Sandru v. TD Ameritrade, Inc.
Filing
32
MEMORANDUM DECISION AND ORDER granting in part and denying as moot in part 7 Motion to Dismiss or Compel Arbitration; denying as moot 16 Claimants Motion for Summary Judgment; denying as moot 17 Plaintiff's Supplemental Request to Dismiss the Defendants Motion; denying as moot 21 Motion to Strike; denying as moot 23 Request for Permission to File an Amended Statement of Claim; denying as moot 24 Plaintiff Motions that the Court does not have Subject matter Jurisdiction and the D efendants Removal to Federal Court was Improper and Moves that the Case be Remanded Back to the State Court; denying as moot 31 Motion to Strike. The Clerk of the Court shall administratively close this case. The parties may seek to re-open the cas e if any issues related to the arbitration arise that can appropriately be brought to the Court for resolution. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
PATRICK SANDRU,
Plaintiff,
Case No. 1:13-cv-00076-REB
v.
MEMORANDUM DECISION
AND ORDER
TD AMERITRADE, INC.,
Defendant.
I.
INTRODUCTION
Pending before the Court is Defendant TD Ameritrade, Inc.’s Motion to Dismiss or
Compel Arbitration. (Dkt. 7). Ameritrade requests the Court dismiss Plaintiff’s
Complaint with prejudice under Federal Rule of Civil Procedure 12(b)(6) or, in the
alternative, compel Plaintiff to arbitrate his claims with the Financial Industry Regulatory
Authority.
Plaintiff responded to Defendant’s Motion to Dismiss/Compel with two filings
(Dkts. 12 & 13) and then filed a Motion for Summary Judgment (Dkt. 16), a
“Supplemental Request to Dismiss the Defendant[’]s Motion to Dismiss” (Dkt. 17), and a
“Request for Permission to File and Amended Statement of Claim” (Dkt. 23). Plaintiff
also argues that the Court does not have subject matter jurisdiction in this case and it was
MEMORANDUM DECISION & ORDER - 1
improperly removed. (Dkt. 24). Defendant asks that the Court strike Plaintiff’s
Supplemental Request to Dismiss (Dkt. 17) and a variety of other filings not authorized
under the Federal Rules of Civil Procedure or the Court’s Local Rules. (Dkts. 21-1 &
31).
II.
BACKGROUND
On January 17, 2013, Plaintiff Patrick Sandru (“Sandru”), appearing pro se, filed a
Complaint in Idaho state small claims court, seeking to require Defendant TD
Ameritrade, Inc. (“Ameritrade”) to deliver physical certificates of Bancorp International
Group Inc. (“Bancorp”) stock he purchased for $609.95 through his Ameritrade account.
Pl.’s Rebuttal, p. 2 (Dkt. 12). Plaintiff’s Complaint alleges, in full:
On 08/30/05 I bought 30,000 shares in Bancorp International
Group Inc. through my broker TD Ameritrade Inc. On
09/27/11 I asked for a certificate for purchased shares and this
was refused. I have asked several times since then and all my
requests have been refused. I asked for a refund and that too
was refused on the grounds that my trades were good and
valid. Now I want a physical certificate for my shares.
Daniels Declr., Ex. 1. See also Pl.’s Rebuttal, p. 1 (Dkt. 12). Ameritrade timely sought
removal of Sandru’s Complaint to this Court on February 13, 2013, asserting that
“[a]lthough Plaintiff’s complaint is perfunctory, [he] appears to assert a right to delivery
of physical shares of stock pursuant to SEC Rule 15c3-3 . . .” Notice of Removal, p. 2
(Dkt. 1).
MEMORANDUM DECISION & ORDER - 2
Sandru first argued in response to the Motion to Dismiss that he has an “Absolute
Right” under Section 15(c)(3) of the Securities Exchange Act of 19341 to “become a
shareholder of record and be shown on the company books as a shareholder”. Pl.’s
Rebuttal, p. 1 (Dkt. 12). He also argued that he wants to be listed on Bancorp’s books “as
a shareholder, not as a beneficial shareholder” and he can only do that if he has a physical
certificate. Pl.’s Rebuttal, p. 3 (Dkt. 12). Finally, his initial response asserted that
Ameritrade “breached [its] own contractual obligations to comply with the Federal
securities laws as specified in their own brokerage agreement.” Id., p. 2.
Although Sandru’s Complaint did not cite to the Securities and Exchange Act, he
readily relied on it as the basis for his Complaint in his response to the Motion to Dismiss
(see Dkt. 12). As this case progressed, and presumably because Ameritrade pointed out
that “[n]umerous courts have held that Section 15(c)(3) of the Securities Exchange Act
does not contain an express or implied private right of action,”2 Sandru sought other legal
grounds for his Complaint. His Motion for Summary Judgment also referred to claims
1
Section 15(c)(3) of the Securities Exchange Act of 1934 and SEC Rule 15c3-3
govern brokers’ responsibilities to customers and custody and delivery of shares.
2
See, e.g., Kidder Peabody & Co., Inc. v. Unigestion Intern., Ltd., 903 F.Supp.
479, 494 (S.D.N.Y. 1995); Carapico v. Philadelphia Stock Exchange, Civ. A. No.
93–3066, 1994 W L 50295, *2-3 (E.D.Pa. Feb. 14, 1994); Def.’s Mem., pp. 7-8 (Dkt 7-1)
(citing other cases).
MEMORANDUM DECISION & ORDER - 3
brought under the Uniform Commercial Code and a Nevada statute. Pl.’s Mot. Summ.
Jdmt., pp. 1-3 (Dkt. 16).3
However, it was not until a more recent filing—in which he requested that the case
be remanded to state court—that Sandru argued this case involves “a simple property
dispute and amounts to a chose in action.” Pl.’s Mem., p 1 (Dkt. 24-1). Despite his
reliance on the Securities and Exchange Act in his initial response to the Motion to
Dismiss, Sandru emphasizes in his request for remand that nothing in his original
Complaint references that Act. Pl.’s Mem., p 2 (Dkt. 24-1).
In short, Sandru repeatedly remodeled his claim and filed briefing not authorized
by the rules, thereby adding to the materials potentially relevant to the motion to dismiss
and delaying a decision on the motion to dismiss while shifting the basis of his claim.
The Court is mindful that Sandru is appearing pro se in this case, but that status “does not
relieve the party of the burden of alleging sufficient facts on which a recognized legal
claim could be based.” Shaw v. Lehman Bros. Bank, FSB, CV09–40–S–BLW, 2009 WL
1521566 *1 (D.Idaho May 28, 2009) (citing Kerr v. Wanderer & Wanderer, 211 F.R.D.
625, 629 (D.Nev. 2002)). Although the Court will “construe the allegations of the
complaint liberally and [afford Sandru] the benefit of any doubt.” Shaw, 2009 WL
1521566 *1 (citing Wanxia LIAO v. Ashcroft, No. C 08–2276 PJH, 2009 WL 636116, *2
3
In yet another filing, his final to date, Sandru asserts that his claim is brought
under the Uniform Commercial Code, revised Article 8, which is governed by state law.
See Pl.'s Mem., p.5 (Dkt. 27) (citing U.C.C. § 8-508).
MEMORANDUM DECISION & ORDER - 4
(N.D.Cal. 2009)), it also will rely on Sandru’s initial representations about the legal
grounds for his Complaint and will not “supply essential elements of the claim that were
not initially pled.” Id. (citing Ivey v. Bd. of Regents of the Univ. of Alaska, 673 F.2d 266,
268 (9th Cir. 1982)).
III.
A.
DISCUSSION
Removal Jurisdiction
The Court has an independent duty to assess whether it has jurisdiction over this
action. United Investors Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir.
2004). “A defendant may remove an action to federal court based on federal question
jurisdiction or diversity jurisdiction.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042
(9th Cir. 2009). “Federal jurisdiction must be rejected if there is any doubt as to the right
of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).
See also DaPron v. Verska, No. 1:12–CV–00246–EJL2013, WL 959335, *3 (D.Idaho
Mar. 12, 2013.
However, whether a case “arises under” federal law, must be determined from
Sandru’s own statement of his claim. See Holmes Group, Inc. v. Vornado Air Circulation
Sys., Inc., 535 U.S. 826, 830–31 (2002) (focusing on the plaintiff’s complaint). Although
Sandru did not list the legal grounds for his cause of action in his Complaint, he initially
acquiesced to removal and asserted the he had a right to possess the Bancorp certificates
under the Securities and Exchange Act. He maintained that position in more than one
brief, only changing course as to the grounds for his claim after Ameritrade pointed out
MEMORANDUM DECISION & ORDER - 5
that Section 15(c)(3) of the Securities Exchange Act, although largely covering the filed
of potential claims for actions involving nationally traded securities, does not provide a
private right of action for the type of relief Sandru seeks here. See discussion at Section
II supra.
The operative time to consider whether removal is proper is when the removal
petition is filed. See Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159 F.3d
1209, 1211 (9th Cir. 1998). Although jurisdiction must be rejected if there is any doubt
as to the right of removal, Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996), here,
Sandru asserted a right under Section 15(c)(3) of the Securities Exchange Act after his
Complaint was removed to federal court and he did not list any other legal grounds for his
Complaint either in his Complaint or his initial briefing in this case. See, e.g., Dkt. 12.
Moreover, the federal government has broadly pre-empted state regulations for nationally
traded securities that “differ from, or are in addition to” the requirements of Section 15 of
the Exchange Act. See 15 U.S.C. § 78o(i)(1). Thus, even if private enforcement under
Section 15(c)(3) of the Securities Exchange Act is precluded, the Act may, in some
circumstances, provide the only grounds for a remedy when a dispute arises regarding
nationally traded securities. Accordingly, the Court finds that federal question
jurisdiction existed at the time of removal.
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B.
Motion to Compel Arbitration
Ameritrade argues that Sandru’s claim must be arbitrated pursuant to his account
agreement with Ameritrade. See Def.’s Mot. (Dkt 7). Although this was raised as an
alternative to Ameritrade’s proposed dismissal of this case, Sandru asserts that he has
raised other claims in addition to any potential claim raised under the Securities and
Exchange Act (whether such a claim is ultimately viable or not); thus, dismissal of any
claim under Section 15(c)(3) of the Securities Exchange Act of 1934 will not necessarily
result in dismissal of the entire case. Regardless, Sandru’s remedy is to arbitrate this
dispute, whatever the particular grounds are for his assertion that he is entitled to a refund
or possession of physical certificates.
Sandru’s agreement with Ameritrade includes the following “Terms and
Conditions”, in bold type:4
All controversies concerning (a) any transaction, (b) the
construction, performance or breach of this or any other
agreement, whether entered into prior to, on or after the date
of this Agreement, or (c) any other matter which may arise
between Ameritrade or its representatives and me shall be
determined by arbitration in accordance with the rules of the
National Association of Securities Dealers, Inc.
4
Under Rule 12(b)(6), the Court may consider matters that are subject to judicial
notice. Mullis v. United States Bank, 828 F.2d 1385, 1388 (9th Cir. 1987). The Court
may take judicial notice “of the records of state agencies and other undisputed matters of
public record” without transforming the motions to dismiss into motions for summary
judgment. Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866,
n. 1 (9th Cir. 2004). The Court may also examine documents referred to in the complaint,
although not attached thereto, without transforming the motion to dismiss into a motion
for summary judgment. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005).
MEMORANDUM DECISION & ORDER - 7
See Daniels Dec., Ex. 6, at 7-8. The Federal Arbitration Act provides that “[a] written
provision in any . . . contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or transaction . . . shall be
valid, irrevocable, and enforceable . . . .” 9 U.S.C. § 2. Although the National
Association of Securities Dealers, Inc., is now referred to as the Financial Industry
Regulatory Authority (“FINRA”), submitting claims to binding arbitration was the
parties’ contemplated remedy. The fact that the name of the arbitration entity has
changed does not alter the parties’ agreement to arbitrate claims arising under their
agreement.
Plaintiff suggests that Ameritrade waived their right to compel arbitration by
removing this case to federal court. Dkt. 27, pp. 5-6. The Court disagrees. See Bauscher
v. Brookstone Securities, Inc., 2012 WL 3100383, at *5-*6 (D. Idaho, July 30, 2012) (no
waiver when defendant delayed filing motion to compel arbitration three-and-one-half
months after removal). Moreover, the dispute raised here, i.e., whether Ameritrade must
provide Sandru with the physical certificates or a refund, falls squarely within the
agreement to arbitrate all controversies regarding the performance or breach of any of the
parties’ agreements. See Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1210 (9th Cir.
1998) (applying “ordinary state-law principles that govern the formation of contract” to
interpreting arbitration agreements).
Requiring arbitration of any claims (however modeled) that Sandru could assert
under the agreement comports with the procedure other similarly allegedly aggrieved
MEMORANDUM DECISION & ORDER - 8
purchasers of Bancorp shares have followed. Sandru points out that: “The defendants
have faced five other such claims as mine for delivery of certificates from other
[Bancorp] Investors and of those cases four have been compelled to arbitration and one
has been arbitrated and an award issued.” Dkt. 23, p. 1. Accordingly, requiring
arbitration of this dispute is not only compelled by the application of contract principles
to the parties’ agreement in this case, but also is a process that has been used, sometimes
successfully, by others who purchased Bancorp shares from Ameritrade. For all these
reasons, the Court will grant Ameritrade’s motion to compel arbitration.
CONCLUSION
Whatever the legal grounds for Sandru’s Complaint, those claims must be
submitted to arbitration. Therefore, it is not necessary for the Court to consider whether
any formal amendment of Sandru’s Complaint should be allowed. Regardless of the label
to be put on any Sandru’s claims, those claims seek a refund or delivery of physical
certificates, fall within the parties’ arbitration agreement, and accordingly must be
arbitrated.
MEMORANDUM DECISION & ORDER - 9
ORDER
NOW THEREFORE IT IS HEREBY ORDERED:
1)
Defendant’s Motion to Dismiss or Compel Arbitration (Dkt. 7) is
GRANTED, in part, as set forth above. Specifically, all claims asserted by
Sandru must be submitted to arbitration. To the extent Defendant’s Motion
seeks any other relief, it is DENIED, as moot at this point in time.
2)
All other motions/requests (Dkts. 7, 16, 17, 21, 23, 24, and 31) also are
DENIED as moot.
3)
This Clerk of the Court shall administratively close this case. The parties
may seek to re-open the case if any issues related to the arbitration arise that
can appropriately be brought to the Court for resolution.
DATED: September 17, 2013
Honorable Ronald E. Bush
U. S. Magistrate Judge
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