Harris v. TD Ameritrade Inc.

Background

Jan Harris, proceeding without a lawyer, alleged that she owned 2,420,000 shares of penny stock issued by Bancorp International Group, Inc. She sought to have the shares registered in her name and to obtain physical stock certificates. Her claims included trespass and accounting claims against TD Ameritrade Inc., TD Ameritrade Clearing, Inc. (together, the “Brokerage Defendants”), Scottrade Inc., and the Depository Trust and Clearing Corporation, Depository Trust Company, and Cede & Co. (together, the “DTC Defendants”).

In a 2018 order, the court compelled arbitration of Harris’s claims against the Brokerage Defendants, dismissed her complaint against the DTC Defendants with prejudice, and stayed the case while arbitration proceeded. The court later denied Harris’s requests for reconsideration, interlocutory appeal certification, and permission to add claims concerning compensation for the defendants’ continued use of her shares. The court explained that her agreements required arbitration of disputes with the Brokerage Defendants, including claims seeking possession of fully paid securities.

Harris reported that the Financial Industry Regulatory Authority’s arbitration forum refused to hear her supplemental claims because they had already been considered in earlier arbitration proceedings. The opinion states that Harris had brought and lost arbitration claims against the Brokerage Defendants on three separate occasions.

Motions and Analysis

Harris filed three motions: a motion to lift the stay and amend her complaint, a motion for immediate possession of the Bancorp shares, and a motion for a declaratory judgment concerning the effect of the earlier arbitration awards.

The court treated the motion to amend largely as a request to reconsider earlier rulings. Harris challenged the conclusion that amendment to assert a standalone claim under Securities and Exchange Commission Rule 15c3-3 would be futile, meaning it would not produce a legally viable claim. The court stated that Rule 15c3-3 does not create a private right of action, meaning it does not allow a private person to sue directly under that rule. The court found that Harris identified no intervening change in controlling law, new evidence, clear error, or manifest injustice. It also held that arbitration agreements barred further litigation of her claims against the Brokerage Defendants in this court. The court denied reconsideration of the earlier dismissal of the trespass claims against the DTC Defendants as belated and unsupported by a valid legal or factual basis. The motion for leave to amend was denied in its entirety.

The court denied Harris’s motion for immediate possession of the shares, relying on the earlier dismissal of her claims against the DTC Defendants, the dismissal of her claims against the Brokerage Defendants subject to arbitration, and the denial of her reconsideration and amendment requests.

The court also denied the motion for a declaratory judgment. Harris asked the court to declare that the 2011 and 2014 arbitration awards in favor of Scottrade and TD Ameritrade were not preclusive, meaning they could not prevent litigation of the same matters. The court found that the awards were final under binding arbitration agreements and that Harris offered no valid legal or factual basis for disregarding them. The opinion also states that Harris did not appear to have sought to vacate or modify those awards.

Disposition

The court lifted the stay only as necessary to consider the three motions and denied the motion for leave to amend, the motion for immediate possession, and the motion for a declaratory judgment. Judge Laura Taylor Swain directed the Clerk to enter judgment dismissing Harris’s claims against TD Ameritrade Inc., TD Ameritrade Clearing, Inc., and Scottrade Inc. without prejudice to arbitration. The Clerk was also directed to dismiss Harris’s claims against Depository Trust and Clearing Corporation, Depository Trust Company, and Cede & Co. with prejudice, in accordance with the 2018 order, and to close the case.