Zannini v. Ameritrade Holding Corp.

• Decision Date: 01 August 2003
• Docket Number: No. S-02-142.,S-02-142.
• Citation: 266 Neb. 492,667 N.W.2d 222
• Parties: David ZANNINI et al., on behalf of themselves and all others similarly situated, Appellants, v. AMERITRADE HOLDING CORP. et al., Appellees.
• Court: Nebraska Supreme Court

667 N.W.2d 222
266 Neb. 492

David ZANNINI et al., on behalf of themselves and all others similarly situated, Appellants,
v.
AMERITRADE HOLDING CORP. et al., Appellees

No. S-02-142.

Supreme Court of Nebraska.

August 1, 2003.

667 N.W.2d 225

E. Virgil Falloon, of Falloon Law Office, and of Counsel, Herbert E. Milstein, Lisa M. Mezzetti, and Victoria S. Nugent, of Cohen, Milstein, Hausfeld & Toll, P.L.L.C., and Burton H. Finkelstein, Douglas W. Thompson, Jr., and Richard M. Volin, of Finkelstein, Thompson & Loughran, for appellants

Robert J. Kriss and Adrienne L. Hiegel, of Mayer, Brown, Rowe & Maw, and Patrick B. Griffin and Richard P. Jeffries, of Kutak Rock, L.L.P., Omaha, for appellees.

HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

667 N.W.2d 226

MILLER-LERMAN, J

I. NATURE OF CASE

Appellants, David Zannini, Christopher Pitcher, Anthony Parente, and William Sigler, filed this purported class action on behalf of themselves as well as all other subscribers to the brokerage and securities clearing services offered by appellees, Ameritrade Holding Corp.; Ameritrade, Inc.; Ameritrade Clearing, Inc.; and Advanced Clearing, Inc. (collectively Ameritrade). Appellants' "Second Amended Class Action Complaint at Law" is the operative petition (petition). The focus of the petition taken as a whole is that Ameritrade failed to provide securities trading services as advertised or agreed to. In their petition, appellants allege, inter alia, that Ameritrade engaged in acts of fraudulent inducement, misrepresentation, and negligence; breached its subscriber agreements; and violated Nebraska's Consumer Protection Act, Neb.Rev.Stat. § 59-1601 et seq. (Reissue 1998), with regard to the brokerage services it provided appellants. The district court granted Ameritrade's motion for summary judgment and dismissed appellants' petition. We conclude that the properly received evidence and the pleadings do not support the district court's order granting summary judgment. We reverse, and remand for further proceedings.

II. STATEMENT OF FACTS

Ameritrade is a retail discount securities brokerage firm which provides subscribers with opportunities to trade securities by a variety of methods, including by Internet, by automated telephone system, and by personally speaking to a broker on the telephone. Appellants allege that individuals subscribe to Ameritrade's services by entering into a contract.

Appellants, as Ameritrade subscribers, filed this purported class action against Ameritrade in the district court for Douglas County. The action has not been certified as a class action. In the petition filed September 10, 1999, appellants claim to represent a class of approximately 217,000 people who were Ameritrade subscribers during the time period of February 1, 1998, to May 10, 1999 (the class period). The petition, consisting of 90 numbered paragraphs, is divided into several sections, including "Nature of the Action," "Venue and Jurisdiction," "Class Action Allegations," and "Substantive Allegations," followed by seven separately identified "causes of action" which begin at paragraph 52. Each "cause of action" incorporates the previous allegations.

In paragraph 1 of the "Nature of the Action" section, appellants allege that they seek to recover damages caused by Ameritrade's violations of Nebraska's Consumer Protection Act and the common law. In paragraph 3 of the "Nature of the Action" section, appellants allege generally that Ameritrade's system was "overburdened, causing frequent inability to place trades and substantial delays in the placement and execution of trades." In paragraph 25 of the "Substantive Allegations" section, appellants allege that they entered into a contract with Ameritrade.

In paragraph 28 of the "Substantive Allegations" section, appellants allege, inter alia, that during the class period they

encountered difficulties in placing trade orders via the internet[, that] the automated telephone trade services were not available[, and that] delays occurred when [they tried] to reach brokers. [Appellants] also experienced significant lag times as a result of Ameritrade's untimely execution of orders....

Appellants allege that this delay resulted from an aggressive and successful marketing

667 N.W.2d 227

campaign in which Ameritrade's subscriber base increased dramatically and that Ameritrade's systems were unable to handle this growth. According to paragraph 41 of the "Substantive Allegations" section

The delays associated with placing and executing trades were the result of [Ameritrade's] emphasis on marketing and sales to increase the subscribership. Meanwhile, [Ameritrade was] neglecting Ameritrade's systems and existing subscribers because the systems could not handle the additional volume. [Ameritrade] at all relevant times knew of the problems and failed to adequately remedy the difficulties, warn subscribers of the difficulties, or adequately provide subscribers with the means by which to avoid such problems.

In paragraph 45 of the "Substantive Allegations" section, appellants allege that they have been "consistently unable to utilize Ameritrade's [s]ervices as a result of [Ameritrade's] over-marketing and failure to maintain adequate systems." Paragraph 45 contains four subsections in which it is alleged that each of the four named plaintiffs suffered financial loss with respect to particular trading orders identified therein.

Based upon these and other similar assertions, appellants set forth seven "causes of action" in their petition. In their first "cause of action," entitled "Fraudulent Inducement," appellants allege that Ameritrade made "material misrepresentations" and "failed to inform" appellants that the Ameritrade systems had "technological limitations which led to significant delays in placing and executing trades, affecting the terms of trades." (Emphasis supplied.) In their second "cause of action," entitled "Negligent Misrepresentation," appellants allege, inter alia, that Ameritrade negligently misrepresented to appellants that it was capable of allowing appellants to "place orders on-line or alternatively place orders via telephone in a timely manner without unreasonable delay," and further that Ameritrade misrepresented that its systems were "capable of quickly executing such trades" without delay. In the third enumerated "cause of action," captioned "Breach of Contract and of the Implied Covenant of Good Faith and Fair Dealing," appellants allege that they each entered into subscriber agreements with Ameritrade and that Ameritrade breached those agreements by forcing appellants to "[experience] delays in placing trades [and experience] unreasonable lag times in Ameritrade's execution of trades." In their fourth "cause of action," appellants allege, generally, that Ameritrade engaged in unfair and deceptive practices in violation of Nebraska's Consumer Protection Act through material misrepresentations and false advertising. Appellants' fifth cause of action, entitled "Negligence," alleges, inter alia, that Ameritrade acted negligently through its misrepresentations concerning its ability to place and execute trade orders. The sixth and seventh "causes of action," labeled "Unjust Enrichment" and "Injunctive and Equitable Relief," respectively, do not constitute separate claims which appellants assert against Ameritrade, but, rather, set forth the nature of relief appellants seek.

We note that each "cause of action" contains a paragraph generally stating the following: "[Appellants] reallege each allegation contained in each of the paragraphs above as if fully set forth herein." As a consequence, each "cause of action" incorporates the general allegations and the allegations of the preceding "causes of action."

On October 10, 2000, Ameritrade filed its motion for summary judgment, urging

667 N.W.2d 228

summary judgment on four separate grounds. Ameritrade argued, restated, that appellants' claims (1) failed to state a cause of action for which relief may be awarded, (2) were "barred" by the Commerce Clause of the U.S. Constitution, (3) were without merit because there is no industry standard for "execution time" in terms of the deadline for executing a trade, and (4) were preempted under the Supremacy Clause of the U.S. Constitution.

Ameritrade's motion came on for hearing on December 13, 2000. During the summary judgment hearing, in support of its motion, Ameritrade's counsel offered and caused to be admitted into evidence two exhibits, exhibit 6, a Securities and Exchange Commission document describing the "best execution" rule, and exhibit 7, the affidavit of William Wood. Following the same hearing, appellants' counsel marked two exhibits, exhibits 8 and 9, but the record does not reflect that these additional exhibits were either offered or admitted into evidence. In an order entered January 3, 2002, the district court granted Ameritrade's motion for summary judgment, dismissing appellants' petition in its entirety. On February 1, 2002, appellants filed their notice of appeal.

III. ASSIGNMENTS OF ERROR

On appeal, appellants assign four errors. Appellants claim, renumbered and restated, that the district court (1) erred in granting Ameritrade's motion for summary judgment, based upon "inappropriate legal and evidentiary standards"; (2) improperly dismissed appellants' Consumer Protection Act claim; (3) erroneously dismissed appellants' negligence claim based upon the premise that appellants have a commercial relationship with Ameritrade; and (4) erroneously concluded that federal law preempted appellants' negligence claim.

IV. STANDARDS OF REVIEW

Summary judgment is proper when the pleadings and the evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a...