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A federal judge in New York has allowed key portions of the JPMorgan Cash Sweep Claims to move forward, trimming others in a closely watched consumer class action accusing the banking giant’s brokerage arm of underpaying interest on customers’ idle cash.

In a mixed ruling Thursday, Senior U.S. District Judge Lorna G. Schofield pared back the consolidated lawsuit but declined to dismiss it entirely, preserving several contract-based allegations against J.P. Morgan Securities LLC while dismissing all claims against parent company JPMorgan Chase & Co..

The decision leaves standing claims that the brokerage firm breached certain contractual promises tied to its bank deposit sweep program — a mechanism that automatically transfers uninvested customer cash into affiliated bank accounts.

Parent Company Dismissed, Subsidiary Remains

Judge Schofield first concluded that the complaint failed to establish a contractual relationship between plaintiffs and JPMorgan Chase, referred to in the order as JPMC Holding. Without such a relationship, contract claims against the parent could not proceed.

The court also found the complaint did not sufficiently allege that the parent company could be held liable for the actions of its brokerage subsidiary.

But the ruling took a different turn when addressing claims against J.P. Morgan Securities.

Contract Claims Survive the Cut

The plaintiffs allege the brokerage firm used its cash sweep program to retain compensation generated from customers’ uninvested funds, while obscuring the financial benefits it received through what they describe as false or misleading disclosures.

They further claim the firm violated its duty to charge reasonable fees and, at times, concealed fees entirely by asserting that no fees were imposed under the program.

Judge Schofield allowed to proceed the claim that J.P. Morgan Securities breached a provision in its deposit account agreement stating that interest rates “will vary” based on business and economic conditions.

The plaintiffs allege the rates did not, in fact, fluctuate in accordance with such conditions.

Defendants argued the language was merely a risk disclosure rather than an enforceable promise. The judge rejected that contention at this stage, writing that when the agreement is read in the plaintiffs’ favor, the provision plausibly constitutes a binding commitment. She noted at least one court applying New York law has treated similar wording as enforceable.

The court also preserved claims that the brokerage firm breached obligations to individual retirement account holders by failing to provide a “reasonable interest rate” on uninvested cash placed in bank deposits or savings instruments.

However, Judge Schofield narrowed the claims to the extent they relied on language suggesting the brokerage would act in customers’ “best interest.” The complaint, she found, did not allege the firm made specific recommendations concerning participation in the sweep program.