Whitesides v. ETrade Securities, LLC

Background

Benjamin Whitesides, Aziz Si Hadj Mohand, and Matthew Cheung were ETRADE customers who held cash-settled oil futures contracts when the price of West Texas Intermediate crude oil futures fell below zero on April 20, 2020. They alleged that ETRADE’s trading platform suffered a system failure, displayed inaccurate prices, and prevented them from closing their positions. They alleged that they suffered substantial losses as a result.

The customers’ relationship with ETRADE was governed by a customer agreement. In their Second Amended Complaint, they alleged that ETRADE breached that agreement by failing to maintain adequate technology, failing to provide trading services during the outage, failing to provide timely access to trading services, and allowing the outage to prevent timely performance.

The Second Amended Complaint also included claims concerning the duty of good faith and fair dealing and California’s Unfair Competition Law. In their opposition to the motion, however, the plaintiffs withdrew those claims. The only claim before the court was breach of contract.

Court’s Analysis

The court applied New York law. To state a breach-of-contract claim, a plaintiff must identify the contract, show performance, identify the defendant’s breach of a contractual obligation, and allege resulting damages. The plaintiff must also identify the specific contract provision allegedly breached and plead facts plausibly showing that the provision imposed the claimed obligation.

The complaint identified provisions stating that ETRADE offered several ways to access an account and that its website and mobile application might provide market data. The court concluded that neither provision promised that ETRADE would provide trading services at all times or when crude oil prices became negative.

At oral argument, the plaintiffs relied on the agreement’s definition of “Service,” which referred to brokerage and other services ETRADE “may offer from time to time.” The court held that this language did not require ETRADE to provide trading services continuously.

The agreement also stated: “The Account Holder understands and agrees that E*TRADE does not guarantee uninterrupted access to the Service or any feature of the Service.” The court found this language clear and concluded that the plaintiffs had not plausibly alleged a contractual promise requiring uninterrupted access. The court also declined to consider a new argument about allegedly false website statements because that argument was not tied to the allegations in the complaint.

Disposition

Judge Corley granted Defendants’ motion to dismiss the Second Amended Complaint for failure to state a claim and denied leave to amend. The court concluded that amendment would be futile because this was the plaintiffs’ third version of the complaint, and they had repeatedly failed to identify a contract provision or website statement requiring uninterrupted trading access. The court denied Defendants’ request for judicial notice as moot. A separate judgment was to issue.