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.
