to agree with Carasick, and has testified that if a firm
charges a handling fee in excess of the costs associated with processing a transaction,
the fee violates Conduct Rule 2430. DE 102-1 at 42:13–44:10, 104:15–105:11. As
discussed in relation to the Motion to Exclude, FINRA's rules "reflect the standard to
which all brokers are held." Badian, 2010 U.S. Dist. LEXIS 123990, at *4–5. This
expert testimony that Conduct Rule 2430 prohibits handling fees in excess of actual
processing costs supports the existence of an industry standard to that effect. See
Whitaker, 2011 U.S. Dist. LEXIS 111938, at *15.5
Newbridge also attempts to blunt Plaintiffs' proposed industry standard by
arguing that it relates only to the disclosure of the nature of fees, and not to the
permissible amount of fees. Newbridge contends that FINRA has never found a
handling fee to be excessive. DE 91 at 7–8; DE 115 at 2. Instead, FINRA has merely
objected when firms characterized charges not arising from processing costs as
handling fees. DE 115 at 2. For example, in Newbridge's own disciplinary proceedings
before FINRA, Newbridge was able to resolve concerns about its handling fees not by
decreasing what it charged its customers, but by re-labeling the charges as "firm
commissions." Id.

5

Newbridge also contests that Conduct Rule 2430 governs fees charged in
connection with the execution of trades. DE 91 at 19. However, the precise
applicability of Conduct Rule 2430 is the subject of conflicting evidence. See, e.g.,
FINRA, Letter of Acceptance, Waiver and Consent, No. 2012032048401, at 4 (Jan. 29,
2013) (condemning handling fees "not attributable to any specific cost or expense
incurred by the Firm executing the trade" as violative of Conduct Rule 2430). Summary
judgment on the issue is thus inappropriate.

14

Newbridge raises a distinction without a difference. Implicit in FINRA's
determination that a firm may not refer to charges beyond those arising from processing
costs as handling fees is the conclusion that, when other charges are included in a
handling fee, the fee is unreasonable. Again, Newbridge's own expert appears to share
this conclusion, having testified that Conduct Rule 2430 condemns handling fees
containing charges other than the costs associated with processing a transaction.
DE 102-1 at 42:13–44:10, 104:15–105:11.
Newbridge further contends that Conduct Rule 2430 does not establish a firm
limit for handling fees because FINRA's interpretation of the rule is comparatively vague
when contrasted with FINRA's guidance on commissions. In its interpretive materials
relating to commissions, FINRA has suggested that a markup of up to 5% of the amount
of a transaction is usually fair. FINRA, IM-2440-1 (2008). In contrast, FINRA has not
issued interpretive materials setting a numerical cap on handling fees. Newbridge
argues that FINRA's guidance relating to commissions illustrates that if FINRA had
intended to set a specific threshold for handling fees under Conduct Rule 2430, it would
have done so. DE 91 at 17.
The Court is not persuaded, however, because FINRA has issued guidance
relating to Conduct Rule 2430's limits for fees. FINRA has announced that fees "must
be reasonable and related to the services performed." FINRA, 2012 Annual Letter 7
(Jan. 31, 2012). FINRA has declared that "fee schedules must clearly reflect
commission charges, and firms cannot disguise commissions by improperly describing
them as charges for ancillary services." FINRA, News Release: FINRA Fines Five
Broker Dealers for Improper Handling Fees (Sept. 7, 2011), available at

15

http://www.finra.org/Newsroom/NewsReleases/2011/P124283. Finally, FINRA has
brought disciplinary actions against broker-dealers charging handling fees "not directly
related to any specific handling services performed by the Firm, or handling-related
expenses incurred by the Firm, in processing [a] transaction." FINRA, Letter of
Acceptance, Waiver and Consent, No. 2012032048401, at 4 (Jan. 29, 2013); see also
FINRA, Letter of Acceptance, Waiver and Consent, No. 2010022181901, at 3 (Sept. 6,
2011) (finding violation of Conduct Rule 2430 where firm charged "handling fee" that did
not "cover any direct handling-related services performed by the firm or handling-related
expenses incurred by the firm in connection with the transactions"). Therefore, though
FINRA has not set a limit on handling fees as they relate to a transaction's overall value,
it has clearly expressed that handling fees not related to actual processing costs are
unreasonable.
More fundamentally, Newbridge's arguments miss the mark because they fixate
upon the absence of some numerical cap on the amount of fees a firm can charge.
Newbridge argues repeatedly that it cannot be found negligent for the amount of its
handling fees because neither FINRA nor some industry practice have created a ceiling
against which its fees could be measured. See, e.g., DE 88 at 6; DE 91 at 17; DE 105
at 9; DE 115 at 4, 8–9. Finkel, however, does not assert so narrowly that Newbridge's
fees are improper for exceeding a fixed amount. Her negligence claim instead reads:
"Newbridge breached its duty, and the standard of care expected from similar
professionals in the community under similar circumstances, by charging an
unreasonable and excessive 'handling fee' that bore no reasonable relationship to its
direct and actual costs in processing transactions." DE 86 ¶ 64 (emphasis added);

16

see also DE 93-1 ¶ 61 (same language in proposed Fourth Amended Class Action
Complaint). Newbridge's contentions regarding the absence of a duty to charge
handling fees below some fixed amount do not directly address the core of Finkel's
claim: that Newbridge had a duty not to charge handling fees unrelated to its underlying
costs.6
In short, FINRA and the experts of both parties are in apparent agreement that a
handling fee must "be reasonable and related to the services performed" to comply with
Conduct Rule 2430. FINRA, 2012 Annual Letter 7 (Jan. 31, 2012); see also, e.g.,
DE 102-1 at 105:4–11; DE 102-2 at 36:3–37:21. This regulatory standard is evidence of
Newbridge's duty to charge only those handling fees relating to costs of actual services
performed. The Court therefore finds that Plaintiffs have provided sufficient proof of a
duty of care to survive summary judgment on Finkel's negligence claim.
2. Plaintiffs Have Provided Sufficient Evidence to Support
Their Construction of the Customer Agreement
The Customer Agreement provides that Newbridge's customers shall pay
commissions and fees at the "then prevailing rate." DE 86-4 at 5. Plaintiffs claim that
Newbridge breached this term of the Customer Agreement by charging excessive
6

Newbridge also contends that Finkel's negligence claim is really one for
"negligence per se" under New York law, because it is premised upon the idea that a
violation of FINRA's regulations is a per se breach of the duty of care. DE 91 at 14 n.7.
Newbridge then argues that the claim must fail because violation of a regulatory rule
cannot constitute negligence per se. Id. (citing Bd. of Educ. v. Grillo, 959 N.Y.S.2d 87
(Table) (Sup. Ct. 2012)). The Court rejects Newbridge's attempt to characterize Finkel's
negligence claim as one for negligence per se. Finkel does not argue that Newbridge is
guilty of negligence for mere breach of Conduct Rule 2430. Instead, Finkel argues that
the rule establishes an industry standard and that Newbridge negligently charged fees
in violation of the standard. Moreover, although violation of a rule, as contrasted with a
legislative enactment, cannot support a claim of negligence per se, the violation can
provide "some evidence of negligence." Grillo, 959 N.Y.S.2d 87 (Table); accord White
v. Long, 612 N.Y.S.2d 482, 484 (App. Div. 1994).

17

handling fees unrelated to its actual processing costs. Newbridge counters that
Plaintiffs have provided no evidence that handling fees at the "then prevailing rate" are
limited to processing costs. The Court finds that Plaintiffs have provided sufficient
factual support for their interpretation of the Customer Agreement, and will accordingly
deny summary judgment on the breach-of-contract claim.
Under New York law, contract interpretation is generally a legal question suitable
for resolution by the Court on summary judgment. LaSalle Bank Nat'l Ass'n v. Nomura
Asset Capital Corp., 424 F.3d 195, 205 (2d Cir. 2005).7 However, the construction of an
ambiguous contract term poses a factual question when reference to extrinsic evidence
is needed to give meaning to the term. Id. When a non-movant raises an issue of fact
to support its construction of an ambiguous term, summary judgment is inappropriate.
Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 574 (2d Cir. 1993). Here,
the term "then prevailing rate" as used in the Customer Agreement is not clear on its
face. The Customer Agreement does not define the term. Taken in context, the "then
prevailing rate" could mean many things to reasonable individuals familiar with the
securities industry, such as the predominant rate charged by others in the industry, the
average rate charged by Newbridge to its customers in comparable transactions, or the
going rate of underlying processing costs at a given moment. The term is therefore
ambiguous, and reference to extrinsic evidence is necessary to give it meaning. See
LaSalle Bank Nat'l Ass'n, 424 F.3d at 205; see also Bank of N.Y. v. First Millennium,
Inc., 607 F.3d 905, 914 (2d Cir. 2010) (term is ambiguous when term could suggest
multiple meanings to reasonable person in industry).
7

The parties agree that New York law governs the Customer Agreement. DE 91
at 14 n.6; DE 112 at 11 n.4.

18

The term "then prevailing rate" may be construed to reflect the dominant rates
used at a given time in comparable transactions. See Aycock v. Vantage Mgmt. Co.,
554 S.W.2d 235, 236–37 (Tex. 1977); see also American Heritage Dictionary 982
(2d coll. ed. 1985) (defining "prevailing" as "[m]ost frequent or common; predominant").
Plaintiffs have provided evidence of an industry standard requiring that handling fees
bear a reasonable relationship to actual processing costs. See supra at 13–17. This
industry standard would presumably reflect actual common practices across brokerdealers. The Court thus finds that Plaintiffs' evidence can support a reasonable
inference that handling fees at "then prevailing rate" must also bear a relationship to
actual costs.
Newbridge responds that handling fees across the industry "vary wildly," thus the
"then prevailing rate" cannot be established by reference to comparable transactions.
DE 91 at 8. Newbridge, however, fails to provide an alternative construction of the term.
Newbridge wisely does not go so far as to argue that the phrase "then prevailing rate" is
entirely without meaning. Cf. Galli v. Metz, 973 F.2d 145, 149 (2d Cir. 1992) (holding
that courts should avoid constructions that render terms meaningless). Still,
Newbridge's argument would carry more persuasive force had Newbridge proposed
some competing interpretation.
Plaintiffs' reading of the "then prevailing rate" also finds support in the Customer
Agreement's other provisions. Section 33 of the Customer Agreement provides that the
contract's terms shall be construed to conform with the applicable laws, regulations, or
rules. DE 86-4 at 6. Plaintiffs have provided evidence that Conduct Rule 2430 requires
handling fees to relate directly to actual processing costs. To the extent handling fees

19

at the "then prevailing rate" did not reflect Newbridge's processing costs, the fees would
appear to violate Conduct Rule 2430. Section 33, however, modifies the Customer
Agreement to avoid such an outcome. The Court views section 33 as requiring that the
term "then prevailing rate" be read to conform with Conduct Rule 2430, allowing only
those handling fees that reflect actual processing costs.
Finally, Remington and Finkel signed their contracts with Newbridge in 2008 and
2010, respectively. DE 86 ¶¶ 7–8. Newbridge argues that, because FINRA first
published guidance that handling fees must reflect the underlying processing costs in
2011, the parties could not have intended to incorporate FINRA's position into the
contracts they executed years earlier. DE 115 at 3; see also FINRA, News Release:
FINRA Fines Five Broker Dealers for Improper Handling Fees (Sept. 7, 2011), available
at http://www.finra.org/Newsroom/NewsReleases/2011/P124283. Conduct Rule 2430,
however, was first adopted as a rule of the NASD, FINRA's predecessor organization,
and was incorporated into FINRA's rules upon FINRA's 2007 formation. See generally
Busacca v. SEC, 449 F. App'x 886, 888 n.1 (11th Cir. 2011) (per curiam); FINRA,
FINRA Rules, http://www.finra.org/Industry/Regulation/FINRARules/ (last visited
Jan. 27, 2014). Prior to FINRA's existence, the NASD also condemned service fees
that did not reflect costs of the services purportedly underlying those fees, and brought
disciplinary actions for violations of Conduct Rule 2430 on that basis. See NASD,
Default Decision, No. ELI20040411-01, at 3–5 (Apr. 20, 2007) (finding violation of
Conduct Rule 2430 where fee charged in connection with purported clearing firm costs
did not arise from actual clearing firm costs); NASD, Letter of Acceptance, Waiver and
Consent, No. E3B20020456-01, at 4 (Sept. 25, 2006) (finding violation of Conduct

20

Rule 2430 where transfer fees were "largely unrelated to . . . actual costs of
processing"). The concept that fees for services must reflect the costs of the purported
underlying services thus long predates FINRA's 2011 guidance relating specifically to
handling fees. See also Martin v. Heinold Commodities, Inc., 643 N.E.2d 734, 747–48
(Ill. 1994) (holding that plaintiffs claiming fraud could recover amount of service fee
where fee was unrelated to purported underlying services). Viewing the facts in a light
most favorable to Plaintiffs, the Court rejects Newbridge's contention that the obligation
Plaintiffs derive from Conduct Rule 2430—to limit handling fees to amounts that reflect
the purported underlying costs—arose only subsequent to the execution of the parties'
contracts.8
In sum, Plaintiffs have provided evidence that the ambiguous term "then
prevailing rate" as applied to handling fees requires the fees to reflect actual processing
costs. The Court will accordingly deny Newbridge's request for summary judgment on
the breach-of-contract claim.
C. Finkel's Claims Are Not Duplicative
Newbridge further argues that Finkel's negligence claim should be dismissed as
duplicative because Newbridge owed no duty of care to Finkel beyond that imposed by
their contracts. DE 91 at 18–19. However, a plaintiff may maintain side-by-side
negligence and contract claims based on the same underlying acts if those acts violate
a legal duty independent of obligations imposed by the contract. Bullmore v. Banc of
Am. Sec. LLC, 485 F. Supp. 2d 464, 469–70 (S.D.N.Y. 2007); accord Tiara Condo.
Ass'n, Inc. v. Marsh & McLennan Cos., 110 So. 3d 399, 406–07 & n.6 (Fla. 2013). In
8

The Court similarly rejects Newbridge's contention that the proposed duty of
care underlying Finkel's negligence claim only arose in 2011. See DE 115 at 3.

21

her negligence claim, Finkel alleges that Newbridge breached a duty of care owed by
broker-dealers to their customers independent of its obligations under the Customer
Agreement. See supra at 13–17. The Court thus determines that the contract and
negligence claims are not duplicative.
D. Finkel Has Not Split Her Claims
Finally, Newbridge argues that Florida's rule against claim-splitting bars Finkel's
claims.9 According to Newbridge, Finkel brought a claim against it in a FINRA
arbitration "involving the same operative facts as this current lawsuit." DE 91 at 20.
Newbridge acknowledges that Finkel did not challenge its handling fees before FINRA.
Id. Nevertheless, because Finkel could have raised her handling-fee claims in that
arbitration, Newbridge contends that she is now barred from doing so.
Under Florida law, the prohibition against claim-splitting arises from the concept
of res judicata. Tyson v. Viacom, Inc., 890 So. 2d 1205, 1211 (Fla. 4th DCA 2005) (en
banc, per curiam). Res judicata bars a party from raising an identical claim in two
actions. Leahy v. Batmasian, 960 So. 2d 14, 18 (Fla. 4th DCA 2007). Claims are
identical if the "facts or evidence necessary to maintain the suit are the same in both
actions." Tyson, 890 So. 2d at 1209 (internal quotation marks omitted).
Here, Finkel's claims in the FINRA arbitration accused Newbridge of
recommending unsuitable investments, reckless investment management, breach of
fiduciary duty arising from Newbridge's allegedly self-interested actions, and failure to
supervise. DE 92-9 at 6–9. Finkel's claims notably did not involve allegations of
9

Newbridge also contends that Remington's contract claim is barred by the
claim-splitting doctrine. DE 91 at 20. The Court has already rejected Newbridge's
claim-splitting argument as it pertains to Remington in its Order granting Plaintiffs leave
to file their Third Amended Class Action Complaint. DE 84 at 6–7.

22

improper handling fees, a breach of contract arising from excessive handling fees, or a
breach of the standards set forth in Conduct Rule 2430. The facts and evidence
relating to Newbridge's alleged mismanagement of Finkel's investments at issue in the
FINRA arbitration are distinct from the facts and evidence in this action relating to
Newbridge's allegedly improper handling fees. The Court thus finds that the claims in
the FINRA arbitration and this action are not identical, and Florida's rule against claim
splitting does not bar Finkel's claims. See Lozman v. City of Riviera Beach, 713 F.3d
1066, 1074–78 (11th Cir. 2013).10
IV. MOTION TO AMEND
A. Legal Standard
A pretrial scheduling order "controls the course of the action unless the court
modifies it." Fed. R. Civ. P. 16(d). The "schedule may be modified only for good cause
and with the judge's consent." Fed. R. Civ. P. 16(b)(4). "This good cause standard
precludes modification unless the schedule cannot be met despite the diligence of the
party seeking the extension." Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1418 (11th Cir.
1998) (per curiam) (internal quotation marks omitted). Therefore, Plaintiffs must
establish good cause for their delay in seeking to amend the pleadings after the Court's
deadline for amendment before the Court may consider whether to grant leave to
amend under Rule 15. See id. at 1419; see also S. Grouts & Mortars, Inc. v. 3M Co.,
575 F.3d 1235, 1241 (11th Cir. 2009) (per curiam) ("A plaintiff seeking leave to amend

10

Newbridge assumes in its papers that Florida's rule on claim-splitting applies in
this action. Because the substance of Florida's claim-splitting rule does not justify the
relief Newbridge seeks, the Court will not address its applicability.

23

its complaint after the deadline designated in a scheduling order must demonstrate
'good cause' under Fed. R. Civ. P. 16(b).").
Once a party seeking untimely amendment has met the "good cause" standard of
Rule 16(b), the Court will examine whether the substance of the amendment meets the
requirements of Rule 15(a)(2). "[A] party may amend its pleading only with the
opposing party's written consent or the court's leave. The court should freely give leave
when justice so requires." Fed. R. Civ. P. 15(a)(2). The Supreme Court has construed
Rule 15(a)(2) as follows:
In the absence of any apparent or declared reason—such as undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue prejudice to
the opposing party by virtue of allowance of the amendment, futility of
amendment, etc.—the leave sought should, as the rules require, be "freely
given."
Foman v. Davis, 371 U.S. 178, 182 (1962); see also McKinley v. Kaplan, 177 F.3d
1253, 1258 (11th Cir. 1999) (per curiam). "Leave to amend a complaint is futile when
the complaint as amended would still be properly dismissed or be immediately subject
to summary judgment for the defendant." Cockrell v. Sparks, 510 F.3d 1307, 1310
(11th Cir. 2007) (per curiam).
B. Discussion
In the Motion to Amend, Plaintiffs seek the Court's leave to file a Fourth
Amended Class Action Complaint ("Proposed Complaint"). See DE 93. The Proposed
Complaint substantially narrows the allegations of the Third Amended Class Action
Complaint to remove any reference to Newbridge's allegedly improper discrimination
among its customers and eliminates Remington as a plaintiff. See generally DE 93-1.
Plaintiffs made these changes in response to concerns expressed in the Court's prior

24

Order Denying Motion for Class Certification. Finkel also seeks the Court's leave to file
a Renewed Motion for Class Certification and to Appoint Class Counsel. See DE 93-2.
1. The Court Will Permit Plaintiffs to File the Proposed Complaint
The time for the amendment of pleadings in this action expired on August 5,
2013. See DE 38. Plaintiffs, however, filed the Motion to Amend after that deadline, on
November 18, 2013. See DE 93. Plaintiffs must therefore establish good cause for
their delay in seeking amendment before the Court will consider the merits of the
proposed amendment. See Fed. R. Civ. P. 16(b)(4).
The Proposed Complaint addresses concerns expressed by the Court in its
Order Denying Motion for Class Certification. That Order issued on November 12,
2013. See DE 89. Plaintiffs could not have responded to the Order prior to its
issuance, but they did respond as promptly as possible by seeking to amend their
pleadings a mere six days after the Court's decision. See DE 93. The Court thus finds
Plaintiffs' delay in seeking amendment to be justified by good cause, and will address
the merits of the Motion to Amend under Rule 15.
Under the liberal standard of Rule 15, leave to amend should be freely given.
Foman, 371 U.S. at 182. Newbridge contends that amendment is inappropriate in this
case because the Proposed Complaint is subject to immediate summary judgment, and
thus futile. DE 106 at 7–11. In support, however, Newbridge merely reiterates its
arguments for summary judgment—arguments the Court has already rejected.
Because Finkel's claims are not subject to immediate summary judgment, the Court
finds that the filing of the Proposed Complaint is not futile. See Cockrell, 510 F.3d
at 1310. Nor does Newbridge demonstrate any other basis for denial of leave to

25

amend, such as bad faith, dilatory motive, or undue prejudice. See Foman, 371 U.S.
at 182. The Court therefore will grant leave to file the Proposed Complaint.
2. The Court Will Allow Remington to
Dismiss His Claim Without Prejudice
In conjunction with Plaintiffs' request to file the Proposed Complaint, Remington
also seeks to voluntarily dismiss his breach-of-contract claim without prejudice pursuant
to Fed. R. Civ. P. 41(a)(2). DE 97 at 5–6. Newbridge does not oppose the voluntary
dismissal, but requests that the dismissal be with prejudice. DE 106 at 9 n.2.
Newbridge argues that the claim should be barred as meritless for the reasons set forth
in its Motion for Summary Judgment. Id. The Court, however, has rejected the Motion
for Summary Judgment, and Newbridge has not stated any other grounds supporting its
argument for dismissal with prejudice. Nor does Newbridge suggest that Remington
seeks to dismiss his claim for any improper purpose, such as delay. The Court will
therefore exercise its discretion to dismiss Remington's contract claim without prejudice.
See Fed. R. Civ. P. 41(a)(2).
3. Finkel May File Her Renewed Motion for Class
Certification and to Appoint Class Counsel
Having narrowed the allegations of her pleadings in response to the Court's
denial of class certification, Finkel now also seeks leave to file a Renewed Motion for
Class Certification and to Appoint Class Counsel. Newbridge opposes Finkel's request,
arguing that Finkel seeks reconsideration of the Court's denial of class certification, and
that the high hurdle for reconsideration of a prior order has not been met. DE 106
at 4–6. The Court, however, does not construe Finkel's renewed request for class
certification as one for reconsideration of prior determinations, and will allow Finkel to
file her renewed motion.
26

In denying class certification, the Court found that Finkel's negligence claim
involving discriminatory pricing would require an assessment of the facts and
circumstances surrounding the reasons various fees were charged to class members at
each of Newbridge's offices. DE 89 at 9. The Court thus concluded that Finkel's claim
was not typical of the claims of customers of other offices. Id. Moreover, the Court
doubted that Finkel could adequately represent the interests of class members who
were the "winners" of the alleged discrimination, or in other words, those class members
who may have been charged discriminatorily lower fees. Id. at 10.
Finkel has now abandoned those aspects of her negligence claim based upon
unfair discrimination, and premises her amended claim solely upon Newbridge's
charging of handling fees unrelated to actual processing costs. See generally DE 93-1.
Finkel therefore does not seek to relitigate the Court's prior determinations regarding the
difficulties presented by allegations of discrimination. Instead, Finkel seeks certification
of a newly defined class posing different issues for the Court's consideration.
The Court, of course, may revisit a grant or denial of class certification at any
time. Fed. R. Civ. P. 23(c)(1)(C); Culpepper v. Irwin Mortg. Corp., 491 F.3d 1260, 1275
(11th Cir. 2007). The Court finds that the narrowed allegations of the Proposed
Complaint provide sufficient grounds to warrant review of the issue. As the submissions
of the parties will aid the Court in reaching the correct determination, the Court will allow
Finkel to file her Renewed Motion for Class Certification and to Appoint Class Counsel.

27

V.

CONCLUSION
It is accordingly ORDERED AND ADJUDGED as follows:
(1)

Newbridge's Motion In Limine to Exclude Testimony from Plaintiffs' Expert, Gene
E. Carasick, Esq. [DE 88] is DENIED.

(2)

Newbridge's Motion for Summary Judgment [DE 91] is DENIED.

(3)

Plaintiffs' Motion to Voluntarily Dismiss Plaintiff Remington's Claim, and for Leave
for Plaintiff Finkel to File Her Fourth Amended Complaint and Renewed Motion
for Class Certification [DE 93] is GRANTED. Plaintiff Remington's claim for
breach of contract is DISMISSED without prejudice. Plaintiff Finkel is directed
to refile her Fourth Amended Class Action Complaint and her Renewed Motion
for Class Certification and to Appoint Class Counsel in accordance with Rule
15.1 of the Local Rules of the United States District Court for the Southern
District of Florida.
DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County,

Florida, this 7th day of February, 2014.

Copies provided to:
Counsel of record via CM/ECF

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