Klein v. TD Ameritrade Holding Corporation, et al
ORDER that the Zola plaintiffs' Motion to Coordinate with Verdiak [sic], Lerner, and Sarbacker or, in the Alternative, to Appoint Zola's Counsel as Lead Counsel in a Consolidated Action (Filing No. 25 in Case 8:14CV288) is denied. The Verdi eck and Lerner plaintiffs' Joint Motion to appoint Finkelstein & Krinsk, Blood Hurst & O'Reardon, and Robbins Arroyo as Interim Class Counsel (Filing No. 21 in Case 8:14CV289 and Filing No. 23 in Case 8:14CV325) is denied. The Sarbacker pla intiff's Motion to Consolidate the Four Related Actions Against TD Ameritrade (Filing No. 12 in Case 8:14CV341) is denied. The Sarbacker plaintiff's Motion to Appoint Plaintiff Michael Sarbacker as Lead Plaintiff and Robbins Geller Rudman & Dowd LLP as Lead Counsel (Filing No. 18 in Case 8:14CV341) is denied. The defendants' Motion to Consolidate (Filing No. 32 in Case 8:14CV288; Filing No. 29 in Case 8:14CV289; Filing No. 31 in Case 8:14CV325; Filing No. 38 in Case 8:14CV341; and Filing No. 50 in Case 8:14CV396) is denied. The defendants shall have to on or before March 19, 2015, to file answers or otherwise respond to the complaints in each action. Ordered by Magistrate Judge Thomas D. Thalken. (JSF)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JAY ZOLA and
JEREMIAH JOSEPH LOWNEY,
TD AMERITRADE, INC., and
TD AMERITRADE CLEARING, INC.,
TD AMERITRADE, INC.,
TD AMERITRADE, INC.,
TD AMERITRADE HOLDING
TD AMERITRADE, INC.,
TD AMERITRADE CLEARING, INC.,
FREDRIC J. TOMCZYK, and
GERALD J. KLEIN,
TD AMERITRADE HOLDING
TD AMERITRADE, INC., and
FREDRIC J. TOMCZYK,
This matter is before the court on several interrelated motions filed by the parties
in five related cases. The motions seek varying degrees of coordination between the
cases from consolidating the five cases for all purposes to merely coordinating initial
discovery and progression.
In the event of consolidation, the plaintiffs’ each seek
appointment as lead plaintiff and class counsel. The motions have been fully briefed.
The plaintiffs consist of the defendants’ customers challenging the defendants’
practice of routing virtually all customers’ orders to certain stock exchanges for trading
based on a single factor: maximizing the payment-for-order-flow income the defendants
receive, rather than a wide variety of factors. See Filing No. 25-1 in Case 8:14CV288 Plaintiffs’ Brief p. 4-6; see also Filing No. 32 in Case 8:14CV288 - Defendants’ Motion
p. 3. The various plaintiffs filed five separate actions, between August 21, 2014, and
October 31, 2015, which have now been removed or transferred to this court. All of the
actions are in the beginning stages and the defendants have not yet filed answers or
otherwise responded to the complaints. The defendants are waiting resolution of the
current motions regarding consolidation prior to such responses. The various actions
allege related, but not identical claims, with some overlap, including breach of contract,
unjust enrichment, breach of fiduciary duty, fraud, misrepresentation, violations of
Nebraska’s Consumer Protection Act, Neb. Rev. Stat. § 59-1601, et seq., and, finally,
claims brought under §§10(b) and 20(a) of the Securities Exchange Act of 1934, which
are subject to the Private Securities Litigation Reform Act of 1995 (PSLRA). The parties
agree the claims in each of the actions implicate the Securities Litigation Uniform
Standards Act of 1998 (SLUSA).
The Zola plaintiffs seek an order coordinating the scheduling for these five
related cases pending resolution of any motions to dismiss. See Filing No. 25 in Case
8:14CV288 - Motion. The Zola plaintiffs argue that due to the unique pleading issues
created by SLUSA, the cases should only be consolidated after the court determines
which claims may proceed subsequent to the defendants’ forthcoming motions to
dismiss. See Filing No. 25-1 in Case 8:14CV288 - Brief p. 3. The Zola plaintiffs assert
a single claim for relief under a breach of contract theory. Id. at 4. The Zola plaintiffs
contend this claim may be the only one to survive a motion to dismiss, but may be
dismissed if consolidated with other claims precluded by SLUSA. Id. The Zola plaintiffs
suggest neither the defendants nor the court is unduly burdened by separate motions to
dismiss, particularly if discovery is stayed, because although the facts are similar in the
cases, the legal claims are unique and fairness requires individual examination. Id. at
5. In the alternative and in the event of consolidation, the Zola plaintiffs seek additional
time to prepare a consolidated complaint and appointment as lead plaintiffs and
counsel. Id. at 3.
The Verdieck and Lerner plaintiffs contend Rule 42 consolidation is appropriate,
however these plaintiffs suggest the scope of consolidation should be limited at this time
to allow each of the actions to “maintain their separate identities.” See Filing No. 24 in
Case 8:14CV289 - Brief p. 3. The joint Verdieck and Lerner plaintiffs argue each
group of plaintiffs approached the lawsuits differently, which will likely result in “very
different outcomes” on motions to dismiss due to SLUSA. Id. at 3-4. These plaintiffs
note the cases do share common questions of fact, but they also “assert fundamentally
different legal and factual allegations and theories” preventing consolidation from
appropriately balancing the interests of the parties and the court. Id. at 5, 7. These
plaintiffs suggest deferring the appointment of lead plaintiff and class counsel until the
motions to dismiss are resolved. Id. at 8. Nevertheless, if those decisions are made at
this time, the Verdieck and Lerner plaintiffs seek they be appointed. Id. at 8-11.
The Sarbacker plaintiff argues the first four related cases (excluding Klein)
should be consolidated for all purposes because they “present substantially similar
factual and legal issues involving defendants’ misconduct, and therefore [consolidation
would] reduce duplication in obtaining evidence, limit the need for multiple proceedings,
minimize the time and expense for all parties involved, and promote efficiency in the
Court.” See Filing No. 12 in Case 8:14CV341 - Motion p. 3; Filing No. 36 in Case
8:14CV341 - Brief p. 4 n.6 (noting Klein should not be consolidated due to its “PSLRAspecific requirements that do not apply to the other actions”).
Sarbacker plaintiff seeks he be appointed lead plaintiff and his counsel be appointed
lead counsel. See Filing No. 18 in Case 8:14CV341 - Motion.
The Klein plaintiff opposes consolidation with the four other actions, but does not
oppose coordination for certain common discovery.
See Filing No. 65 in Case
8:14CV396 - Brief p. 4. Specifically, the Klein plaintiff contends he shares only one
overlapping claim - breach of fiduciary duty - with the Verdieck and Lerner plaintiffs.
Id. at 3. Otherwise, the Klein plaintiff states his claims are based on federal securities
law, while the remaining cases allege only state law claims such as breach of contract,
unjust enrichment, and violations of state law. Id. The Klein plaintiff denies the matters
warrant consolidation under these circumstances because the claims are distinct and
governed by different considerations, particularly the PSLRA pleading requirements,
with materially different litigation strategies. Id. at 4. In any event, the Klein plaintiff
states lead plaintiffs and lead counsel were appointed prior to transfer of the case from
the United States District Court of the District of New Jersey to this district, and they
should appropriately remain so appointed. Id. at 8-13.
The TD Ameritrade defendants seek to have the five cases consolidated
pursuant to Fed. R. Civ. P. 42 and, after lead plaintiffs and lead counsel are determined,
the plaintiffs file a consolidated and amended complaint. The defendants argue each of
the cases are “based on substantially the same core allegations that TD Ameritrade
failed to meet its best execution obligations in routing customer orders to market
See Filing No. 33 in Case 8:14CV288 - Brief p. 3.
defendants contend the plaintiffs’ claims are “substantially overlapping” and seek similar
relief. Id. at 6. The defendants state they will suffer undue burden by having to defend
five separate actions, even if only for filing motions to dismiss and the attendant briefing.
Similarly, the defendants indicate the court is burdened by having to resolve
duplicative motions. Id. The defendants deny the plaintiffs would suffer any prejudice
through consolidation despite possible SLUSA standards issues, which should only be
considered on the fully briefed forthcoming motions to dismiss.
Id. at 7.
defendants contend the plaintiffs’ SLUSA concerns stem from the nature of the cases
as class actions, rather than whether these separate class action matters are
consolidated. Id. Further, the defendants argue the court would, more efficiently in a
single consolidated action, be able to determine the merits of each claim,
notwithstanding potentially different legal standards and theories. See Filing No. 40 in
Case 8:14CV288 - Brief p. 4.
Consolidation of separate actions is governed by Fed. R. Civ. P. 42(a), which
If actions before the court involve a common question of law
or fact, the court may:
join for hearing or trial any or all matters at issue in
consolidate the actions; or
issue any other orders to avoid unnecessary cost or
“Consolidation of separate actions presenting a common issue of law or fact is
permitted under Rule 42 as a matter of convenience and economy in judicial
The district court is given broad discretion to decide whether
consolidation would be desirable and the decision inevitably is contextual. The consent
of the parties is not required by the rule.” 9 Charles A. Wright & Arthur R. Miller,
Federal Practice & Procedure § 2383 (2d ed. 1994). Whether to grant a Rule 42(a)
motion to consolidate is within the sound discretion of the court. United States Envtl.
Prot. Agency v. Green Forest, 921 F.2d 1394, 1402-03 (8th Cir. 1990). The court
must weigh the saving of time and effort that would result from consolidation against
any inconvenience, expense, or delay that it might cause. Wright & Miller, § 2383.
“[D]istrict courts generally take a favorable view of consolidation . . . .” Id. Furthermore,
“[a]ctions involving the same parties are apt candidates for consolidation.” Id. § 2384.
However, under Fed. R. Civ. P. 42(b), consolidation is considered inappropriate “if it
leads to inefficiency, inconvenience, or unfair prejudice to a party.”
EEOC v. HBE
Corp., 135 F.3d 543, 551 (8th Cir. 1998).
Although the cases may present some common issues of law and fact, the cases
remain at an early stage of litigation, involve diverse plaintiffs, different causes of action
and, in some cases, different defendants. While it is possible consolidation, at a later
time, may promote judicial economy, inconvenience, inefficiency, and unfair prejudice to
the plaintiffs suggests consolidation is inappropriate prior to the initiation of discovery.
As suggested by the defendants, the court need not resolve the technical SLUSA issues
at this time, however the plaintiffs present a sufficient showing their separate interests in
case management and presentation may suffer if the cases are consolidated prior to
resolution of the defendants’ forthcoming motions to dismiss. This prejudice outweighs
the minimal inconvenience potentially suffered by the defendants in responding to the
separate plaintiffs’ distinct complaints and the court to the defendants’ motions to
dismiss. Discrete consideration of the separate cases will likely benefit the parties and
the court for future proceedings, including the class certification process, and,
ultimately, decrease the delay suggested by the parties in consolidating the matters
prior to the defendants’ response to the complaints.
Accordingly, the motions to
consolidate are denied and the court need not yet determine appointment of lead
plaintiffs or counsel. The defendants will have three weeks to file answers or otherwise
respond to the complaints.
If motions to dismiss are filed, the standard briefing
schedule will apply to any responses and replies. Extensions of these deadlines will be
granted only upon individual showings of good cause with factual and legal justification.
IT IS ORDERED:
The Zola plaintiffs’ Motion to Coordinate with Verdiak [sic], Lerner, and
Sarbacker or, in the Alternative, to Appoint Zola’s Counsel as Lead Counsel in a
Consolidated Action (Filing No. 25 in Case 8:14CV288) is denied.
The Verdieck and Lerner plaintiffs’ Joint Motion to appoint Finkelstein &
Krinsk, Blood Hurst & O’Reardon, and Robbins Arroyo as Interim Class Counsel (Filing
No. 21 in Case 8:14CV289 and Filing No. 23 in Case 8:14CV325) is denied.
The Sarbacker plaintiff’s Motion to Consolidate the Four Related Actions
Against TD Ameritrade (Filing No. 12 in Case 8:14CV341) is denied.
The Sarbacker plaintiff’s Motion to Appoint Plaintiff Michael Sarbacker as
Lead Plaintiff and Robbins Geller Rudman & Dowd LLP as Lead Counsel (Filing No. 18
in Case 8:14CV341) is denied.
The defendants’ Motion to Consolidate (Filing No. 32 in Case 8:14CV288;
Filing No. 29 in Case 8:14CV289; Filing No. 31 in Case 8:14CV325; Filing No. 38 in
Case 8:14CV341; and Filing No. 50 in Case 8:14CV396) is denied.
The defendants shall have to on or before March 19, 2015, to file
answers or otherwise respond to the complaints in each action.
Pursuant to NECivR 72.2 any objection to this Order shall be filed with the Clerk
of the Court within fourteen (14) days after being served with a copy of this Order.
Failure to timely object may constitute a waiver of any objection. The brief in support of
any objection shall be filed at the time of filing such objection. Failure to file a brief in
support of any objection may be deemed an abandonment of the objection.
Dated this 26th day of February, 2015.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge
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