McKinney v. Morgan Stanley

Background

The plaintiffs challenged the interest rates paid on balances in Morgan Stanley’s Bank Deposit Sweep Program. The case was a proposed class action brought by Mark E. McKinney, Neal Gagner, and James Bertonis against Morgan Stanley, Morgan Stanley Smith Barney LLC, and E*TRADE Securities LLC.

Thomas Simmons was pursuing a similar case against the same defendants in the District of New Jersey. Another related case, Burmin, had been filed there earlier and involved allegations that E*TRADE failed to pay reasonable interest on certain retirement-account sweep accounts. Simmons asked to intervene in McKinney and transfer it to New Jersey so that he could seek consolidation with his case and the earlier related case. The McKinney plaintiffs and defendants opposed the motion.

Intervention

The court considered both intervention as of right and permissive intervention under Federal Rule of Civil Procedure 24. It held that Simmons was not entitled to intervene as of right. Although his motion was timely and he had an interest that could be affected by the case, he did not show that his interests were inadequately represented by the existing plaintiffs and proposed class. The court noted that no class had yet been certified and that Simmons had no legally recognized interest in controlling the related litigation.

The court nevertheless granted permissive intervention. Simmons’s claims shared legal and factual questions with the McKinney case, his motion was timely, and intervention was unlikely to cause unfair delay or prejudice. The court also concluded that allowing him to seek transfer would promote efficient and coordinated handling of the related cases.

Transfer

The court applied the first-filed rule, which generally gives priority to the court where a sufficiently similar lawsuit was filed first. It found that McKinney and Burmin were sufficiently similar because both focused on whether E*TRADE breached duties by failing to pay reasonable interest on Bank Deposit Program accounts, even though the proposed classes and some claims differed.

The court found no reason to depart from that rule. Most convenience factors were neutral: E*TRADE was headquartered in New Jersey, Morgan Stanley was headquartered in New York, and the two courthouses were less than 15 miles apart. The plaintiff’s choice-of-forum factor favored New Jersey because Burmin was filed there first. The court therefore granted the motion to transfer.

Disposition

Judge Valerie Caproni granted Plaintiff-Intervenor Thomas Simmons’s motion to intervene and transfer. The Clerk was directed to terminate all open motions and transfer the case to the United States District Court for the District of New Jersey.