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Zola v. TD Ameritrade, Inc.

United States District Court, D. Nebraska

February 26, 2015

JAY ZOLA and JEREMIAH JOSEPH LOWNEY, Plaintiffs,
v.
TD AMERITRADE, INC., and TD AMERITRADE CLEARING, INC., Defendants. TYLER VERDIECK, Plaintiff,
v.
TD AMERITRADE, INC., Defendant. BRUCE LERNER, Plaintiff,
v.
TD AMERITRADE, INC., Defendant. MICHAEL SARBACKER, Plaintiff,
v.
TD AMERITRADE HOLDING CORPORATION, TD AMERITRADE, INC., TD AMERITRADE CLEARING, INC., FREDRIC J. TOMCZYK, and PAUL JIGANTI, Defendants. GERALD J. KLEIN, Plaintiff,
v.
TD AMERITRADE HOLDING CORPORATION, TD AMERITRADE, INC., and FREDRIC J. TOMCZYK, Defendants.

ORDER

THOMAS D. THALKEN, Magistrate Judge.

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.

BACKGROUND

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"). Additionally, the 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 centers." See Filing No. 33 in Case 8:14CV288 - Brief p. 3. Additionally, the 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. Id. 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. The 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.

ANALYSIS

Consolidation of separate actions is governed by Fed.R.Civ.P. 42(a), which provides:

If actions before the court involve a common question of law or fact, the court may:
(1) join for hearing or trial any or all matters at issue ...

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