Caron v. TD Ameritrade

Background

Douglas R. Caron alleged that he bought 463,372 Bancorp International Group shares through TD Ameritrade in 2005. He said the Depository Trust and Clearing Corporation, the Depository Trust Company, and Cede & Co. held the shares in certificate form, but that a lock prevented delivery of the certificates. Caron alleged that the defendants lacked enough genuine, registered certificates and misled him, courts, and a Financial Industry Regulatory Authority arbitration panel about the certificates.

Caron had previously sued TD Ameritrade in Washington State court seeking delivery and registration of the certificates. That court compelled arbitration, and the arbitration panel later ruled that TD Ameritrade did not have to provide the certificates. Caron filed this federal case without a lawyer and sought relief from earlier judgments or orders. He also asserted claims involving federal criminal statutes, alleged falsification of evidence, common-law fraud, Securities and Exchange Commission Rule 10b-5, and breach of fiduciary duty. Various individuals who had also bought Bancorp shares moved to intervene.

Rulings

Judge Nathan granted the defendants’ motions to dismiss Caron’s amended complaint with prejudice. The court ruled that Federal Rule of Civil Procedure 60(b) could not be used in this court to set aside the state-court order and, in any event, the request was too late. The court also ruled that the Federal Arbitration Act required a challenge to the arbitration award within three months, while Caron filed this case nearly three years after the award.

The court held that Caron could not privately enforce the federal criminal statutes he cited because those statutes did not create a private right to sue. It also held that the court could not impose sanctions for alleged misconduct in the arbitration or another forum. The court further ruled that claim preclusion—a rule preventing relitigation of claims that were or could have been raised earlier—barred Caron’s fraud and fiduciary-duty claims against TD Ameritrade because the claims arose from the same events addressed in the FINRA arbitration. Separately, the court held that the alleged statements did not adequately support common-law fraud or Rule 10b-5 claims against either defendant because the complaint did not sufficiently identify fraudulent statements or show reliance and resulting loss.

The court denied the motions to intervene because dismissal of the action made them moot and because the proposed intervenors did not state a claim or defense or attach the required pleading. The court directed the Clerk’s Office to close the case. It also certified that an appeal would not be taken in good faith and denied a fee waiver for an appeal.