Gurfein v. Ameritrade, Inc.

312 F. App'x 410
CourtCourt of Appeals for the Second Circuit
DecidedFebruary 27, 2009
DocketNo. 07-3591-cv
StatusPublished

This text of 312 F. App'x 410 (Gurfein v. Ameritrade, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gurfein v. Ameritrade, Inc., 312 F. App'x 410 (2d Cir. 2009).

Opinion

SUMMARY ORDER

Plaintiff-appellant Hadassah Gurfein appeals from a July 18, 2007, judgment of the United States District Court for the Southern District of New York (Stanton, /.) dismissing her Third Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(6). Gur-fein alleged that defendant Ameritrade, Inc., an online brokerage, breached its contractual duties by routing to the American Stock Exchange (“AMEX”) her limit orders to sell Forest Labs put options and by violating various Securities and Exchange Commission (“SEC”), National Association of Securities Dealers (“NASD”), and AMEX rules and regulations. Gurfein also alleged that Ameritrade violated its duty of best execution. We assume the parties’ familiarity with the underlying facts and procedural history.

This Court reviews the denial of a motion to dismiss the complaint de novo, “ ‘accepting the truth of each factual allegation it contains.’ ” Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 549 F.3d 137, 141 (2d Cir.2008) (quoting Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital, Inc., 531 F.3d 190, 194 (2d Cir.2008)). As part of this review we may consider exhibits annexed to the complaint or incorporated by reference. Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir.1993).

To survive a motion to dismiss, “the plaintiff must provide the grounds upon which [her] claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.’ ” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007)). A complaint need not detail factual allegations, but it must contain more than “labels and conclusions.” Twombly, 127 S.Ct. at 1965.

Routing to the Appropriate Market

Gurfein alleges that Ameritrade breached its contract because it routed to AMEX all of her electronic orders to sell Forest Labs put contracts, despite its representation that it would route her trades to “the appropriate market.”1 According [412]*412to Gurfein, AMEX was not “the appropriate market” as demonstrated by a June 16, 2003, SEC report. The district court properly found, however, that this claim fails as a matter of law. The SEC’s nonspecific findings about orders placed through three primary direct access firms, not including Ameritrade and not involving Forest Labs options, are too far removed from the trades at issue here to make claims regarding AMEX’s handling of Gur-feiris trades anything more than speculative. See Gurfein v. Ameritrade, Inc., No. 04-cv-9526, 2007 WL 2049771 at *4 (S.D.N.Y. July 17, 2007); see also Tworn-bly, 127 S.Ct. at 1965. For similar reasons we agree with the district court’s determination that “[a]s a matter of law, the [SEC Report] standing alone is insufficient to establish that the routing by a broker-dealer of options for execution by a specialist on the AMEX not mentioned in the Report breached that broker-dealer’s duty to provide best execution.” Gurfein, 2007 WL 2049771 at *4.

We also note that the Third Amended Complaint does not appear to contain nonconclusory allegations that there was an alternative exchange that was reasonably available to Ameritrade under the circumstances and that would have offered materially better overall execution. See Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 270 (3d Cir.1998). Gurfein failed to allege the existence of a specific, alternative market that would have executed her orders immediately if they had been routed there. Moreover, even if such an alternative market did exist, numerous factors are relevant to execution, including (in addition to speed) price, clearing costs, convenience, and others. See id. The mere allegation that the AMEX fell short of a hypothetical ideal market on one particular dimension (speed) is not enough to suggest that Am-eritrade breached its duty of best execution, considered as a whole and in light of the numerous dimensions on which an investigator might measure quality of execution.

Violation of Regulatory Rules

“The meaning of contract provisions is a question of law over which we exercise de novo review.” Photopaint Techs., LLC v. Smartlens Corp., 335 F.3d 152, 160 (2d Cir.2003). Whether a contract is ambiguous is a question of law for the court to decide. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 178 (2d Cir.2004). “[judgment as a matter of law is appropriate if the contract language is unambiguous.” Photopaint Techs., 335 F.3d at 160 (footnote omitted). “Contract language is unambiguous when it has 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 of opinion.” Id. (internal quotation marks omitted). We will not find ambiguity merely because parties in litigation urge different interpretations of the contract. Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 616 (2d Cir.2001). Gurfein argues that the terms of the agreement support her claims or at least contain ambiguities that merit discovery. We disagree.

In its- most recent iteration, Gur-feiris complaint alleges that Ameritrade breached its contract by failing to comply with NASD, SEC and AMEX rules. The district court dismissed this claim, finding that “[n]o one injured by a failure to comply with those regulations can sue a broker-dealer for failing to follow the rule. [413]*413Therefore, when those regulatory rules are incorporated into a customer agreement, they do not bring with them a right to sue for an infraction.” Gurfein, 2007 WL 2049771 at *3. On appeal, Gurfein argues that the district court erred because a breach of contract claim can still rest upon failure to comply with rules incorporated into a contract that do not by themselves create a private cause of action. Gurfein’s argument misses the mark. Although is bound by the applicable rules and regulations in the various markets in which it operates, contrary to the in the Third Amended Complaint, the language of Ameritrade’s agreement with Gurfein makes clear that Ameritrade did not contractually obligate itself to its to follow these rules and regulations so as to create a separate cause of action for any alleged violation of them.

Gurfein contends that two paragraphs from the 2002 Terms and Obligations bound Ameritrade to comply with various rules and regulations.

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