Thomas v. Fidelity Brokerage Services

• Decision Date: 01 August 1997
• Docket Number: Civil Action No. 96-2540.
• Parties: Robert C. THOMAS, on behalf of himself and a class of all other similarly situated Fidelity customers, v. FIDELITY BROKERAGE SERVICES, INC.
• Court: U.S. District Court — Western District of Louisiana

Page 791

977 F.Supp. 791

Robert C. THOMAS, on behalf of himself and a class of all other similarly situated Fidelity customers, v. FIDELITY BROKERAGE SERVICES, INC.

Civil Action No. 96-2540.

United States District Court, W.D. Louisiana, Alexandria Division.

August 1, 1997.

Donald G. Kelly, Kelly Townsend & Thomas, Natchitoches, LA, Randall A. Smith, Smith, Jones & Fawer, New Orleans, LA, Conlee S. Whiteley, Allan Kanner, Allan Kanner & Assoc., New Orleans, LA, for Plaintiffs.

Roy C. Cheatwood, Nancy S. Degan, Phelps & Dunbar, New Orleans, LA, A. Robert Pietrzak, Helene Glotzer, Brown & Wood, New York City, for Defendant.

RULING

LITTLE, Chief Judge.

For the following reasons, the court GRANTS plaintiff's motion to remand.

I. BACKGROUND

Plaintiff, Robert C. Thomas, filed suit against Fidelity Brokerage Services, Inc. ("Fidelity") in the Tenth Judicial District Court for the Parish of Natchitoches, Louisiana on 12 October 1996. Thomas, both individually and on behalf of a class of all people similarly situated,¹ alleges breach of fiduciary duty and breach of contract claims arising out of Fidelity's practice of receiving order flow payments from market makers. Without invoking any specific amounts, the complaint asserts that the actual damage to each class member is "very far below" the jurisdictional amount. Vowing not to seek payment of attorney fees and costs from the defendant, the plaintiff states in the complaint that he will press for these fees "out of the class recovery." Plaintiff made no demand for punitive damages.

Fidelity timely removed the action asserting this court's original jurisdiction under 28 U.S.C. § 1332. Plaintiff filed a motion to remand on 2 December 1996, arguing that this court may not exercise diversity jurisdiction over the parties because the defendant has not established that the $50,000 amount in controversy requirement of 28 U.S.C. § 1332(a) has been satisfied.² The parties have focused their jurisdictional arguments on the issues of whether, and in what manner, attorney fees may be included in the amount in controversy.

On 25 March 1997, we issued a ruling finding that attorney fees may only be included in the amount in controversy where the underlying cause of action mandates an award to a prevailing party. Based on this determination, we directed the parties to submit supplemental briefs discussing whether the law of Louisiana or of another state controlled the claims in this case and whether the plaintiff would be entitled to attorney fees under the applicable substantive law. Both sides have submitted the additional briefs and we proceed to the resolution of this unusually thorny motion to remand.

II. STANDARD OF REVIEW

We repeat the applicable standard of review for a motion to remand. When the complaint does not allege a specific amount of damages, the removing defendant must prove by a preponderance of the evidence that the amount in controversy exceeds $50,000.³ De Aguilar v. Boeing Co., 11 F.3d 55, 58 (5th Cir.1993).

The defendant can make this showing in either of two ways: (1) by demonstrating that it is "facially apparent that the plaintiffs' claims are likely above $50,000," or (2) "by setting forth the facts in controversy — preferably in the removal petition, but sometimes by affidavit, that support a finding of the requisite amount." Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir.1995) (emphasis in original) (citations omitted). Should a court find that the amount in controversy is not apparent from the face of the complaint, it may order the parties to submit "summary-judgment-type evidence, relevant to the amount in controversy at the time of removal." Id. at 1336. See also id. at n. 16; Nicole Duarte Martin, Federal Jurisdiction and Procedure, 42 Loy. L.Rev. 537, 542 (1996).

To sustain its burden, "[t]he defendant must produce evidence that establishes that the actual amount in controversy exceeds $50,000." De Aguilar v. Boeing Co., 47 F.3d 1404, 1412 (5th Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 180, 133 L.Ed.2d 119 (1995). The defendant may not rely upon conclusory statements, Allen, 63 F.3d at 1335, nor upon "a state law that might allow the plaintiff to recover more that what is pled." De Aguilar, 47 F.3d at 1412. All facts must be judged at the time of removal. Allen, 63 F.3d at 1335.

If a defendant satisfies his burden, the plaintiff may still establish that removal is improper by showing that it is "legally certain" that his recovery will not exceed the jurisdictional amount. De Aguilar, 47 F.3d at 1412. Plaintiffs may satisfy the legal certainty test by citing a state law that prohibits recovery in excess of the amounts sought in the ad damnum clause of the complaint or by filing a binding stipulation or affidavit stating that recovery will not exceed the jurisdictional amount. Id.⁴

III. ANALYSIS

In the current case, the court has already found that the amount in controversy is not apparent on the face of the complaint, that the damages sustained by each member of the putative class may not be aggregated for purposes of satisfying the minimum jurisdictional amount requirement, and that attorney fees may only be included if the underlying claims require such an award. We turn directly to the question of the applicable law and the issue of whether the plaintiff would be entitled to attorney fees under the substantive claims he raises.

A. Choice of law

Louisiana rules control the choice of law analysis in this action. La. Civ.Code Ann. art. 3517 (West 1994); Trautman v. Poor, 685 So.2d 516, 518 (La.Ct.App.1996). Plaintiff raises two claims, a breach of contract claim and a breach of fiduciary duty claim, and we analyze each separately. See La. Civ.Code Ann. art. 3515 comment (d) (West 1994) (describing how Louisiana's choice of law provisions incorporate the theory of dépecage).

1. Breach of contract claim

The contract between the parties contains a choice of law provision which invokes Massachusetts law for the interpretation and enforcement of the contract. We find, and both parties agree, that this contract provision is enforceable and that the breach of contract claim is, therefore, controlled by the law of Massachusetts. La. Civ.Code Ann. art. 3540 (West 1994); Sentilles Optical Servs., a div. of Senasco, Inc. v. Phillips, 651 So.2d 395, 398 (La.Ct.App.1995).

2. Breach of fiduciary duty claim

The parties dispute which Louisiana conflict of law rule applies to the analysis of the breach of fiduciary duty claim. The plaintiff asserts that the general rule, contained in article 3515, applies. Arguing that fiduciary duties are quasi-contractual and that the contract's choice of law provision applies to all disputes arising from the contract, the defendant urges the use of articles 3537-3541 which govern disputes involving conventional obligations. To determine which choice of law rule should be utilized to ascertain the applicable law for plaintiff's breach of fiduciary duty, we must first determine that the claim is a true breach of fiduciary duty claim.

The Louisiana Supreme Court has described a fiduciary relationship as follows:

The dominant characteristic of a fiduciary relationship is the confidence reposed by one in the other and [a person] occupying such a relationship can not further his own interests and enjoy the fruits of an advantage taken of such relationship. He must make a full disclosure of all material facts surrounding the transaction that might affect the decision of his principals.

Plaquemines Parish Comm'n Council v. Delta Dev. Co., Inc., 502 So.2d 1034, 1040 (La. 1987) (quoting Anderson v. Thacher, 76 Cal. App.2d 50, 172 P.2d 533, 543 (1946)). Similarly, the Fifth Circuit identified the duty of loyalty that flows from the position of trust as the distinguishing feature in a fiduciary relationship. Gerdes v. Estate of Cush, 953 F.2d 201, 205 (5th Cir.1992). Thus, to bring a breach of fiduciary duty claim, as opposed to a negligence claim against a fiduciary, a plaintiff must allege "fraud, breach of trust, or an action outside the limits of the fiduciary's authority." Id.; FDIC v. Barton, 96 F.3d 128, 133 (5th Cir.1996); accord Short v. Giffin, 682 So.2d 249, 253 (La.Ct.App.1996), writ denied, 689 So.2d 1372 (1997).

The complaint in the current case alleges that Fidelity failed to disclose its receipt of order flow payments and failed to pass on the benefit of these payments to its customers. We find that these allegations go beyond mere negligence to state a claim for breach of fiduciary duty, as contemplated by the Louisiana Supreme Court in Plaquemines Parish. Having determined that the claim is a true breach of fiduciary duty claim, we now must determine if this claim may be classified as a dispute about a conventional obligation subject to the conventional obligation choice of law rules.

The defendant cites both Massachusetts and Louisiana cases in support of its argument that fiduciary obligations are contractual obligations. After carefully reviewing the Louisiana cases cited,⁵ we are unpersuaded that a breach of a fiduciary obligation is governed by the conventional obligation choice of law provisions. The defendant cites cases that describe breach of fiduciary duty claims as contract claims for the purpose of determining the applicable prescription period. The fact that the same prescription provision, article 3499, may apply to both contract claims and breach of fiduciary duty claims does not mean, however, that a breach of fiduciary duty claim is a contract claim.⁶ Defendant has failed to identify and this court has failed to discover authority for the proposition that a breach of fiduciary duty claim is a per se breach of contract claim. See Davis v. Parker, 58 F.3d 183, 191 & n. 10 (5th Cir.1995) (finding that an action for nullity of a contract due to a breach of fiduciary duty is not necessarily a tort or a contract claim within the meaning of the attorney malpractice st...