TD Ameritrade, Inc. v. Kelley

Background

TD Ameritrade, Inc. filed the underlying case in 2015 to vacate an arbitration award involving Edward W. Kelley. The award required TD Ameritrade to deliver Kelley a physical certificate for 152,380 shares of Bancorp International Group, Inc. The court concluded that complying with the award would be illegal or impossible and vacated it, but directed TD Ameritrade to continue making good-faith efforts to provide the certificate if doing so later became legal and possible. The court entered final judgment more than four years before Jan Harris filed the motion at issue here.

Harris, who was proceeding without a lawyer, was also a TD Ameritrade customer and owned Bancorp shares. She asked for permission to intervene under Federal Rule of Civil Procedure 24(b)(1)(B) and sought relief from the judgment under Rules 60(b)(4) and 60(b)(5). She argued that the arbitration agreement and award were invalid, that the parties lacked a valid claim or controversy or standing to bring the underlying case, and that the judgment improperly allowed TD Ameritrade to avoid obligations under Securities and Exchange Commission Rule 15c3-3.

Intervention

The court denied permissive intervention. It found Harris’s request untimely because she knew about the judgment no later than December 28, 2017 but waited approximately 29 months before seeking intervention. Allowing intervention would prejudice TD Ameritrade by requiring it to spend resources responding to Harris’s efforts to reopen the judgment. The court found no comparable prejudice to Harris from denial because the judgment did not bind her or prevent her from litigating against TD Ameritrade in the earlier round of her dispute. The court also found that Harris claimed no interest in the property at issue in the judgment, that the judgment did not impair her rights, and that Kelley had litigated his case vigorously.

Rule 60(b) Requests

Rule 60(b) generally allows a party or its legal representative to seek relief from a final judgment. The court recognized that, in limited cases involving exceptional circumstances and significant consequences to inadequately represented nonparties, a nonparty may seek such relief. It held that Harris’s circumstances did not meet that demanding standard. She had not participated in the underlying litigation, and the judgment affected her only indirectly by supporting TD Ameritrade’s position that providing physical certificates was illegal or impossible. The court therefore denied her request to bring Rule 60(b) motions as a nonparty and did not consider those motions on their merits.

Whether the Judgment Was Void

The court nevertheless considered whether there was a reason to vacate the judgment on its own initiative. It rejected Harris’s argument that the court lacked subject-matter jurisdiction. The underlying case presented a live dispute because TD Ameritrade sought relief and Kelley opposed it. TD Ameritrade also had standing because compliance with the award allegedly required it to violate the law or do the impossible, that injury was connected to Kelley’s award, and vacating the award provided relief.

The court concluded that it had diversity jurisdiction because TD Ameritrade was a citizen of New York and Nebraska, Kelley was a citizen of South Carolina, and the amount in controversy exceeded $75,000. The court also rejected Harris’s arguments that Kelley’s claims were not arbitrable and that Securities and Exchange Commission Rule 15c3-3 created a private claim for customers. It explained that the judgment did not rewrite federal law; instead, it applied the rule allowing courts to vacate arbitration awards that would require a party to violate the law.

The court concluded that the judgment was not void and declined to set it aside under Rule 60(b)(5) on the ground that it was no longer equitable to enforce prospectively. Judge Crotty therefore denied Harris’s motion in its entirety, left the judgment undisturbed, and directed the clerk to close the motion.