Seems a joke: Court Blocks Broker's Escape From 'Real-Time' Quotes Suit
By Steven Bonisteel, Newsbytes
LINCOLN, NEBRASKA, U.S.A.,
05 Feb 2002, 7:45 AM CST
Online broker Ameritrade [NASDAQ:AMTD] has failed in a bid to derail a lawsuit from a disgruntled customer who says the company's online stock-quote system wasn't quite as "real-time" as advertised.
A panel of the 8th Circuit Court of Appeals ruled Friday that Ameritrade and its parent company, Ameritrade Holding Corp., can't escape a potential class-action battle in a state court in Nebraska by wielding a law that says some securities litigation must play out in federal courts.
Ameritrade, based in Omaha, Neb., was sued nearly two years ago by Californian Mitchell Green after the Los Angles resident decided the real-time stock quotes he was receiving for his $20-a-month subscription were sometimes hours old.
Green, who has been hoping to launch a class action that could round up disgruntled Ameritrade customers across the country, originally filed his lawsuit in the district court for Douglas County, Neb., in March 2000, with such state claims as breach of contract, fraud and the violation of Nebraska's Consumer Protection Act.
Ameritrade turned to the U.S. District Court in Lincoln with the argument that the Securities and Litigation Uniform Standards Act (SLUSA) of 1998 called for federal jurisdiction over such securities- related cases and asked for a dismissal of Green's suit, which claimed that the not-so-real-time data jeopardized users' stock- picking decisions.
Instead, District Court Judge Richard Kopf gave Green 30 days to revise his complaint, and eventually sent the case back to the court in Douglas County with a reworded claim alleging only breach of contract under Nebraska law.
In its ruling Friday, the three-judge appeals panel said Ameritrade believed the revised lawsuit should also be nixed under the federal law, arguing that Green's claims were "precisely the type of litigation that Congress intended to preempt" when it enacted the SLUSA.
The SLUSA states that federal courts have jurisdiction when a class action lawsuit alleges "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security" or the use of a "manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security."
But the appeals panel said the revised complaint doesn't say Green used incorrect information from Ameritrade's real-time quote system to make decisions on buying or selling stock. Instead, it says he subscribed to a "real-time" quote service and then found that data was sometimes "hours" old.
"Ameritrade asserts that consumers in general use that kind of information to purchase and sell securities, and therefore SLUSA applies to the provision of that information in this case," the panel said. "This argument highlights Ameritrade's failure to understand the showing necessary to satisfy the 'in connection with the sale or purchase of a covered security' criterion of SLUSA."
The panel said case law makes it clear that the SLUSA must apply only in connection with a transaction, and that Green's new complaint no longer makes such a claim, nor does it ask for damages based on money lost as a result of trading on out-of-date quotes.
In addition, the appeals judges said, Ameritrade's argument that the SLUSA applied whether or not a transaction took place "appears to be somewhat short-sighted."
The "logical conclusion" of that argument, the judges said, "would expose Ameritrade to liability under federal securities law to non- purchasers or non-sellers of a security." |
