Caron v. TD Ameritrade
| Decision Date | 30 November 2020 |
| Docket Number | 19-cv-9015 (AJN) |
| Parties | Douglas R. Caron, Plaintiff, v. TD Ameritrade, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff brings civil and criminal claims against TD Ameritrade and various clearing house organizations under state and federal law for failing to deliver to him physical share certificates of his securities purchase in Bancorp International Group, as well as fraudulently concealing the fact that that they did not have the authentic, registered share certificates in their possession, from both him and an arbitration panel. Defendants have moved to dismiss all of Plaintiff's claims on various grounds. For the reasons described below, Defendants motions are GRANTED.
The following facts are drawn from Plaintiff's Amended Complaint, see Dkt. No. 17, and assumed to be true for the purpose of resolving this Motion to Dismiss. See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007).
Plaintiff Douglas R. Caron is a client of Defendant TD Ameritrade Inc. Id. at ¶ 8. Sometime between June 15, 2005 and July 12, 2005, Plaintiff purchased 463,372 shares in Bancorp International Group Inc. ("Bancorp") for $4,082.63 through the TD Ameritrade platform acting as a self-directed investor. Id. Though Plaintiff is the beneficial owner of the BCIT shares, the shares are held in trust in certificate form by Defendants, The Depository Trust & Clearing Corporation, The Depository Trust Company and Cede & Co (collectively, "DTCC"), which are organizations that hold securities in order to facilitate the clearance and settlement of securities transactions. Id. at ¶ 3.
On August 11, 2005, shortly after Plaintiff bought his shares in Bancorp, Defendants DTCC imposed a "lock" on certain share certificates in the company, including those owned by Plaintiff. Id. at ¶ 11. A "lock" means that share certificates cannot go in or out of DTCC. Id. Defendants DTCC imposed the lock on Bancorp certificates because they learned that Bancorp had been subjected to a "corporate hijacking" by fraudsters who were printing unregistered, unauthorized share certificates for the company. Id. at ¶¶ 9-10.
In September 2011, Plaintiff requested that Defendants deliver him his Bancorp share certificates, but he was told by Defendants that the certificates could not be delivered due to the DTCC lock. Id. at ¶ 15. Plaintiff maintains that the lock in fact does not prevent all transactions, because owners can still execute trades outside of DTCC using physical share certificates. Id. at ¶ 12. Therefore, he demanded that Defendants deliver him the physical share certificates despite the lock. Id. He also maintains that Defendants have failed to replace the unregistered, counterfeit Bancorp certificates with real ones, and that Defendants have attempted to fraudulently conceal that fact by falsely claiming that they hold legitimate Bancorp share certificates on deposit. Id. at ¶ 14. Defendants have denied this allegation and maintain that they cannot not deliver the shares because of the DTCC lock. Id. at ¶ 16.
On March 2, 2012, Plaintiff filed a claim in Washington State court against Defendant TD Ameritrade to compel it to deliver to him his physical share certificates in Bancorp and toensure that those shares are registered directly in his name on the books of Bancorp. Id. at ¶ 17. The Court granted Defendant TD Ameritrade's motion to compel arbitration before the Financial Industry Regulatory Authority (FINRA), and the case moved to arbitration. Id. at ¶ 19.
During the FINRA arbitration, Plaintiff contends that executives at Defendants TD Ameritrade and DTCC testified in a materially false and misleading manner that Defendants DTTC held enough legitimate share certificates in Bancorp to cover the trades done by Defendant TD Ameritrade. Id. at ¶ 20. Plaintiff explains that executives from Bancorp have stated that DTCC in fact holds an insufficient amount of certificates to cover those trades. Id. at ¶ 21. Moreover, Plaintiff claims that in 2017 in a New York Civil Court case, Winter v. Lafferty (cv-010297), Defendants DTCC produced copies of 23 certificates that Plaintiff says they falsely swore to the court were on deposit at DTCC. Id. at ¶ 22. Plaintiff maintains that all but 2 of the 23 certificates were issued and cancelled in 1999, well before the lock on Bancorp shares was imposed. Id. at ¶ 22.
Plaintiff filed suit in this Court pro se on September 26, 2019. See Dkt. No. 1. In his Amended Complaint, Plaintiff maintains that Defendant TD Ameritrade was "negligent and failed in their fiduciary duty to the plaintiff" by failing to ensure that Defendants DTCC held genuine, registered certificates. Dkt. No. 17 at ¶ 35. Plaintiff also alleges that Defendants knew that the "DTCC depository" had been compromised by the Bancorp fraud and that they "have done nothing about it and lied to cover this up." Id. at ¶ 36. Plaintiff asserts a variety of federal and state civil and criminal claims and seeks "relief from a prior judgment or order," as well as "monetary settlement of not less than $583,297" along with punitive damages. Id. at ¶ 7.
Defendant TD Ameritrade filed a motion to dismiss the Amended Complaint or compel arbitration on January 13, 2020. See Dkt. No. 19. Defendants DTCC filed a motion to dismissthe Amended Complaint on the same day. See Dkt. No. 24. Both parties move to dismiss on various grounds. See Dkt. Nos. 19, 24. Since that time, various individuals have made motions to intervene in this case. See Dkt. Nos. 33, 35, 46, 47, and 53.
The Court interprets Plaintiff's Amended Complaint to be asserting two types of claims. First, Plaintiff asks this Court to set aside "prior judgments or order[s]" against him. Dkt. No. 17 at ¶ 6. As described below, neither Federal Rules of Civil Procedure Rule 60(b) nor the Federal Arbitration Act can provide him such relief.
Second, Plaintiff asserts new claims for (a) violations of 18 U.S.C. §§ 472, 473, 1001, 1018, 1503, 1519, and 1520 against both Defendants; (b) falsification of evidence against both Defendants; (c) common law fraud and violations of SEC Rule 10b-5 against both Defendants; and (d) breach of fiduciary duty against Defendant TD Ameritrade. Id. at ¶¶ 44-76. These claims fail because (1) Plaintiff has no standing to bring claims for violations of those criminal statutes, (2) there is no basis to issue sanctions under Rule 11 for the alleged falsification of evidence, (3) Plaintiff is barred from bringing the fraud and breach of fiduciary duty claims against Defendant TD Ameritrade by the doctrine of res judicata, and (4) Plaintiff has failed to state a cause of action for common law fraud or violations of SEC Rule 10b-5 against either Defendant.
Lastly, the Court dismisses the motions to intervene because they are moot now that Plaintiff's Complaint has been dismissed and because they should not have otherwise been granted under Federal Rule of Civil Procedure Rule 24(b).
In his Amended Complaint, Plaintiff states that he "seeks relief from a prior judgment or order, pursuant to Rule 60(b) of the Federal Rules of Civil Procedure" because "the falsification by TDA and DTCC came to light after a final judgment or order" and provides a basis to reopen the case. Dkt No. 17 at ¶ 6. Though Plaintiff does not explicitly state which judgment or order he is seeking relief from, the Amended Complaint references, albeit indirectly, the Washington State court decision to compel arbitration, which occurred sometime around 2012, and the FINRA arbitration, which Defendant TD Ameritrade explains resulted on September 8, 2016 in the unfavorable ruling for Plaintiff that Defendants did not have to provide Plaintiff with the share certificates. See Dkt. No. 21 at 9.
To the extent Plaintiff seeks for this Court to vacate the order from the Wisconsin State court compelling arbitration, the Federal Rules of Civil Procedure Rule 60(b) provides no relief. Rule 60(b) allows for a federal district court to set aside a judgment that was rendered in that court. See Bankers Mortg. Co. v. United States, 423 F.2d 73, 78 (5th Cir. 1970) (); Palacio v. United States, 219 F. App'x 811, 812 (10th Cir. 2007). Cf. United States v. Foy, 803 F.3d 128, 135 (3d Cir. 2015) (). At any rate, a motion under Rule 60(b) made on the grounds of newly discovered evidence or fraud must be made "no more than a year after the entry of the judgment or order." Fed. R. Civ. Proc. Rule 60(b). That deadline has well passed, as Plaintiff filed his Complaint on September 26, 2019, around eight years after the judgment. See Dkt. No. 1.
Assuming Plaintiff instead seeks to overturn the FINRA arbitration award, there can be no relief there either. "Although Rule 60(b) may be used to modify a judgment confirming an arbitration award, it is well-established that Rule 60(b) does not apply to the arbitration award itself." Cong. Sec., Inc. v. Fiserv Sec., Inc., 2004 WL 829028, at *2 (S.D.N.Y. 2004) (cleaned up). Plaintiff would have to bring his claim under the Federal Arbitration Act, which permits a court to vacate an award "where the award was procured by corruption, fraud, or undue means," 9 U.S.C. 10(a)(1). See Supreme Oil Co. v. Abondolo, 568 F. Supp. 2d 401, 406 (S.D.N.Y. 2008) () (citing Hall St. Assocs., L.L....
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