In re: JPMorgan Foreign Exchange Trading Litigation
OPINION & ORDER re: 45 MOTION to Dismiss The Consolidated Amended Class Action Complaint filed by JPMorgan Chase & Co., JPMorgan Chase Bank, N.A. The defendants' February 15 motion to dismiss the Amended Complaint is granted. The Clerk of Court shall close the case. (Signed by Judge Denise L. Cote on 7/3/2013) (tro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
LOUISIANA MUNICIPAL POLICE EMPLOYEES’
RETIREMENT SYSTEM, individually and on :
behalf of all others similarly situated, :
JPMORGAN CHASE & CO. and JPMORGAN CHASE :
12 Civ. 6659 (DLC)
OPINION & ORDER
John C. Browne
Stefanie J. Sundel
Bernstein Litowitz Berger & Grossmann LLP
1285 Avenue of the Americas
New York, NY 10019
Joseph H. Meltzer
Kessler Topaz Meltzer & Check LLP
280 King of Prussia Road
Radnor, PA 19087
Susan L. Saltzstein
Marco E. Schnabl
Jeffrey S. Geier
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
DENISE COTE, District Judge:
Plaintiff Louisiana Municipal Police Employees’ Retirement
System (“LAMPERS”) brings suit individually and on behalf of all
others similarly situated against JPMorgan Chase & Co. (“JPM”)
and JPMorgan Chase Bank, N.A. (the “Bank”) (collectively
“JPMorgan” or “defendants”), for charging undisclosed mark-ups
on foreign exchange transactions that JPMorgan executed for
This Opinion grants the defendants’ motion
The following facts are taken from the Consolidated Amended
Class Action Complaint (“Amended Complaint”) and documents
integral to it. 1
JPM owns and operates the third-largest
custodian bank in the world.
The Bank is a subsidiary of JPM
and provides custodial banking services to institutional
LAMPERS -- one such institutional investor -- is a
pension fund and retirement system that provides retirement
benefits to full-time municipal police officers and employees in
the State of Louisiana.
Since 2005, LAMPERS has been a
custodial client of the Bank.
It uses the Bank’s custodial
services for multicurrency trading and settlements, accounting,
portfolio servicing and reporting, and income collection.
The integral documents include the Global Custody Agreement
executed by LAMPERS and the Bank, the accompanying Fee Schedule,
a “Suppress AutoFX Form” which was executed by the plaintiff,
certain regulatory disclosures sent by the Bank to LAMPERS and
other custodial clients, and a page of defendants’ website.
Custodial clients of the Bank, including LAMPERS, often
invest in multiple securities of foreign issuers and
occasionally engage in direct currency trading as well.
result of these activities, custodial clients regularly need to
convert U.S. Dollars into foreign currencies, or foreign
currencies into U.S. Dollars.
This conversion is accomplished
through a Foreign Exchange or “FX” transaction.
In an FX
transaction one currency is bought or sold in exchange for
another currency at a particular rate that is available in the
The Bank offers FX services to its custodial
clients and regularly executes FX transactions at its customers’
At its core, the present action is based on the
allegation that the Bank executed certain FX transactions at one
rate, but charged the custodial clients a different rate,
resulting in profit for the Bank, and that the Bank failed to
disclose this practice to its custodial clients.
The agreement between LAMPERS and the Bank regarding the
Bank’s provision of custodial services is embodied in a Global
Custody Agreement (“Custody Agreement”), which the parties
executed on July 28, 2005.
The Custody Agreement “sets out the
terms governing custodial, settlement and certain other
associated services offered by [the] Bank to Customer” and
provides that the “[B]ank will be responsible for the
performance of only those Securities custody duties that are set
forth in this Agreement.”
In the Custody Agreement, LAMPERS
acknowledged that the “Bank is not providing any legal, tax or
investment advice in connection with the services hereunder.”
Section 1.2 of the Custody Agreement defines certain terms
used in the agreement.
The words “custodial” and “services” are
Section 2 of the Custody Agreement is entitled “What Bank
is Required to Do.”
This section, which includes fifteen
subsections, delineates a number of the Bank’s obligations under
the Custody Agreement.
For instance, section 2.1 states that
the Bank “will establish and maintain” both a Securities Account
-- to hold the customer’s financial assets -- and a Cash Account
-- to hold the customer’s cash.
Section 2 also requires the
Bank to segregate the client’s assets, to use reasonable care in
settling trades, to make certain book entries, to notify the
client of certain events, to forward certain proxy material, to
allow auditing, and to hold assets generally in the country in
which their principal trading market is located.
The Bank is
also required to perform certain ministerial acts, like
presenting for redemption any financial asset for which the Bank
has received notice of a call, or executing certificates
required to obtain payments on financial assets.
The last subsection is subsection 2.15, which is entitled
“Foreign Exchange Transactions,” and is at the heart of this
This subsection provides that:
To facilitate the administration of Customer’s trading
and investment activity, Bank may, but will not be
obliged to, enter into spot or forward foreign
exchange contracts with Customer, or an Authorized
Person, and may also provide foreign exchange
contracts and facilities through its Affiliates or
Subcustodians. Instructions, including standing
Instructions, may be issued with respect to such
contracts, but Bank may establish rules or limitations
concerning any foreign exchange facility made
available. In all cases where Bank, its Affiliates or
Subcustodians enter into a master foreign exchange
contract that covers foreign exchange transactions for
the Accounts, the terms and conditions of that foreign
exchange contract and, to the extent not inconsistent,
this Agreement, will apply to such transactions.
The parties at no point entered into a
master foreign exchange contract.
The Custody Agreement further states that the “Customer
authorizes Bank to accept and act upon any Instructions received
by it without inquiry.”
Section 7.4 of the Custody Agreement
warns that the Bank may have a “potential conflict of duty or
interest” with respect to a client’s transactions, and provides
The client therefore “acknowledges” that the Bank
“may be in possession of information tending to show that the
Instructions received may not be in the best interests of
Customer but that Bank is not under any duty to disclose any
The Custody Agreement also describes the “fees, expenses
and other amounts” that LAMPERS owes to the Bank for the
services that the Bank provides. 2
In particular, section 4.1,
Customer will pay Bank for its services hereunder the
fees set forth in Schedule A hereto or such other
amounts as may be agreed upon in writing from time to
time, together with Bank’s reasonable out-of-pocket or
incidental expenses, including, but not limited to,
legal fees and tax or related fees incidental to
processing by governmental authorities, issuers, or
The accompanying Fee Schedule, which sets
forth just four figures, includes a “Custody and Accounting Flat
Fee Per Year” of $85,900.00.
No Transaction Fees.”
Beneath this figure appears “Note:
The Fee Schedule also lists three fees
that are assessed “per account per year.”
These fees are for
“Compliance,” “Alternative Asset Services,” and “Performance
Measurement,” and no one of these fees exceeds $4,500.
Finally, pursuant to section 2.11, the Bank is required to
send to the customer a formal statement of account, and is
protected from claims arising from the disclosures in that
statement unless they are made within sixty days.
provides that the
The caption for this section reads “Fees, Expenses and Other
Amounts Owing to Bank”, but section 10.3 explains that
“[h]eadings are for convenience only and are not intended to
Bank will not be liable with respect to any matter set
forth in those portions of any Statement of Account or
any such advice (or reasonably implied therefrom) to
which Customer has not given Bank a written exception
or objection within sixty (60) days of receipt of the
Statement of Account, provided such matter is not the
result of Bank’s willful misconduct or bad faith.
Custodial clients of the Bank are able to execute FX
transactions with the Bank in two ways.
Clients can enter into
“direct” FX transactions, in which the defendants quote an
exchange rate based on current market rates and the client can
decide whether to accept or reject the proposed rate.
client accepts defendants’ proposed rate, the transaction is
executed at the agreed-upon rate.
Alternatively, clients can
elect to automate their FX transactions through “Standing
Instructions” to the Bank.
This automated program is called
“AutoFX” and currency exchanges conducted through this program
are sometimes called “Indirect” FX transactions.
To use the AutoFX program clients must enroll and create
LAMPERS enrolled in the AutoFX program
sometime in or before January 2007. 3
When a customer enrolls in
the program and creates Standing Instructions, the customer does
It is clear on the face of the Amended Complaint that the
plaintiff enrolled in the program on or before January 2, 2007,
because the Amended Complaint contains a “Currency Audit” of
plaintiff’s Indirect FX transactions for the period of January
2, 2007 through December 31, 2008. The defendants’ Motion to
Dismiss suggests that LAMPERS enrolled much earlier. Because
this fact does not appear in the Amended Complaint, however,
this Opinion does not rely on it.
not individually negotiate the exchange rate for each
Instead, the Standing Instructions direct the
execution of the FX transaction on a recurring basis and
JPMorgan simply complies.
In response to its customers’ Standing Instructions,
JPMorgan buys and sells currencies on the currency market.
After the close of trading, JPMorgan’s FX traders use a pricing
matrix to examine the range of exchange rates that were
available throughout the day.
The Amended Complaint alleges
that the traders then select a rate to charge the customer that
is either higher or lower (depending on whether JPMorgan was
buying or selling currency) than the rate JPMorgan received.
For example, if a customer’s Standing Instruction requested the
purchase of Euros, and JPMorgan was able to purchase Euros for
1.40 at the prevailing market rate, the FX trader might then
choose to charge the customer for the Euros at a rate of 1.42.
As reflected by this example, the two-cent spread was retained
by JPMorgan as its “commission” on the trade.
In selecting the
rate to charge customers, the defendants regularly chose the
worst (or nearly the worst) rate of the day.
On occasion, the
defendants charged the customers a rate that fell outside the
range of market prices available on the day the trade was
The defendants advertised the benefits of the AutoFX
program to their customers.
In particular, they represented
that AutoFX was designed to “reduce costs” and offer
“competitive rates provided directly by the dealing room.”
Their website depicted the program as allowing “clients to
outsource their FX requirements to JMorgan with all the
associated benefits of workload, risk and cost reduction.” 4
defendants also emphasized their own skill and value in
connection with the program, indicating that their “size, scale
and expertise . . . translates into fast, competitive and
The defendants described themselves as
“the world’s ‘FX trading volume leader,’” and thus able to
“offer a unique combination of comprehensive product expertise,
time-zone support, superior liquidity, award-winning research
and value-added strategies.”
In letters sent to custodial
clients to solicit their enrollment in the AutoFX program -including a letter received by LAMPERS on June 8, 2009 -- the
Bank explained that automation of FX transactions would “benefit
A screenshot of the referenced website was attached as an
exhibit to the plaintiff’s original complaint, but not to its
Amended Complaint. In addition to including the language
described above, the website also advertised that the Bank’s FX
services allow a customer to “[e]liminate counterparty
concerns,” stating that “[a]s a J.P. Morgan FX client, JPMorgan
Chase Bank, N.A. would be your contractual counterparty. As
such, clients have the benefit of dealing with an entity
recognized for its fortress balance sheet and preeminent credit
position.” (Emphasis supplied.)
both the firm and its clients” and would “reduce the costs” of
It is also alleged that the Bank represented that it would
conduct Indirect FX transactions in accordance with “best
The plaintiff alleges that the parties
understood this to mean that the Bank would conduct “trading in
such a manner that the client’s total cost or proceeds in each
transaction [was] the most favorable under the circumstances.”
In particular, LAMPERS points to two documents delivered in July
2007 and August 2010 -- after LAMPERS had enrolled in AutoFX -which contained “important disclosures” of JPM’s best execution
Both mailings describe an enactment of the Markets
in Financial Instruments Directive (“MiFID”) -- a European Union
law governing transparency requirements for investment services
-- and JPM’s obligations thereunder. 5
The mailings stated that
“MiFID best execution rules require that firms take all
reasonable steps to obtain the best possible results when
executing orders on behalf of clients.”
The disclosures also
allegedly indicated that JPM’s best-execution obligations
applied to Indirect FX transactions by, for instance, stating
The Amended Complaint does not attach the mailings as exhibits,
but the plaintiff has submitted them with its opposition to the
defendants’ motion to dismiss.
[b]est execution is only owed when [JPM] accepts an
order to execute a transaction on your behalf. . . .
When [JPM] provides, quotes, or negotiates a price
with you on request . . . it will not be receiving a
‘client order’ as part of a service where Best
Execution will apply to determine the price given to
you. The distinction is between:
Where you are relying on JPMorgan to get your best
price, i.e., for JPMorgan to act on your behalf in
protecting your interests, and
Where you merely request or take a price.
Custodial customers of the Bank received monthly account
statements from the Bank.
If the client had executed FX
transactions, the account statement reflected the rate that the
client was charged.
The monthly account statement did not,
however, provide the rate at which the Bank itself had acquired
the currency it provided to the client, nor did it include the
time when that underlying trade was executed.
Custodial clients who were enrolled in AutoFX also
received, by default, AutoFX Confirmations.
Confirmations are trade confirmations that are automatically
generated upon the commission of a transaction. 6
In response to
The Amended Complaint does not explicitly describe the
information contained in these AutoFX Confirmations. The
Amended Complaint does, however, argue that because LAMPERS
executed a “Suppress AutoFX Confirmations Form” it was “unable
to review the automatically generated trade confirmations
against the instructions issued for a given transaction” and
instead, LAMPERS had to rely on the monthly account statements
“which . . . do not break out any spreads charged from the
actual FX rates paid.” The import of these allegations is that
defendants’ encouragement, however, many custodial
customers -- including LAMPERS -- executed “Suppress AutoFX
LAMPERS executed this form on February
If a customer executed the Suppress AutoFX
Confirmations Form, it no longer received the automatically
generated confirmation forms for its trades.
In January and February of 2011, two whistleblower actions
filed against the Bank of New York Mellon (“BNY Mellon”) were
See Commonwealth of Virginia, ex. Rel. FX Analytics
v. The Bank of New York Mellon Corp., No. CL-2009-15377 (Va.
Cir. Unsealed Jan. 21, 2011); State of Florida, ex rel. FX
Analytics v. The Bank of New York Mellon Corp., No. 2009-CA-4140
(Fla. Cir. Unsealed Feb. 7, 2011).
These actions alleged that
BNY Mellon was charging undisclosed mark-ups for FX transactions
executed for its customers.
Following the unsealing, LAMPERS
performed its own “Currency Audit” of 1,542 FX transactions
executed by the defendants for LAMPERS and determined, as
described above, that the defendants were systematically
charging LAMPERS uncompetitive FX rates.
This law suit
LAMPERS filed its original complaint on August 30, 2012.
On November 5, the Case Management Order appointed LAMPERS as
the Confirmations did contain information that would have
allowed a custodial client to discern the spread.
In accordance with the Case Management Order,
LAMPERS filed the Amended Complaint on January 17, 2013.
Amended Complaint includes five causes of action: (1) breach of
contract; (2) breach of fiduciary duty; (3) unjust enrichment;
(4) violation of New York General Business Law (“NYGBL”) § 349
et seq; and (5) accounting.
The breach of contract claim is
brought against the Bank alone, while the other claims are
brought against both defendants.
On February 15, 2013, the
defendants filed a motion to dismiss the Amended Complaint in
The motion was fully submitted on March 29.
the reasons that follow, defendants’ motion is granted.
When deciding a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), the court must “accept all allegations
in the complaint as true and draw all inferences in the nonmoving party's favor.”
LaFaro v. New York Cardiothoracic Grp.,
PLLC, 570 F.3d 471, 475 (2d Cir. 2009) (citation omitted).
survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.”
U.S. 662, 678 (2009) (citation omitted).
Ashcroft v. Iqbal, 556
The court is “not
bound to accept as true a legal conclusion couched as a factual
Id. at 678.
Accordingly, a court may disregard
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements.”
Applying the plausibility standard is “a context-specific
task that requires the reviewing court to draw on its judicial
experience and common sense.”
Id. at 679.
depends on a host of considerations: the full factual picture
presented by the complaint, the particular cause of action and
its elements, and the existence of alternative explanations so
obvious that they render plaintiff's inferences unreasonable.”
L–7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir.
Although the focus should be on the pleadings in
considering a motion to dismiss under Rule 12(b)(6), the court
will deem the complaint to include “any written instrument
attached to it as an exhibit or any statements or documents
incorporated in it by reference.”
Mangiafico v. Blumenthal, 471
F.3d 391, 398 (2d Cir. 2006) (citation omitted).
Even if the
plaintiff does not attach to the complaint or incorporate by
reference “a document upon which it solely relies and which is
integral to the complaint, the court may nevertheless take the
document into consideration in deciding the defendant's motion
to dismiss, without converting the proceeding to one for summary
Holowecki v. Fed. Express Corp., 440 F.3d 558, 565-
66 (2d Cir. 2006) (citation omitted).
The necessity of
transforming a Rule 12(b)(6) motion into a motion for summary
judgment is “largely dissipated” when the plaintiff is shown to
have had actual notice of the document extrinsic to the
complaint and to have relied upon the document to frame the
Cortec Indus., Inc. v. Sum Holdings, L.P., 949 F.2d
42, 48 (2d Cir. 1991).
When a “complaint relies heavily upon
[the] terms and effect” of a document, such as a contract, it is
considered “integral” to the complaint.
398 (citation omitted).
Mangiafico, 471 F.3d at
In the event that a contract extrinsic
to the complaint is properly considered on a motion to dismiss,
a court is “not constrained to accept the allegations of the
complaint in respect of the construction of the [contract].”
Int'l Audiotext Network, Inc. v. American Tele. & Tele., 62 F.3d
69, 72 (2d Cir. 1995).
The court must, however, “strive to
resolve any contractual ambiguities in [the plaintiff's] favor.”
I. Breach of Contract
The Amended Complaint claims that the Bank breached the
Custody Agreement and the implied covenant of good faith by
charging undisclosed and non-agreed upon fees for the execution
of Indirect FX transactions.
The parties recognize that the
Custody Agreement adopts New York law and agree that New York
law applies to each of the claims asserted by LAMPERS.
Krumme v. WestPoint Stevens, Inc., 238 F.3d 133, 138 (2d Cir.
Under New York law, to establish a prima facie case for
breach of contract, a plaintiff must plead “(1) the existence of
an agreement, (2) adequate performance of the contract by the
plaintiff, (3) breach of contract by the defendant, and (4)
Eternity Global Master Fund Ltd. v. Morgan Guar.
Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (citation
The parties dispute centers on whether LAMPERS has
adequately alleged a breach of the Custody Agreement.
Under New York law, when a court interprets contract
language, its “primary objective is to give effect to the intent
of the parties as revealed by the language they chose to use.”
Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428
(2d Cir. 1992).
Consistent with this goal, words appearing in
the contract “should be given the meanings ordinarily ascribed
to them and absurd results should be avoided.”
v. City of New York, 435 F.3d 78, 104 (2d Cir. 2006) (citation
In cases where the parties' dispute rests on the
interpretation of a contract term, it is the court's role to
determine whether, as a matter of law, the term is ambiguous.
Law Debenture Trust Co. v. Maverick Rube Corp., 595 F.3d 458,
465 (2d Cir. 2010).
A contract term is unambiguous where it
conveys “a definite and precise meaning, unattended by danger of
misconception in the purport of the contract itself, and
concerning which there is no reasonable basis for a difference
Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252
F.3d 608, 617 (2d Cir. 2001) (citation omitted).
A term is
ambiguous, on the other hand, when it is
capable of more than one meaning when viewed
objectively by a reasonably intelligent person who has
examined the context of the entire integrated
agreement and who is cognizant of the customs,
practices, usages, and terminology as generally
understood in the particular trade or business.
Ambiguity does not arise merely by virtue of the fact that
the parties volunteer different definitions.
Trust Co., 595 F.3d at 467.
See Law Debenture
For instance, the proposal of an
interpretation that “strains the contract language beyond its
reasonable and ordinary meaning” does not create ambiguity where
none otherwise exists.
Seiden Assocs., Inc., 959 F.2d at 428
Where contract language is unambiguous,
extrinsic evidence of the parties' subjective intent may not be
See Law Debenture Trust Co., 595 F.3d at 466.
The Amended Complaint alleges that the Bank’s conduct
breached three provisions of the Custody Agreement: sections
2.15 (Foreign Exchange Transactions), 4.1 (Fees and Expenses),
and 7.1 (Standard of Care; Liability).
Because the alleged
breach of section 4.1 is at the heart of this action, the claim
regarding that section will be addressed first.
The Amended Complaint alleges that the Bank breached
section 4.1 of the Custody Agreement when it charged LAMPERS a
“fee” for Indirect FX transactions.
LAMPERS equates any spread
on the Indirect FX transactions the Bank executed for LAMPERS
with a “fee.”
For ease of reference, the language of section
4.1 is repeated here:
Customer will pay Bank for its services hereunder the
fees set forth in Schedule A hereto or such other
amounts as may be agreed upon in writing from time to
time, together with Bank’s reasonable out-of-pocket or
incidental expenses, including, but not limited to,
legal fees and tax or related fees incidental to
processing by governmental authorities, issuers, or
Schedule A lists four categories of
services, none of which includes the execution of FX
transactions, but it does direct that “no transaction fees” will
be charged in connection with “custody and accounting” services.
LAMPERS does not argue that the ordinary meaning of “custody and
accounting,” as that phrase appears in Schedule A, encompasses
FX services. 7
But, the Custody Agreement itself uses the more
general term “services hereunder.”
Thus, the issue is whether
the execution of FX transactions for the client is a service
under the Custody Agreement and whether the rate that the Bank
LAMPERS does argue that the Custody Agreement nowhere suggests
that FX Services are “non-custodial services.” This misses the
point. The mere fact that the services are delineated in the
Custody Agreement does not make them custodial services.
Indeed, as discussed below, in addition to custodial services,
the Custody Agreement expressly governs “settlement and certain
other associated services.” Thus, by the Custody Agreement’s
own terms, a service can be a service under the Custody
Agreement without being a “custodial service.”
listed on its monthly statements for each of these FX
transactions is a “fee” when that rate includes the spread on
the Indirect FX transactions.
The provision of FX trading services for a client
constitutes a “service” under the Custody Agreement.
above, the word “services” is not defined in the Custody
The word first appears in section 1.1, which
describes the “Intention of the Parties.”
It provides that:
this Agreement sets out the terms governing custodial,
settlement and certain other associated services
offered by Bank to Customer.
Among those “associated services” are the
facilitation of the administration of a client’s trading and
investment activity through performance of the “spot or forward
foreign exchange contracts with Customer,” as described in
But, before proceeding to analyze whether a disclosed rate
is a fee, it is important to note several features of this
First, the contract did not require the Bank to
perform FX transactions.
Section 2.15 is explicit that the Bank
“may, but will not be obliged to” enter into such transactions.
Moreover, the same section also advises the client that the Bank
will be the counterparty in these transactions, and may choose
to provide the services through its affiliates or subcustodians.
As explained in section 7.4, the Bank is an institution that
provides diverse financial services which may generate a profit
for the Bank.
Thus, while the performance of FX transactions
for a client is broadly speaking a service that is offered under
the contract, it is not a service that the Bank was required to
perform to earn its yearly fee and it is a service in which the
Bank stands on the opposite side of the transaction.
The next issue presented is whether section 4.1’s reference
to “fees” encompasses the rates for FX transactions reported to
LAMPERS on its monthly account statements.
or charged for a service.”
A fee is a “sum paid
rate is “the ratio for converting one country’s money into
another country’s money.”
Black’s Law Dictionary (9th ed.
These are two distinct concepts, and the plaintiff does
not actually dispute that proposition.
Thus, it was not a
breach of the Custody Agreement to reflect an exchange rate on
the FX trading services that LAMPERS requested that the Bank
The National Futures Association defines a foreign exchange
rate as “what it costs to exchange one country’s currency for
another country’s currency.” National Futures Association,
Trading Forex: What Investors Need to Know (2010). The term has
also been defined as “the quantity of one currency required to
buy or sell a unit of the other currency,” or the “relative
value between two currencies.” Simmons, Automated Clearing
House Transactions: Operations, Compliance, and Audit, Glossary
of Terms (2013). The Federal Reserve Bank of New York defines
an exchange rate as “[t]he price of one currency in terms of
another country’s currency.” Federal Reserve Bank of New York,
The Basics of Foreign Trade and Exchange (1993).
Of course, the plaintiff does not contend that no rate
should have been reflected on its account statements, and that
the inclusion of any rate constituted a “fee” that it was
It acknowledges that the exchange of one
currency for another must be done at some rate.
offered two theories, however, for why a different rate should
have been used by the Bank on at least some transactions.
First, in its Amended Complaint, LAMPERS alleges that the
Bank’s disclosures of the MiFID regulations imposed upon the
Bank the duty to use a “best execution” rate.
that such a duty required the Bank to use reasonable diligence
to ascertain the best market for the subject security and buy or
sell in such market so that the resulting price to the customer
is as favorable as possible under prevailing market conditions.
See In re Bank of New York Mellon Corp. Forex Trans. Litig., No.
12-MD-2335 (LAK), 2013 WL 440628, at *10 (S.D.N.Y. Jan. 23,
2013) (relying on Financial Industry Regulatory Authority
LAMPERS does not identify any provision in the
Custody Agreement, however, that imposes such an obligation on
Nor does LAMPERS contend that there is a “best
execution” duty imposed in the United States generally when a
bank acts as a principal in an FX transaction.
There are several reasons why the two disclosures regarding
the MiFID regulations did not impose upon the Bank a contractual
duty to only reflect best execution rates in its monthly
First, the Custody Agreement contains an
This Agreement, including the Schedules, Exhibits, and
Riders (and any separate agreement which Bank and
Customer may enter into with respect to any Cash
account), sets out the entire Agreement between the
parties in connection with the subject matter, and
this Agreement supersedes any other agreement,
statement, or representation relating to custody,
whether oral or written. Amendments must be in
writing and signed by both parties.
In light of the integration clause, there is no basis to find
that the “best execution” standard described in the MiFID
disclosures was incorporated into the Custody Agreement.
LAMPERS responds, however, that even if the MiFID
disclosures were not incorporated into the contract, they
constitute extrinsic evidence that is admissible to interpret
the parties’ intent with respect to ambiguous contract language.
But, in the absence of an ambiguity in the meaning of the word
“fee” such that it could be understood to include the exchange
rate in these circumstances, it would be improper to use parol
or extrinsic evidence to alter the ordinary meaning of the term
In any event, these documents, to the extent they are
described in the Amended Complaint, do not shed light on the
meaning of the term fee in the Custody Agreement.
MiFID regulations are European regulations, and there is no
basis to find that they imposed any legal obligation in a
contract that is to be interpreted under New York law, even if
some of the transactions that the Bank performed for LAMPERS
were performed in Europe.
Thus, the contract did not impose
upon the Bank an obligation to perform trades at the best
execution rates when executing Indirect FX transactions with the
Second, LAMPERS argues that the implied duty of good faith
and fair dealing imposed upon the Bank the obligation to avoid
any “secret” mark-up of FX rates.
It contends that any FX
transactions that the Bank performed for the plaintiff had to be
performed for the flat annual fee negotiated between the
According to LAMPERS, interpreting the contract in
this fashion would do no more than hold the Bank liable for
failing to meet LAMPERS “reasonable expectations” that the Bank
would not misrepresent FX rates.
Relying on JPMorgan Chase
Bank, N.A. v. IDW Group, LLC, No. 08-9166 (PGG), 2009 WL 321222,
at *8 (S.D.N.Y. Feb. 9, 2009) (“Chase”), and International Union
v. Bank of New York Mellon Corp., No. 11-3620 (WHA), 2012 WL
476526, at *6 (N.D. Calif. Feb. 14, 2012) (“BNYM”), the
plaintiff contends that courts recognize that the concealment of
information reasonably expected to be disclosed constitutes a
breach of the convenant of good faith and fair dealing.
This second theory of liability is no more successful.
Under New York law, “[t]he implied covenant of good faith and
fair dealing prevents any party from doing anything which will
have the effect of destroying or injuring the right of the other
party to receive the fruits of the contract.”
Gaia House Mezz
LLC v. State Street bank and Trust and Co., -- F.3d --, 2013 WL
2500579, *6 (2d Cir. June 12, 2013) (citation omitted).
order to find a breach of the implied covenant, a party’s action
must directly violate an obligation that may be presumed to have
been intended by the parties.”
Id. (citation omitted).
addition, “when a complaint alleges both a breach of contract
and a breach of the implied covenant of good faith and fair
dealing based on the same facts, the latter claim should be
dismissed as redundant.”
Cruz v. FXDirectDealer, LLC, -- F.3d -
-, 2013 WL 3021904, at *8 (2d Cir. 2013).
For the reasons already explained, rates for FX
transactions are not fees, and therefore the rates disclosed by
the Bank to LAMPERS do not constitute “fees,” as that term is
used in the Custody Agreement.
To the extent that plaintiff’s
breach of the implied covenant of good faith claim is premised
on the same conduct alleged to constitute a breach of the
Custody, it must be dismissed as redundant.
additionally fails because the Amended Complaint identifies no
way in which the Bank’s conduct “directly violate[d] an
obligation that may be presumed to have been intended by the
Gaia House Mezz LLC, 2013 WL 2500579, at *6 (citation
LAMPERS claims it had a reasonable expectation that the
Bank would not misrepresent FX rates, but this contention misses
the point on several grounds.
rates for the FX transactions.
The Bank did not misrepresent the
It is conceded that the rates
JPMorgan charged were accurately reflected on monthly account
LAMPERS identifies no foundation for its
“reasonable expectation” that, in addition to reporting the
charged exchange rate, JPMorgan would also reveal its mark-up on
the Indirect FX transactions.
In any event, because the spreads were evident from the
AutoFX Confirmations and publicly available databases, there was
nothing secret about the mark-ups.
The two decisions cited by
LAMPERS do not suggest otherwise.
In Chase, the defendant IDW -
- an executive search firm -- was retained by JPMorgan to
“provide advice and assistance in obtaining for JPMorgan’s
benefit the best and most qualified talent in the financial
Chase, 2009 WL 321222, at *6.
to disclose that it had also been retained to actively solicit
“one of JPMorgan’s most senior and valued executives” on behalf
of one of JPMorgan’s competitors.
Id. (citation omitted).
the court in Chase recognized, while the written agreements did
not require such disclosure, a jury could reasonably find that
IDW’s decision to assist JPMorgan’s competitor in luring away
one of JPMorgan’s top executives, was incompatible with its
obligations to JPMorgan under their agreements.
identified no way in which JPMorgan’s failure to disclose its
spread on Indirect FX transactions would similarly deprive
LAMPERS of the “fruits” of the Custody Agreement.
BNYM, 2012 WL
476526, although more supportive of LAMPERS’ position, does not
indicate how the Bank’s non-disclosure of the spread in the FX
transactions had “the effect of destroying or injuring the right
of the other party to receive the fruits of the contract.”
House Mezz LLC, 2013 WL 2500579, at *6 (citation omitted).
Court therefore declines to follow BNYM.
At its heart, this action is premised on a
mischaracterization of foreign exchange transactions.
transactions, one currency is sold in return for the purchase of
See Eun et al., International Financial Management,
The Market for Foreign Exchange, 74 (3d ed. 2004).
execution of the trade, the purchasing power of the buyer’s
country is converted into the purchasing power of the seller’s
Cf. Vishipico Line v. Chase Manhattan Bank, N.A., 754
F.2d 452, 455 (2d Cir. 1985).
The relative purchasing powers
are expressed as ratios of one currency to another.
exchange market in which the transactions occur is a
decentralized or over-the-counter market, which means there is
no central location for buyers and sellers of currencies to do
Due to the decentralized nature of the market, at any
given time there is no single price for currencies.
et al., Soft Dollars and Other Trading Activities, § 1:57
Trading and Execution: A Primer -- Foreign Exchange Markets
The market is also two-tiered in that it encompasses two
markets -- the interbank or wholesale market and the retail
International banks make up the majority of
participants in the interbank or wholesale market, whereas their
customers traditionally operate in the retail market.
et al., International Financial Management, The Market for
Foreign Exchange, 76 (3d ed. 2004).
The prices of currency or -
- in other words -- the exchange rates in the wholesale and
retail markets differ.
As the Seventh Circuit explained in In re Mexico Money
Money is just a commodity in an international market.
Pesos are for sale -- at one price for those who buy
in bulk (parcels of $5 million or more) and at
another, higher price for those who buy at retail and
must compensate the middlemen for the expense of
holding an inventory, providing retail outlets,
keeping records, ensuring that the recipient is the
one designated by the sender, and so on. Neiman
Marcus does not tell customers what it paid for the
clothes they buy, nor need an auto dealer reveal
rebates and incentives it receives to sell cars. This
is true in financial markets no less than markets for
physical goods. The customer of a bank’s foreign-
exchange section (or an airport’s currency kiosk) is
quoted a retail rate, not a wholesale rate, and must
turn to the newspapers or the Internet to determine
how much the bank has marked up its Swiss Francs or
In re Mexico Money Litig., 267 F.3d 743, 749 (7th Cir. 2001).
Thus, while there may be spreads between FX transactions, the
exchange rate a Bank charges its customers is more naturally
characterized as the price of the commodity the customer has
chosen to purchase, rather than a fee for the provision of
The Custody Agreement is fully consistent with this
understanding of foreign exchange transactions.
In the Custody
Agreement, the parties recognize that the Bank “may” enter a
foreign exchange transaction “with Customer” in order to
“facilitate” the administration of the customer’s trading and
There was no requirement that the customer
use the Bank for these exchange activities or requirement that
the Bank agree to do so for the customer.
If the customer does
choose to use the Bank for the FX Exchange activities, however,
the transaction was one between the Bank and the customer, in
which the Bank was free to sell or buy a currency at any rate.
The contract imported no requirement that the rate be the best
available market rate, the rate at which the Bank had originally
procured the currency that it bought or sold to the customer, or
any other particular measure.
The client had several ways to protect itself from the Bank
selecting an unreasonable rate.
First, as recognized in section
2.15, the parties could enter into a “master foreign exchange
contract” that would set the terms and conditions for the
Second, the client could give the Bank
“Instructions, including standing Instructions” for the
Third, the client had the right to receive
Confirmations for each transaction.
Fourth, the monthly account
statement identified the rates at which the Bank was recording
the exchange transactions for LAMPERS’ account and public
information from the Reuters database would reveal whether those
disclosed rates were or were not within the range of reasonable
rates for those currencies at that period of time.
For many years, LAMPERS has chosen to rely on this fourth
method, and indeed has relied on the Reuters database in
formulating its allegations against the Bank.
that it is no longer satisfied with the rates reported by the
Bank, the plaintiff cannot claim that the FX transaction rates
are now fees and that it should not have been “charged” some
portion of those “fees.”
LAMPERS’ breach of contract claim rests, as well, on
sections 2.15 and 7.1 of the Custody Agreement.
these provisions, however, can bear the weight that LAMPERS
assigns to them.
Section 2.15, entitled “Foreign Exchange Transactions,”
provides that the “Bank may, but will not be obliged to, enter
into spot or forward foreign exchange contracts with Customer,
or an Authorized Person, and may also provide foreign exchange
contracts and facilities through its Affiliates or
As discussed above, nothing in the language of
this section imposes an obligation on the Bank to execute
Indirect FX transactions with its customers at a particular
Indeed, the provision is emphatic that the Bank has no
obligation to perform FX transactions at all.
Section 7.1, entitled “Standard of Care; Liability,” is
It reads, in part:
(a) Bank will use reasonable care in performing its
obligations under this Agreement. Banks will not be
in violation of this Agreement with respect to any
matter as to which it has satisfied its obligation of
reasonable care. . . .
The Amended Complaint alleges that section 7.1’s “reasonable
care” standard obligated the Bank to price FX trades in a manner
that was not “designed to extract substantial and secret
profits” and to “adequately describ[e]” the AutoFX program to
But plaintiff’s argument finds no support in the
language of section 7.1.
By its own terms, section 7.1 merely
requires the Bank to exercise reasonable care in the execution
of the obligations already created under the Custody Agreement.
Because the Custody Agreement nowhere requires the Bank to
execute FX transactions at a particular exchange rate or to
describe the AutoFX program to customers, section 7.1’s
reasonable care standard cannot support a breach of contract
claim premised on the Bank’s failure to take such actions.
II. Breach of Fiduciary Duty
The plaintiff claims that the defendants breached fiduciary
duties that they owed to the plaintiff when they charged
exchange rates that were less favorable than the rates at which
the defendants had executed the Indirect FX transactions, and
kept the spread for themselves.
To state a claim for breach of
fiduciary duty under New York law, a plaintiff must allege “(1)
the existence of a duty on defendant’s part as to plaintiff; (2)
a breach of this duty; and (3) injury to the plaintiff as a
Alfaro v. Wal-Mart Stores, Inc., 210 F.3d 111,
114 (2d Cir. 2000) (citation omitted).
relationship exists between two persons when one of them is
under a duty to act for or to give advice for the benefit of
another upon matters within the scope of the relation.”
Capital Funding Partners v. State Street Bank & Trust, 11 N.Y.3d
146, 158 (2008) (citation omitted).
Essential elements of any
fiduciary relationship are “reliance, de facto control and
Id. (citation omitted).
“When parties deal at arms
length in a commercial transaction, no relation of confidence or
trust sufficient to find the existence of a fiduciary
relationship will arise absent extraordinary circumstances.”
re Mid-Island Hosp., Inc., 276 F.3d 123, 130 (2d Cir. 2002).
determine whether a fiduciary duty exists between parties,
courts consider any contract that exists between the parties as
well as the nature of the parties’ relationship.
Corp. v. Wellington Adver., Inc., 82 N.Y.2d 158, 162 (1993).
LAMPERS has failed to allege facts sufficient to plausibly
plead a breach of a fiduciary duty by the defendants.
foremost, the relationship between the Bank and LAMPERS is
indisputably one of a bank and its customer.
between a bank and its customers do not, without more, give rise
to a fiduciary relationship. 9
Mfrs. Hanover Trust Co. v.
Yanakas, 7 F.3d 310, 318 (2d Cir. 1993).
As significantly, the parties’ Custody Agreement contains
several terms that are at odds with a finding that a fiduciary
In the section of the Custody Agreement
laying out the intention of the parties, custodial customers
expressly acknowledge that the “bank is not providing any legal,
tax or investment advice in connection with the services
Elsewhere in the agreement, the Bank warns that it
LAMPERS asserts that JPM’s fiduciary obligation arose because
it was an agent of the Bank’s custodial customers. Because the
plaintiff has not adequately pleaded the existence of a
fiduciary relationship between the Bank and plaintiff, its claim
that a fiduciary relationship existed with the Bank’s parent
“provides diverse financial services and may generate profits as
a result,” and that the Bank “or its Affiliates may be in
possession of information tending to show that the Instructions
received may not be in the best interests of Customer but that
[the] Bank is not under any duty to disclose any such
Furthermore, the contract does not, despite
plaintiff’s conclusory statement to the contrary, accord the
Bank discretion over custodial clients’ assets.
Distribs. Corp. v. Subaru of America, Inc., 425 F.3d 119, 122
(2d Cir. 2005).
The areas in which the Bank is granted
discretion are actually few and are carefully delineated.
does the section expressly devoted to FX transactions use
language implying the existence of a fiduciary duty.
Other hallmarks of a fiduciary relationship are also
There is no basis to find from the allegations in the
Amended Complaint and the documents integral to it that the Bank
provided advice to the plaintiff, had de facto control over the
use of its assets, dominated their relationship or had a
relationship of confidence or trust with the plaintiff.
are no allegations, for instance, that defendants acted in an
advisory role, that the parties had a long-standing or personal
relationship, or that plaintiff was especially vulnerable.
e.g., de Kwiatkowski v. Bear, Stearns & Co., Inc., 306 F.3d
1293, 1308-09 (2d Cir. 2002); EBC I, Inc. v. Goldman Sachs &
Co., 5 N.Y.3d 11, 21-22 (2005).
In the absence of a fiduciary relationship, the Bank’s
alleged practice of charging exchange rates that were
“inconsistent with the rates paid by the Defendants, or with the
actual rates prevailing at the time the FX trades was executed”
cannot constitute a breach of a fiduciary duty.
the plaintiff fails to state a plausible claim for breach of a
The plaintiff identifies three reasons for finding that a
fiduciary duty existed.
First, it claims that because the Bank
is a “custodian” with substantial control over custodial
clients’ assets and discretion in the management of those assets
it owed a fiduciary duty to those clients.
Second, it alleges
that the Custody Agreement itself imposed a fiduciary duty on
the Bank in connection with FX transactions.
alleges that the defendants’ representations in connection with
the AutoFX program and the nature of that program imposed
fiduciary duties on the defendants.
None of these circumstances are sufficient to allege the
existence of a fiduciary relationship between the defendants and
The relationship of a custodial bank to its client is
one of depositor and customer, a relation that does not, without
more, give rise to a fiduciary duty.
See Nathan v. J & I
Enters., Ltd., 622 N.Y.S.2d 798, 798 (2d Dep’t 1995).
conclusory allegation that the Bank had substantial discretion
in connection with clients’ assets is also unsupported by
factual allegations, and contradicted by the Custody Agreement.
Next, the Custody Agreement does not create a fiduciary
relationship between the Bank and the custodial clients, for all
the reasons identified above.
No facts are alleged to suggest
that the Custody Agreement was anything other than an arm’s
In addition, none of the Agreement’s terms
suggest that the parties’ relationship was “grounded in a higher
level of trust than normally present in the marketplace between
those involved in arm’s length business transactions.”
799 N.Y.3d at 19.
Where, as here, parties to a contract “do not
create their own relationship of higher trust, courts should not
ordinarily transport them to the higher realm of relationship
and fashion the stricter duty for them.”
Oddo Asset Mgm’t v.
Barclays Bank PLC, 19 N.Y.3d. 584, 593 (2012) (citation
The plaintiff’s final ground for asserting the existence of
a fiduciary relationship between the parties relies on the
nature of the AutoFX program and the Bank’s representations
about the program.
In essence, the plaintiff claims that a
fiduciary relationship was created between the parties because
(1) the nature of the AutoFX program meant that the plaintiff
depended on the Bank to obtain the best rate for the plaintiff;
(2) the Bank had superior access to allegedly confidential
information; and (3) the defendants made representations to
custodial clients about their business ethics, their expertise,
the benefits of their AutoFX program, and their best execution
None of these allegations plausibly suggests that
the defendants were fiduciaries of the plaintiff.
First, there is often some level of dependency between
counterparties to a business transaction that does not itself
give rise to a fiduciary relationship.
See Legend Autorama,
Ltd. v. Audi of Am., Inc., 954 N.Y.S.2d 141, 144 (2d Dep’t
In addition, to characterize the plaintiff as dependent
ignores all of the ways in which the plaintiff was able to act
The Amended Complaint acknowledges that
custodial customers were at liberty to execute direct FX
transactions with the Bank.
In other words, LAMPERS could have
negotiated an exchange rate for each of its trades.
There is no
allegation that custodial customers were required to execute any
FX transactions through the AutoFX program.
Indeed there is no
allegation that custodial clients were required to conduct any
FX transactions of any kind with the Bank.
In addition, the
Amended Complaint acknowledges that the Indirect FX transactions
were executed at the direction of the plaintiff’s Standing
Thus, taking the allegations of the Amended
Complaint as true, no inference can be drawn that the plaintiff
was dependent on defendants to obtain the best exchange rate
Plaintiff’s allegation that the defendants had superior
access to confidential information about the rate at which they
executed FX transactions is also contradicted in a number of
ways by the Amended Complaint.
While one party’s superior
knowledge of pertinent information sometimes creates a fiduciary
relationship, “a party’s knowledge is not superior where the
relevant information ‘was either a matter of public record, was
not pursued by the plaintiff, or was disclosed at least in
Grumman Allied Indus., Inc. v. Rohr Indus., Inc., 748
F.3d 729, 739 (2d Cir. 1984).
These principles are particularly
First, the Amended Complaint contains a “Currency
Audit” of FX transactions executed between LAMPERS and the Bank
between roughly January 2, 2007 and December 31, 2008,
suggesting that there is nothing confidential about the range of
market prices available for FX transactions.
See In re Bank of
New York Mellon Corp. Forex Trans. Litig., 2013 WL 440628, at
As the Amended Complaint acknowledges, information on the
daily prevailing market rates for currencies is available from
“a Reuters-sponsored database that is widely accepted in the FX
market as an accurate and reliable source of pricing
Second, the Amended Complaint acknowledges that -- unless a
customer executed a “Suppress AutoFX Confirmations Form” -- the
customer received automatic trade confirmations that would have
allowed the customer to discern the spread.
The Director of
LAMPERS executed this form on February 21, 2007.
Thus, to the
extent that the plaintiff faced greater barriers to identifying
the defendant’s spread, these barriers were self-inflicted.
Neither the defendants’ “encouragement” to execute the forms,
nor a customer’s regret for having signed the form, justifies
the retroactive creation of a fiduciary relationship where none
Third, the Amended Complaint also acknowledges -- as does
the Custody Agreement –- that a customer could contact the Bank
to negotiate an exchange rate for any trade it desired to make.
Thus, if the plaintiff wanted to ascertain available rates, it
could have done so by negotiating directly with the Bank.
The defendants’ representations about the benefits of the
AutoFX program, their own expertise, or their best execution
obligations are also insufficient to suggest the existence of
extraordinary circumstances that would have converted the
parties’ business relationship into a relationship of higher
The defendants’ statements fail to suggest that they had
a duty to act for or to give advice to the plaintiff.
Johnson v. Priceline.com, Inc., 711 F.3d 271, 279 (2d Cir. 2013)
(applying Connecticut law).
Indeed, the very representations
from defendants’ website on which the plaintiff relies in its
Amended Complaint appear alongside the express statement that
the Bank would be acting as a “counterparty” in any FX
transactions with customers.
In addition, in the absence of factual allegations
suggesting that the defendants’ exercised de facto control over
the plaintiff’s assets and dominance over the plaintiff, the
defendant’s representations that they would execute certain
transactions in a manner designed to ensure the best possible
results for their clients is insufficient to create a fiduciary
relationship between the parties.
In sum, the plaintiff has
failed to state a claim for breach of a fiduciary duty against
III. Unjust Enrichment
The Amended Complaint also claims that the defendants were
unjustly enriched by their “unlawful acts, omissions and
breaches of fiduciary duties.”
To state a claim for unjust
enrichment the plaintiff must allege “(1) that the defendant
benefited; (2) at the plaintiff’s expense; and (3) that equity
and good conscience require restitution.”
Beth Israel Med. Ctr.
V. Horizon Blue Cross & Blue Shield of N.J., Inc., 448 F.3d 573,
586 (2d Cir. 2006) (applying New York law).
Unjust enrichment is not a catchall cause of action to
be used when others fail. It is available only in
unusual situations when, though the defendant has not
breached a contract nor committed a recognized tort,
circumstances create an equitable obligation running
from the defendant to the plaintiff. . . . An unjust
enrichment claim is not available where it simply
duplicates, or replaces, a conventional contract or
Corsello v. Verizon New York, Inc., 18 N.Y.3d 777, 790 (2012).
The Amended Complaint has not identified a basis on which
restitution could be required.
To the extent LAMPERS argues that the Custody Agreement
obligated the Bank to provide Indirect FX transactions at cost,
this claim is merely duplicative of the plaintiff’s contract
claim and cannot survive.
To the extent the plaintiff’s
contract claim fails, the plaintiff must identify some other
basis on which restitution can be founded.
There is no inherent
reason why there may not be a spread between FX transactions.
In re Mexico Money, 267 F.3d at 749.
Instead of offering a
factual basis for restitution, the Amended Complaint merely
recites the elements of a claim for unjust enrichment without
linking those elements to facts that could support them.
such, the plaintiff has failed to state a claim for unjust
Iqbal, 556 U.S. at 678.
IV. Violation of NYGBL § 349
Section 349 of NYGBL declares unlawful “deceptive acts or
practices in the conduct of any business, trade or commerce or
in the furnishing of any service” in New York State.
Gen.Bus.L. § 349.
“To maintain a cause of action under § 349, a
plaintiff must show: (1) that the defendant’s conduct is
consumer-oriented; (2) that the defendant is engaged in a
deceptive act or practice; and (3) that the plaintiff was
injured by this practice.”
Wilson v. Northwestern Mut. Ins.
Co., 625 F.3d 54, 64 (2d Cir. 2010).
In addition, to have
standing to bring a NYGBL § 349 claim, a plaintiff must satisfy
a territoriality requirement that focuses on “the strength of
New York’s connection to the allegedly deceptive transaction,
rather than ‘on the residency of the parties.’”
Cruz, 2013 WL
3021904, at *5.
“The gravamen of a § 349 claim is consumer injury or harm
to the public interest.”
City of New York v. Smokes-
Spirits.com, Inc., 541 F.3d 425, 455 (2d Cir. 2008).
“consumer-oriented” requirement may be satisfied by showing that
the conduct at issue “potentially affects similarly situated
Wilson, 625 F.3d at 64.
oriented conduct does not require a repetition or pattern of
deceptive conduct, a plaintiff must demonstrate that the acts or
practices have a broader impact on consumers at large.”
other words, private contract disputes that are “unique to the
parties . . . would not fall within the ambit of the statute.”
Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank,
N.A., 85 N.Y.2d 20, 25 (1995).
The NYGBL § 349 claim fails because the Amended Complaint
fails to adequately allege that the defendants’ conduct was
It is true, as the plaintiff points out,
that business-to-business transactions can involve the kinds of
consumer-oriented practices with which § 349 is concerned.
Oswego, 85 N.Y.2d at 26.
It distorts the law beyond
recognition, however, to suggest that an ancillary service that
is provided in connection with a contract for custodial banking
services offered to institutional investors and that explicitly
gives clients the option to negotiate specific rates or to issue
“Standing Instructions” for automated FX transactions is a
“consumer-oriented” service. 10
The recent decision in Cruz, 2013 WL 3021904, is not to the
In Cruz the consumer-orientation requirement of NYGBL
§ 349 was not addressed.
Id., 2013 WL 3021904, at *5-*6.
assuming the “online foreign currency exchange trading” services
described therein were consumer-oriented, they are
distinguishable from the services at issue here.
3021904, at *1.
Id., 2013 WL
In the present case, JPMorgan is alleged to
provide custodial services to institutional investors.
To the extent the decision in BNYM, 2012 WL 476526, at *6-*7,
reaches the opposite conclusion in a factually similar context,
this Court declines to adopt its reasoning.
connection with those services, it offers, to the same
customers, ancillary FX services, which include the AutoFX
The Amended Complaint nowhere alleges that these
services are offered to a wider consumer-base, or that they are
otherwise likely to “have a broader impact on consumers at
Wilson, 625 F.3d at 64.
Accordingly, the Amended
Complaint fails to state a claim under NYGBL § 349.
Under New York law, an accounting is an equitable remedy
that requires the existence of a fiduciary relationship, a joint
venture, or other special circumstances between the plaintiff
and the defendants warranting equitable relief.
Awnair Corp. of Am., 3 N.Y.2d 444, 450 (1957).
plaintiff has failed to adequately allege the existence of a
fiduciary relationship between the parties and does not
otherwise allege a special or confidential relationship, the
claim for an accounting must fail as well.
The defendants’ February 15 motion to dismiss the Amended
Complaint is granted.
The Clerk of Court shall close the case.
New York, New York
July 3, 2013
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